International Business Companies
How Should International Business Companies Be Operated?
To guarantee that an international business is operated appropriately, the offshore management company is required to have substance. This means it should not function as a “mailbox company” or a “shell.”
As a result, it will keep the company out of the tax framework of onshore entity, where services of delegation take place and where majority of the company’s employees will be centred.
For instance, it is imperative for International Business Companies to have a central management and control in their authority of integration under the English Law. This is because if the company is integrated outside the UK, there are high chances of it being liable to UK tax. However, this is not relevant to UK like it is with countries like France and Switzerland. This is evident from the case studies below:
International Business Companies formation
Case 1: What amount of conduct is sufficient to prove that the central management and control of a company is in its country of jurisdiction and not onshore? The following are a few factors that are normally considered by the tax authorities concerning this:
- The location of the company where its activities are taking place
- The place where meetings are assembled and decisions taken for day to day activities.
- The tax resident of the directors
- How directors operate, is it independently or at request of a person onshore?
- Whether the shareholders with a majority stake are located normally or are tax residents
Case 2: In BVI and Cayman islands, how many of the 2,500 management companies are operated in a way that would stand the scrutiny of tax authorities? Unfortunately, in the course of our business, we have come across a number of businesses that may be at risk and have even gone ahead to advise industrial professionals of the simple steps they can undertake to limit such risks.
In addition to that, managers based in UK should be cautious of potential tax risks. It is important that a manager or advisor in UK meets the requirement of English tax law exemptions like investment manager exemption, particularly in execution or trading. A risk that may subject offshore entities to UK taxation may be created if the UK manager or adviser does not consider and comply with relevant conditions.
Benefits for incorporating an offshore company
Anonymity: In most offshore jurisdictions, registrars do not disclose any information about the beneficiaries, shareholders and directors of offshore companies. As such, the principal in charge may remain anonymous while carrying out relevant transaction on behalf of the company. However, this only applies to genuine operations.
Asset protection: Normally, it is the laws of jurisdiction of incorporation that applies rather than the company in question, in international business context. However, offshorejurisdictions are famous for their promising asset protection laws.
Ease of Reporting: Compared to other companies that are registered in onshore jurisdiction, International Business Companies are limited in terms of compliance reporting requirements. Most offshore companies are not eligible to file accounts and annual reports under jurisdiction of the company development. A local authority charges the International Business Companies a flat annual license fee instead. However, this is insignificant compared to directly reporting the taxes and expenses in onshore jurisdiction.
If you want your International Business Company formation to be done quickly and efficiently, just Contact Us and we will be glad to help you.