Offshore Company Formations
Companies, which may be incorporated in a wide range of jurisdictions, can often provide further flexibility when structuring private or corporate wealth. The choice of jurisdiction will depend on a number of factors including whether the applicable rate of tax will be low or zero, the existence of favourable double taxation treaties and the requirements of any overall structure to cater for post-retirement residency. Typically, for planning purposes, a company is registered in a jurisdiction other than that in which you or your business is domiciled. A company has the following characteristics:
- Incorporated by law
- Distinct and separate legal personality from its creator
- Limited liability
- Option to issue shares
- Perpetual existence
A company is usually governed by the Memorandum and Articles of Association that establish it and, flexibility through shareholdings allows for effective succession planning.
Companies may be used to:
- own and operate businesses
- guarantee obligations
- buy and sell goods and services
- make investments
- hold real estate and other assets
- enter into contractual obligations
By carrying out transactions in a private company, the name of the underlying principal may be kept out of documentation.
In addition, many jurisdictions have strict provisions with respect to “piercing the corporate veil”, which in essence, means that it is difficult to determine the true ultimate ownership of a company and only the company itself will be held liable for its actions or debts, and any debtors cannot look through to the ultimate owner of the company to satisfy those liabilities or debts. In many cases corporate governance rules require the laws of the jurisdiction where the company is incorporated to apply rather than where any litigation originates thus providing another layer of legal protection to the principal.
It is possible to organise assets and transactions in such a way that assets are shielded from future liabilities. The use of trusts and companies is quite common to effectively shield assets and business interests from unexpected third party litigation or punitive damages.
Tax Efficient Structures
The zero or minimal tax rates applicable to some companies make them very attractive for the structuring of client wealth as well as trading activities. Some businesses open branches in other jurisdictions and use them as trading vehicles. Gulf residents will be subject to tax in other jurisdictions and therefore, with respect to their international purchases, structures can be beneficial to mitigate Inheritance and Capital Gains Tax.
Free Zone Companies
Learn more about Free Zone companies HERE.
Foreign Withholding Tax
Jurisdictions with double taxation agreements which cover dividend distributions can be used to reduce the incidence of withholding tax on international dividends.
Holding Real Estate Assets
Most jurisdictions are exempt from tax on any gain realised from the disposal of property held outside the jurisdiction. This makes a company an ideal vehicle to hold real estate assets offshore from an individual’s personal residence.
It is important that intellectual property is held correctly as the location of the holder of intellectual property can have an effect on withholding taxes such as royalties. Emphasis has also to be paid to issues like the registration of patents and licensing agreements (to cover the use of intellectual property).