International Trade and Tax Planning
The Onshore Alternative
New “Offshore” Solutions!

Canada, Ontario (LP) Cyprus Denmark (K/S) Estonia Ireland Rep. Netherlands (CV) Scotland (LLP) United Kingdom (LLP) USA, Delaware (LLC)

A properly configured and managed business structure can provide substantial tax benefits, protect assets, improve business efficiency, reduce costs and maintain confidentiality.

An improperly configured business structure is a recipe for disaster for the owner and his business.

Of course, there are times when an offshore company can be used to close a one-off deal if both your trading partners and the relevant tax office feel happy about the arrangement, or they are not located, most usually, within Europe, North American and other sensitive countries. But entering new markets or marketing products or services to unknown customers under the name of Tropical Island Trading Corp., incorporated in the Seychelles or Belize, which is perfectly workable, unless, of course, you really are exporting current consumer goods.

Even though the image of an offshore company has taken such a battering over the years, this does not mean that an offshore company is all but useless for the international entrepreneur.

Near-zero tax trading is still possible through an offshore company, but keeping a low profile is essential. Whilst the minute legal details call for specialist knowledge, the underlying idea is usually simplicity itself – it involves the use of a respectable onshore company to front transactions.

The Offshore, the Developed countries and
Tax Authorities
New Offshore Solutions

Should I avoid the Offshore now?
Will it be illegal using the offshore?
Can I trade through an Offshore Company?
If I can use the Offshore, which cautions should I take?
And which other or New Offshore Options do I have?

Trading through an offshore company can cut your tax bill but, will all your business partners trade with is?

Confidentiality is a primary concern of many offshore practices, particularly asset protection. When it comes to utilising an offshore company for trading however, a whole new category of priorities must be considered. These are the priorities of your trading partners and the attitude of onshore authorities.

Today legality and appearance are the essential requisites for the offshore entrepreneur. In many circumstances, it is not desirable to raise invoices in the name of an exotic offshore company, nor is it possible to ask your offshore company’s clients or trading partners to make payments to a bank in an obvious offshore tax haven. Remember that the books of your customers or trading partners are open to scrutiny by their local tax authorities and dealings with offshore havens (even if legal) are viewed with skepticism, if not suspicion. Tax authorities of high-tax nations are aware that offshore companies can be used for illegal tax evasion by businesses that need to “reduce” their taxable profits before year-end.

After all, the ownership of an offshore company is difficult and often impossible to establish. This allows dishonest business owners to incorporate a company in an offshore haven and use it to siphon money offshore, usually by having the offshore company raise invoices payable by the onshore business.

Consequently, trading directly in the name of a tax haven company can cause loss of business as many prospective customers feel uneasy about being wrongly suspected of participating in such invoicing.

In many developed countries, tax authorities do not even allow or recognise payments remitted to companies based in offshore tax havens. This reflects the opinion that anyone entering into a transaction with an offshore company is not doing so out of genuine commercial need, but solely for reasons of tax mitigation, if not tax evasion.

Of course, there are times when an offshore company can be used to close a one-off deal if both your trading partners and the relevant tax office feel happy about the arrangement, or they are not located, most usually, within Europe, North American and other sensitive countries. But entering new markets or marketing products or services to unknown customers under the name of Tropical Island Trading Corp., incorporated in the Seychelles or Belize, which is perfectly workable, unless, of course, you really are exporting current consumer goods.

Even though the image of an offshore company has taken such a battering over the years, this does not mean that an offshore company is all but useless for the international entrepreneur.

Near-zero tax trading is still possible through an offshore company, but keeping a low profile is essential. Whilst the minute legal details call for specialist knowledge, the underlying idea is usually simplicity itself – it involves the use of a respectable onshore company to front transactions.

Staying within the law! Any tax mitigation structure must ensure compliance with the law. If mistakes are made, not only can any tax-saving benefits be lost, but heavy penalties can be incurred.

New “Offshore” Options

Not all offshore companies are treated equally by partners and tax authorities. Quite often more sophisticated low tax structures are demanded for trading and holding, rather than companies registered in tax havens (as Panama, Belize or BVI).

A properly configured and managed business structure can provide substantial tax benefits, protect assets, improve business efficiency, reduce costs and maintain confidentiality.

An improperly configured business structure is a recipe for disaster for the owner and his business.

The necessity for some or all of the optional services will always depend on the actual circumstances of each individual client, and his business. These options should best be considered before placing an order for incorporation, although their integration at a later stage is also possible.

