WHY OFFSHORE?

Offshore: the meaning is "far from  shore" or "a financial operation transacted outside the country in question (yours)."

OFFSHORE SCHEME

REASONS TO GO OFFSHORE
There are many reasons for individuals to move both their personal and commercial activities to the offshore world. These objectives can be primarily summarized as follows:

• Privacy - the more that is known about your financial status, legal ownership and titles to assets of value and other such private matters, the more vulnerable you and your assets are to attack. Common sense dictates that what others do not know you have cannot be
  taken from you.  Confidentiality of one's personal affairs is a key objective and a priority for almost everyone who makes the move offshore.

• Tax reduction  - it is in your rational self interest to seek ways in which you can lawfully reduce tax liabilities from investment and capital income, thus making your hard earned money work harder for you, not the other way around.

• Estate Planning - when you factor in the combined force of estate, income and excise taxes, your hard-earned estate could lose up to 80% of its value. With proper estate planning one's investment income accumulates and provides for or eventually passes on to designated beneficiaries with minimal tax liability and hassles.

• Asset Protection - accumulating assets is no longer a guarantee of security, for once you begin to accumulate, you need to begin thinking about how to protect your hard-earned assets.

Asset protection has become a topic of great interest to professionals, executives, business owners, and developers. A fluctuating economy, a tough credit market, professional malpractice, toxic waste liability and increasing exposure to tort and contract claims have increased the focus on how to lawfully protect one's assets from creditors. However, asset protection planning is not just for high paid professions and executives. Today's world is an environment filled with lawsuits, taxes, accidents and financial risks that can easily wipe out anyone's assets. No matter how safe you feel, you can never be certain that the wealth you have built up over a lifetime won't suddenly be taken from you tomorrow. Whatever your occupation or lifestyle, we all sail close to financial disaster and potential liability.

• Even if you win a lawsuit, the winner still normally pays their own legal costs and fees. The legal system is often slow, ineffective and expensive. Even small nuisance lawsuits can result in tens of thousands of dollars in legal costs plus hundreds of hours in personal time.

• There are many individuals who make it a career to file frivolous lawsuits knowing the tremendous expense of responding to even the most baseless legal action.

• There is a litigation explosion, particularly in the United States. It is estimated that over 40 million lawsuits are filed each year.

• Many people avoid jury duty because of the time required and the low economic reimbursement for jury service. This often results in a non-representative jury unfamiliar with sophisticated legal arguments and outrageous decisions and awards.

• Insurance coverage is frequently inadequate. In many cases, the coverage amounts are so low that insurance companies will post the coverage and offer little effective defense.

• There are a lot of people in search of blame. This results in a deep pocket mentality. Many individuals and companies are faced with frivolous lawsuits merely because they have exposed

What is a Corporation?
A corporation is an entity recognized by law as a separate "person" with limited liability. A corporation has the option to sell shares, the right to sue and be sued, and has perpetual existence.

What is an IBC or Offshore Corporation?
An IBC (International Business Company) is a usually tax-exempt corporation which can do business all over the world except in the country where it has been incorporated.

How are Offshore Corporations used?
Offshore corporations may be used to own and operate businesses, issue shares, bonds or otherwise raise capital, guarantee obligations, hire employees, buy goods and services, sell goods and services, make contracts, rent office space, maintain checking and savings accounts, and maintain retirement plans for employees.  Although most offshore corporations are private and closely held, some are publicly traded on major stock exchanges.

What are the articles of incorporation?
The Articles of Incorporation is the document which establishes the corporation and contains basic information such as the name, share structure, and purpose of the corporation.

What Are By-Laws?
The By-laws, or in some jurisdictions "Articles of Association", are rules the corporation creates for its shareholders, officers, and directors. By-laws are adopted by the Board of Directors as one of the first organizational steps in setting up a corporation. Upon instruction, we can adopt a standard set of By-laws for a new corporation. Unlike Articles of Association, By-laws are usually maintained internally but may be publicly filed if requested.

What does a Corporate search reveal?
A corporate search will reveal the name of the corporation, the date of existence, amendments, and any other publicly filed document. Under many offshore jurisdictions, there is no requirement that the names of corporate officers, directors or shareholders be filed in any public registry. In other jurisdictions, nominee officers can be used.
Therefore, the actual beneficial owner's identity remains a secret.

