Since our clients are international the concept of off-shore operations regularly features in a request for our advice. Our priority is to assist our clients with structuring their affairs in a manner which maximises the benefits of using an offshore jurisdiction. However the following covers our initial advice.
Why do I need to be off-shore for my personal interests?
There are many reasons for using such countries but for private wealth and personal matters these include:
- to secure privacy – with no public disclosure of who is involved;
- to reduce tax paid – by using a country with low or no tax;
- to gain security – achieved by having cash and assets resident in a “safer” country compared to the country of residence;
- to service lifestyle – where having no primary residence and having interests in several countries, gives rise to lifestyle that requires an international solution in terms of arrangements for assets and access to cash through banks.
Why do I need to be off-shore for my business interests?
The reasons for going off-shore for business can include some or all the above. However they mainly relate to commercial issues :
Benefits for private wealth and personal matters include:
- low or no tax due
- security in a safer location than country of residence
- servicing international lifestyle
Benefits for business interests include:
- low or zero taxation within international treaties and agreements
- avoidance of disclosure to competitors
- marketing and image issues
- preferred location for core interests
We recommend use of preferred off-shore locations. These are best considered within an international corporate structure
- making best use of low or zero taxation jurisdictions within international treaties and agreements;
- to avoid disclosure to competitors of the ultimate owner or sources of the business;
- in respect of marketing and image issues – taking on the identity of another country or culture to show operations are for example “European” or from a country with an improved reputation for design, quality or performance; and
- choosing a preferred location for banking and transaction management.
Why are some countries preferred as off-shore jurisdictions?
When it comes down to how they operate tax, finance, law and company matters, not all jurisdictions are the same. Some have systems that are more attractive than others and for this reason only a group of countries are generally classified as off-shore – strictly “preferred off-shore countries”.
It is popular to associate “off-shore” with a few countries with low or no tax systems, or those with arrangements for the administration of companies that do not require disclosure. So a simple choice results from comparing what is required by an individual or company, to how far this is available from a particular off-shore country.
However there are other considerations as to choice. These result from international efforts over the last 10 years to “clean up” operations in off-shore locations – particularly in respect of money laundering and tax evasion. It is known that not all off-shore countries comply with these to the same standard.
Many of our international clients seek to operate in the UK with an English “face” to their interests. Where it may be required, we would offer an off-shore company from a jurisdiction with a legal system based on the principles of English common law shared by the USA, the UK, Commonwealth countries and others.
Whilst we can undertake formations in most locations we generally favour those that are “near off-shore” being those closer to our UK base in terms of time zones and accessibility. Such locations include Isle of Man, Gibraltar, and Jersey.
Does “off-shore” still mean private?
This has been very publicly challenged by recent revelations from traditional locations of privacy. In addition governments and banks are rightly required to be alert to the movement of funds from international crime and for terrorism. Such anti-money laundering measures are often applied to inquiries to discover tax avoidance.
Many off-shore jurisdictions that traditionally have been without tax treaties with other countries now comply with Tax Information Exchange Agreements (TIEA). Consequently there are more opportunities for enquiries.
Is there an “off-shore” image to concern me?
For many years operating internationally through an off-shore country brought little reaction. Today a mere mention of off-shore can lead to an image of money laundering and tax evasion.
Yet over 50% of all international banking transactions involve a country considered as “off-shore”. In addition it has long been accepted as reasonable for major companies and private individuals that operate internationally, to arrange their affairs to include an off-shore location.
Off-shore locations were often “black listed” whereas now some are “white listed“ – according to a perception that have been “cleaned up”. Indeed the arrangements in some jurisdictions are now very well regulated and can be considered as safe to use within an appropriate business structure.