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Types of offshore companies
Most of our clients utilise the following types of offshore companies to structure international business and for tax planning:
- Very low or zero tax offshore companies incorporated in jurisdictions often described as tax haven islands, such as the differing types of offshore company that can be formed in offshore company formation centres such as the Seychelles or British Virgin Islands.
- The LLC or Limited Liability Company and the LLP or Limited Liability Partnership types of vehicle. These classes of company are used for offshore business, international business and tax planning because they have the advantage of limited liability but the flow-through characteristics of a partnership for tax purposes. This means that profits are divided among the members, in proportion to their respective holdings, and are taxed in their hands. In some circumstances, if all the members or partners are non tax resident in the domicile of the LLC or LLP company and no business is undertaken in that country, neither the LLC or LLP company nor the members or partners will be subject to tax in the company's country of establishment. Such companies are said to be "fiscally transparent" and examples include US LLCs and the UK LLP.
- Companies incorporated in jurisdictions which offer both offshore companies and onshore companies and which may benefit from favourable tax regulation or special offshore company regimes. For example Cyprus, although not typically regarded as a tax haven, it has a favourable tax regime, which effectively means that correctly structured, managed and administered Cyprus Companies can be utilised for undertaking offshore business and international business without paying tax in Cyprus provided that any profits arising are not made in Cyprus. This type of tax regulation is known as "territorial taxation".
Foundations
Foundations have existed in parts of Europe since the Middle Ages, when they were originally only used for charitable or religious purposes. In modern times, foundations have increasingly been used for wealth management purposes, as pioneered in civil law jurisdictions such as Liechtenstein and Austria. In recent years, a number of common law jurisdictions have introduced foundation legislation, and the popularity of foundations continues to increase.
Like a company, a foundation is a separate legal entity (in contrast to a trust, which may only operate and own property through a trustee). Once the founder of a foundation transfers assets to the foundation, those assets cease to be the founder’s property and become the sole property of the foundation.
Unlike the shareholders of a company, the beneficiaries of a foundation have no control over the foundation and have no ownership interest of any kind in foundation assets, unless such assets are actually distributed to a beneficiary in accordance with the foundation’s charter or regulations.
As neither the founder nor beneficiaries of a foundation have any ownership interest in foundation assets and as management and control of a foundation is typically vested with the foundation’s council (which may be located in a low tax or nil tax jurisdiction), a foundation is a highly useful entity for tax planning, asset protection, wealth management and “outside estate” succession planning.
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