International tax planning: Offshore Company Formation

We are an English tax and law office within the network of international tax consultants and lawyers (LowTax Network International), focussing, in particular, on "international tax planning for natural and legal persons". Other focal points are: the setting up of financial services companies and banks abroad, licences for games of chance within the EU and offshore, the setting up of trusts and foundations and, in addition, the transfer of domestic assets into trusts within the English-speaking legal area (asset protection,bankruptcy protection,inheritance law).

 

Company Formation- Offshore Company Formation- International Tax Planning: Setting up a company formation in a foreign country

The client or an appointee does NOT relocate to the foreign company's country of residence (appointment of nominee or permanent General Manager)

As most countries have laws that prevent the abuse of incorporation practices, we choose to distance ourselves from so-called cheap company formation, in which only a mailbox is established in the foreign country and/or, as part of a nominee scheme, a person who is not even an attorney or tax adviser enters into hundreds of nominee relationships. These types of structures become quickly transparent to local financial authorities and often result in a disaster for the client.

 

Place of management:

If all income earned worldwide is to be taxed in the foreign country, the requirements for a “permanent establishment” in accordance with the DTA rules must be fulfilled. This is essentially the “place of management.”

There are several structural options for this purpose:

 

An attorney/tax adviser in the foreign country (i.e., in the country of residence of the foreign company), or the advisory office as a legal entity, acts outwardly (i.e., as a nominee) as director of the company and hands over all rights and obligations to the nominator (beneficiary/client) via a nomination agreement. The client relocates his main place of residence to the foreign country and acts as director of the company. In certain cases, relocation of the "main place of residence" is not mandatory and requires only a management presence (be advised, however, that due to "daily business" requirements, this is seldom possible) An attorney/tax adviser in the foreign country, or the advisory office as a legal entity, acts outwardly (as a nominee) as director of the company, AND the client or his appointee relocates to the foreign country for certain periods of time to conduct management activities, in which case both parties possess only joint signing authority.

· In addition to these solutions, there is also the option of appointing an attorney/tax adviser/employee from the formation advisory office in the company's country of residence as General Manager, i.e., with an employment contract (no nominee relationship) and a "regular salary." The "regular salary" amount must be line with income levels in the company's respective country of residency and would need to be between EUR 600 - EUR 1,800 per month, depending on required expenses/time. This internal relationship can be set up such that the foreign-based General Manager operates only under instruction, or the client becomes a secondary director, in which case both parties possess only joint signing authority. In special cases, "internal agreements" may be established in which the foreign-based General Manager "reduces" a part of his salary, if necessary and advisable. As a matter of course, the foreign-based General Manager declares his income when submitting his tax return and pays wage taxes and/or social security contributions in accordance with the laws of his country of residence. The foreign-based General Manager's income is considered part of the foreign company's expenses and is correspondingly deductible. In many countries (e.g., Cyprus), a legal entity may be appointed as the General Manager, which is often more useful for both sides. In these cases, a General Manager's Contract is signed between the foreign company and the "Director's Limited Company." No nominee relationships come into play in this scenario.

These laws may be circumvented by establishing in the foreign country a production site, a mine, a quarry or any other site for the extraction of natural resources or by conducting construction or installation activities over a period longer than 12 months. In accordance with Article 5 of the DTA, these are then considered permanent establishments in the foreign country, regardless of the company director's identity or country of origin.

 

Company Formation- Offshore Company Formation- International Tax Planning: Ordinary Place of Business in the foreign country

A "mailbox" is never considered an ordinary place of business in the foreign country. Rather, the company in the foreign country must be reachable by mail, including certified mail, and by phone. The minimum requirements include: A deliverable postal address (including for certified mail), accessibility by telephone during normal business hours, accessibility by fax. So-called "Registered Offices" are generally not sufficient, as these are readily apparent to local financial authorities, or the foreign company's country of residence may deny the issuance of a tax ID number (for example, in the UK). Along with Registered Offices, we offer so-called "Head Office solutions" that provide credible documentation for an ordinary place of business in the foreign country.

 

An overview of our services:

· Formation of the corporation, entry in the commercial register

· Establishment of an ordinary place of business

· Upon request: Establishment of a nominee director in the company's country of residence, or a permanent director

·Upon request: Establishment of a nominee shareholder or bearer stock, if permitted by the respective country

·New bank account setup in the name of the company, including online banking and credit cards

· Referral to a tax adviser in the company's country of residence for bookkeeping, annual reports and sales tax reporting.

 

The client or an appointee relocates his main place of residence to the foreign company's country of residence

In such cases, the client or his appointee (e.g., an employee) acts as director of the company in the foreign country. A main place of residence is defined as follows: Presence in the foreign country (company's place of residence) during 51% of the year and a domicile in the director's own name (hotels or stays with relatives do not count as a main place of residence).

Upon request, we can handle all of the required services:

· Formation of the corporation, entry in the commercial register

· Establishment of an ordinary place of business

· New bank account setup in the name of company

· Referral to a tax adviser in the company's country of residence for bookkeeping, annual reports and sales tax reporting.