What are Bearer Shares?
Bearer share certificates do not indicate the name of the owner. The certificate is endorsed in blank such that the person having physical possession of the document is the owner. Bearer shares facilitate the transfer of assets because transfer of ownership is accomplished simply by the transfer of the certificate. Bearer Shares may be registered in private or notarized book.

What are Registered Shares?
Registered share certificates indicate the name of the owner on the document. The name of the shareholder is also recorded in the internal corporate records of the company. Although the registered owner is recorded in the corporation's internal records, no public registry of shareholders is maintained in either Panama or the Seychelles Islands. The share registry is an internal corporate document available only to directors, officers and shareholders, under conditions specified in the jurisdiction's corporate statute.

What are the Shelf Companies?
The Shelf Companies are ready-made, never used corporations that have been created to meet a client's immediate needs. I.e to open a bank account or ask a credit card where the company to apply needs a minimum of 2 years of incorporated.

What Is a Registered Agent?
A Registered Agent is required to ensure that the corporation has an assigned representative at a known address to receive all service of process (legal notices) on its behalf. The Registered Agent forwards these documents to the address of record of the corporation.

How to use an Offshore Corporation? How best to make profitable use of offshore structures?
Using an IBC (International Business Corporation) as a shield for your financial affairs is well worth exploring. For with this structure you can receive money from offshore and send money offshore in perfectly legitimate and mostly "tax-free" ways. Let's say you're an independent real estate agent and you are looking for a way to place some of your substantial commissions offshore - without attracting undue attention. One way is to become a franchisee of your offshore company. Keep in mind that this IBC, in theory is not legally yours - you are not the director, or even a registered/recorded shareholder. This offshore company - "International Real Estate Corporation" - has a franchise program which independent realtors can join - from anywhere in the world (a bit like www.offshoreworld.org ). Naturally, you see the benefit of being part of their "global" network and hook your business up to it. Like most of the franchises, the Franchisor requires an ongoing percentage of your sales - in return for being able to use their name and marketing strategies. So each month you remit 15% of your gross commissions to
"International Real Estate Corporation". This money is a legitimate cost of your business and would be tax deductible, thereby reducing the amount of tax you pay
in your home country. At the same time this 15% franchise fee is accumulating in the bank account of "International Real Estate Corporation". And guess who has access to the funds in their bank account? In this way you can accumulate say 15% of your earnings offshore - and expatriate it as a cost of your legitimate business. Meanwhile, that 15% can accumulate tax free in your preferred offshore haven.
This same strategy could be applied to many different types of business using licensing fees, royalties, trademark fees and other forms of legitimate business expenses.
Or let's reverse the process - and imagine that you have money in your offshore IBC/bank account, and you want creative ways to bring it back onshore so you can spend it  without having it considered as taxable income. One way is to become an "employee" or agent of your offshore corporation. Perhaps this company needs a representative in your country, to conduct various business dealings on a contract or consultancy basis. The company may decide to provide you with a credit card to cover company related expenses like your accommodation, your car running expenses - or even taking clients out to dinner. Naturally, if it is the company you work for that is paying for these things, then you have no need to report such expenditure as your income. After all, the company is not you!
This method would allow you to repatriate funds (from the account you have power of attorney over) as and where required, and to use such funds as you desire. The company may also decide to purchase property - and make you the property manager. This "job" would no doubt provide the "perk" of free accommodation in return for services rendered. The company would also provide the funds for the upkeep of their property investment. If the company wanted to pay you a salary - then such money would be taxable in your jurisdiction, but this amount could be considerably less than what you are really earning.
Another example: you can create a "remote" business which can earn money for you offshore. For example: imagine you sell computers and you decide to set up another "profit-generating" business in tandem with this. Your existing business is retailing, and you decide to get into leasing (financing computers over the lifetime of their usefulness). Naturally, this new leasing business is conducted by the offshore company whose account you have power of attorney over. The scenario works like this: you sell computers and also lease computers. To those customers who choose to lease, you arrange the contract on behalf of the leasing company. This company pays you the agreed upfront amount on computers so leased - and the leasing fees from your clients go to the offshore leasing company. The end result is that all the leasing profits (the difference between the upfront computer cost and the full term lease income) remains with the offshore company.

There are many ways to structure your existing business affairs using an offshore company. With forethought and planning, you can accrue tax free profits, tax free spendable cash and other benefits just by thinking outside the square.

Other questions?

Email to opm@taxhaven-opm.org

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