An offshore company seems to be the most successful solution for a business, because an offshore company provides complete confidentiality of the company owner. In addition, an offshore company is not obliged to submit financial statements and pay taxes in the country of incorporation. This makes an offshore company, also, the cheapest business solution. But is it really so? What are many sellers of consulting services silent about, offering to quickly buy an offshore company with an account at an attractive price?
Due to the international policy to combat tax evasion, most offshore jurisdictions have adopted amendments to tax and corporate laws. Below is a brief overview of the changes.
Offshore company in Belize.
Effective 1 January 2019, the Government of Belize introduced a new regime for International Business Companies (IBCs). Offshore Belizean companies are now authorised to:
conduct business activities within the country
work with residents of Belize
own real estate in Belize
own shares of local companies
open accounts in Belizean banks in local currency
Companies licensed by the International Financial Services Commission (IFSC) are required to establish a physical presence in Belize (called "substance") by the end of 2019. IFSC licence is required to provide banking, insurance, brokerage services, Forex and securities trading. To confirm the physical presence on the territory of Belize, it is possible by renting a real office and hiring official employees of the company (with mandatory payment of salaries).
In addition to the fact that the company must be managed from Belize, the company is required to incur operating expenses in Belize and keep corporate documents and registers in the Belize office. By confirming their physical presence in Belize, IBC companies will be considered tax residents of Belize, and are required to file an annual financial statement and pay local taxes.
If a Belizean IBC company was incorporated before 16 October 2017 and its operations do not require an IFSC licence, such company may be exempt from tax until 30 June 2021. Companies incorporated since 17 October 2017, in order to be exempt from tax and obtain a Tax Exemption Certificate (Tax Exemption Certificate), need to confirm that:
the company is physically located outside Belize
the company pays taxes in the country of principal activity
The new changes to such companies apply from 1 January 2019, but the Government of Belize gives a transition period of 1 year.During the transition period, the offshore in Belize retains its "offshore" status.
Importantly, in addition to paying taxes, the Belize Tax Commission may require an audit of companies that:
receive income of at least 6 million dollars. U.S. dollars per year
carry out activities in a particular zone of Belize with income from 250 000 dollars. US DOLLARS
are listed on the Belize Stock Exchange
are in the process of restructuring or liquidation,
are in the process of selling assets through auction
whose activities require an IFSC licence
Offshore company in Seychelles.
Seychelles is no exception, with amendments to the Business Tax Act, the International Business Companies Act, the International Trade Zone Act - in relation to BEPS (international anti-breach and profit shifting programme) coming into force on 1 January 2019.
In line with the innovations, Seychelles has moved to a territorial taxation system and offshore companies are now allowed to do business in Seychelles.
Based on changes to the Business Tax Act, offshore companies will be required to file annual financial and audit reports with the Registrar. But this requirement only applies to companies that derive taxable income in Seychelles.
That is, Seychellois companies that operate outside of Seychelles, have an account in a foreign bank (not local), and do not work with companies registered in Seychelles, retain the status of "offshore company" and still do not pay taxes.
Companies registered in Seychelles, such as securities exchanges, clearing agencies, securities dealers or investment advisers, in order to benefit from the favourable income tax rate, must meet the minimum requirements of having an economic presence in Seychelles (at a minimum, having a real office).
Tax TIN number for an offshore company in Seychelles
As of August 2019, all Seychelles companies will be able to obtain a tax number. This option is now available to every company, regardless of where the company operates. For companies that do not operate in Seychelles (offshore companies) there will be no tax implications associated with obtaining this TIN.
If you have an offshore company in Seychelles that you do not want to stop working with, obtaining a TIN (Tax Identification Number) will increase your chances of opening an offshore account with a foreign bank.
What do I need to provide to get a TIN for offshore in Seychelles?1. Only the company's registration agent can obtain a TIN.2.
Obtain a current CertificateofGood Standing, confirming that the company is renewed for the current year
3. The company's internal accounting records must be kept at the place of incorporation (it is sufficient to send agents quality scanned copies).
Offshore company in the BVI.
As we can see, in most cases, companies registered in offshore jurisdictions are no longer "offshore" in the classical sense. In addition to the requirement to pay taxes, many offshore companies have cancelled the confidentiality of company owners. In particular, one of the most famous offshore zones is the British Virgin Islands. The new Localisation, Physical Presence of Business Act 2019, stipulates that:
the company must have an actual office in the BVI
the company must incur operating expenses in the BVI
the company's management must be located in the BVI
the company must have formally employed employees who are physically located in the BVI
In addition, each BVI company is now required to provide information or documents to the International Tax Authority (ITA) upon request in order to establish compliance with economic substance requirements. Typically, the ITA requests financial documents, proof of business address, tax residency, employee records, etc.).
If a BVI company fails to respond to an ITA request and provide documents, the company may be subject to fines (up to US$50,000). In addition to fines, the BVI Registrar may strike the company off the Register.An important change, now, is the removal of the confidentiality of the beneficial owner of a BVI company.
Thus, information about the beneficiary, which has been entered into the Beneficial Ownership Secure Search system (BOSS), will be provided upon request of the competent authorities of those countries, which are designated in this system as the country of tax residence of the beneficiary.
How to work with an offshore company?
In case you already have an offshore company, but it was used as an intermediary company, a wallet company, we recommend to close this company, taking into account the stricter requirements of the legislation of offshore countries. It is now virtually impossible to open an offshore account without complying with the above requirements. If your offshore company is an asset owner or part of a holding company, we suggest restructuring your business. The choice of a new country for company registration depends on the type of activity and business structure.
But, if it is very important for you to keep the name of the company and its history, we offer redomicile of offshore company, namely moving (transferring) the legal address of the company from one country to another.
Redomicile of an offshore company is a transfer of the company, with preservation of the form and structure of the company management, under the regulation of the legislation of another country.
What is necessary to transfer an offshore company from one country to another?
First of all, it is necessary to make sure that the legislation of both countries allows the transfer of the company (redomiciliation).
Collect the entire package of corporate documents and order an up-to-date extract from the state register in the country of incorporation (Certificate of Good Standing)
In some cases, a legal opinion of a local lawyer on the possibility of redomiciling the company will be required.
The process of redomiciliation of an offshore company is not possible if:
The offshore company is in liquidation/bankruptcy;
The company has debt obligations to third parties;
The company is a party to legal proceedings.
After the transfer of an offshore company to another country, the offshore company ceases to exist in the country of initial registration and receives a certificate of redomicile.