Tax options that can substitute a simple offshore.

Brief resume and Advantages of
The New “Offshore” Options

Canada (LP) – A Canadian LP is designed similarly to the Scottish LP. It is as well a white-listed structure. Moreover, there will be no need to deal with VAT, as the LP is registered outside the EU.

Cyprus – Cyprus’ a well-established international centre, has been critically assessed as constituting an attractive location for international trading companies from a tax perspective, among others. This is due to the enactment of the new Cyprus tax legislation, which is now compatible with the “acquis communautaire”. Cyprus laws and practices are now harmonized with the EU Laws and Directives, the Code of Conduct and the Organization for Economic Cooperation and Development’s recommendation on Harmful Tax Corporation, and more over its tax exemption on all incomes generated outside Cyprus.

Denmark (K/S) – Denmark is a highly developed member state of the EU, and a jurisdiction with a standard level of taxation, which can in no way be described as a “tax haven”. At the same time, Danish legislation provides the opportunity of registering and using Danish companies (K/S) with a zero rate of tax. The K/S is a limited partnership, having no less than two partners. One of the partners is a general partner, while the other partner(s) has/have the status of limited partners. A Danish K/S with foreign partners and which does not carry on business in Denmark is not liable for tax in Denmark. Under Danish tax law, a K/S is not regarded as a taxable entity in its own right (and accordingly, is not required to obtain a taxpayer registration number in Denmark), but the profits derived by a K/S are taxable in the hands of its partners (i.e. the general partner and the limited partner(s)) on a pro rata basis, in accordance with their interest in the K/S, at the place of their residence.

Netherlands (CV) – The most common type of Dutch partnership used in international tax planning is the limited partnership (commanditaire vennootschap – “CV”). CVs generally have at least one general partner with unlimited liability and one limited partner with limited liability. There is no minimum contribution requirement. There are closed CVs and open CVs: partnership interests are not freely transferrable in closed partnerships (transfer requires the consent of all the partners); partnership interests are freely transferrable in open partnerships. For Dutch tax purposes, closed CVs are tax transparent and, therefore, not liable to Dutch corporate income tax. This means that the income of CV is not taxed by the Netherlands at the level of CV.

Gibraltar – If you choose Gibraltar Company, then its income is entirely not taxed, given the Company’s bank account is not held in Gibraltar and your partners are not based in Gibraltar. Gibraltar is located in the European Union; however, it is not included into EU VAT zone. Gibraltar companies must submit annual financial statements.

Hong Kong – This prestige offshore has long been acknowledged for international trading, especially if you trade with China or other Asian countries. Hong Kong has concluded a vast number of Double Tax Treaties, thus it can suite for concluding contracts better than a classic tax haven company. Hong Kong companies must submit annual financial statements.

Ireland Rep. (LTD or LP) – Ireland is a very suitable jurisdiction for companies to be based whilst acting in commercial transactions. There are a number of structures available which allow an Irish entity to be used in worldwide commercial transactions whilst minimising the exposure to Irish tax. It is relatively easy and inexpensive to form a company in Ireland and there are many advantages to having a company here.

Mauritius (GBC2) – Category 2 Global Business Companies (GBC2) which are similar to the BVI type International Business Companies, are governed by the provisions of the Companies Act 2001.  GBC2 companies are cost-effective, flexible and wholly tax-exempt vehicles for structuring of client’s investments. Information relating to a GBC2 are confidential and not available for public inspection.

Scotland LLP – As long as your Scottish Limited Partnership consists of 2 offshore members and does not trade in the UK, such LP is considered a tax transparent entity. Another reason of Scottish LP popularity is that it is an EU structure. Moreover, there is no requirement to submit financial statements to the UK tax office.

UAE, RAK – It is a very interesting jurisdiction, where you can register a simple offshore company (RAK Offshore). A UAE company is completely non-taxed. Moreover, you can open a corporate bank account at one of the Dubai banks, which have become quite popular lately.

United Kingdom (LLP) – As long as your UK Limited Liability Partnership consists of 2 offshore members and does not trade in the UK, such LLP, just like the Scottish LP, is also considered a tax transparent entity. Another reason of UK LLP popularity is that it is an EU structure. Moreover, there is no requirement to submit financial statements to the UK tax office.

USA (LLC) – Delaware does not impose any income tax on LLC’s which do not transact business in Delaware. Additionally, Delaware does not impose either an income tax or inheritance tax upon members who are not Delaware residents.