Online Company Formation

International Trading

If a firm has significant business in a third party jurisdiction it is often possible to reduce the overall tax position by transferring management and control to a more tax efficient area. For example, if a British firm purchased a given type of good in Italy for resale to the Middle East it would seem inappropriate to say that such a transaction should be subject to UK corporation tax.

A potential solution would be to Form a Limited Company in a low tax area such as Cyprus to specifically control these transactions. If this is done correctly and does not offend the anti-avoidance provisions of the Taxes Act, 1988, it should be possible to benefit from the Cypriot corporate tax rate of 10.00 %.

Obviously, any remittances back to the UK may be subject to full UK taxes, however, funds not so required would be available for investment elsewhere. In respect to Cyprus, the fact that it has an extensive double taxation treaty network, demands the submission of annual audited accounts. In the above example Cyrpus is also strategically placed which goes to prove the commercial veracity of the establishment of the Cypriot company/office.

Even better, in certain circumstances it may be possible to reduce the flat 10.00% tax rate by inserting an offshore limited partnership (this being tax free) with taxes only being paid on that ascribed proportion of profits earned by the Cypriot company in its capacity as the "general partner". The 'limited' and passive partners having no direct tax consequences.

This therefore prevents direct fiscal remittance to the appropriate high tax 'mother' country, as all profits earned by the passive partner will be totally tax free.

Investments 

Offshore/Tax Exempt companies are often used as an investment conduit in order to allow money /assets to grow in a tax friendly environment without giving it to the taxman.

International Consultancy

With the growing demand for professional consultants to work outside their usual country of residence there is often the possibility of greatly reducing or even eliminating individual and corporate tax consequences by using offshore companies. This is possible as you can often legally extricate yourself from the tax system of your home country for a fiscal year or more.

During this expatriate period it may then be possible to avoid the tax system(s) of the chosen host jurisdictions by limiting ones period of residency in any given country to between 4 and 6 months. These being the normal European 'breathing' periods before full local tax obligations exist. The purpose of the offshore company would be to provide a fiscally beneficial entity to issue necessary invoices, register for VAT and/or act as a controlling vehicle for future home country remittances.

Confidentiality

As competition becomes more intense, the ability to restrict competitor's access to your company's true financial position could mean the difference between success and failure. In certain circumstances it could also be necessary to 'mask' the true ownership of a company. Unfortunately, such confidentiality is not available directly in the UK or in most other West European countries, however, it can often be guaranteed by using offshore/tax exempt companies.

Property Companies

In certain circumstances there are significant tax advantages in having properties held by appropriate domestic and/or offshore mechanisms. For example, for non-domiciled individuals in the UK, a local company owned in turn by a tax-free company can legally avoid all capital gains taxes. The reason for this is that "shares" are considered "moveable" property under British law and capital gains realised by a non-domiciled individual through his or her interest in the offshore 'tax free' company is not a British taxable event unless the gains are directly remitted.

Further, by using appropriate tax treaties it may also be possible to arrange "back-to-back" loans to virtually eliminate domestic tax liability on rental payments. In respect to Continental property acquisitions, even in jurisdictions such as France, Spain and Portugal is also possible - with correct planning - to avoid CGT or equivalent taxes and various property acquisition duties (which are extremely high in the case of France) by using double taxation treaties/companies. However, whilst Britain and Portugal have very favourable tax laws especially for non-domiciled individuals, the French fiscal system always demands local professional advice.

Family Protection

One of the major objectives of tax mitigation clients is to ensure that wealth established during their lifetime is not fettered away by future generations or circumstances. To avoid this tax planning firms can often provide a whole range of 'tailor-made' companies, trusts, foundations and establishments which can be used together with many of the other tax mitigation mechanisms already outlined. In particular, they can often be formulated to allow, for initial investment flexibility whilst the original "settlor" is alive, followed by a "fixed" structure upon his or her demise. In addition, with the correct advice, "asset protection schemes" can also legally avoid the almost universal "forced heirship" provisions of civil law jurisdictions.

Intellectual Property

In many cases offshore/tax exempt companies can be very successful in exploiting the various international withholding tax rates for dividends, royalties and interest. For example, it is very common, for a nominal consideration, to transfer patent, copyright or trademarks in favour of an appropriate offshore/tax exempt company before significant appreciation. Once acquired it then being possible to issue intellectual property (IP) sub-licenses or exploitation rights to appropriate third party structures.