Domiciliary and De-offshorisation Services
In all jurisdictions the establishment of a Company must be accompanied by a legitimate address of its offices that should be registered with the authorities upon its formation. So if you who wish to take advantage of favourable tax regimes in other jurisdictions by founding a company, you need to domicile in it i.e. you require a valid registered address.
Tax haven Jurisdictions:
These are jurisdictions which facilitate reduced taxes. In tax haven jurisdictions the requirement may only be that a company has a registered office address and/or a registered agent and this may completely fulfil all Domiciliation requirements. In most of these jurisdictions there are no direct taxation laws and therefore there are no domestic provisions which define tax residence generally or which provide criteria for determining tax residence. Some examples:
- Belize: Companies registered under the International Business Companies Act (IBC Act), Chapter 270 of the Laws of Belize are not deemed to be Belize residents. Section 2 (1) of that Act (Interpretations) provides that a “person resident in Belize” means a person who ordinarily resides in Belize or carries on business from an office or other fixed place of business within Belize, but does not include a company incorporated under this (IBC) Act.
International trusts or offshore trusts (as provide by the Trusts (Amendment) Act of 2007, are treated as non-taxable under that Act. The basis is that neither the settlor, beneficiaries or trust property reside in Belize and the trust purpose nor objective is to be performed outside of Belize. International Trusts are registered by the Director of the International Financial Services Commission. International trust registration is mandatory (Trust (Amendment) Act of 2007, Section 65B).
- Cayman Islands: There are no direct taxation laws in the Cayman Islands so there is no legal definition of tax residence or tax residence provisions.
- Seychelles: No personal income tax. The residence will be determined in accordance with the business tax act, section 2 defining resident person. All entities that are incorporated under the laws of Seychelles are considered as resident for tax purposes, it will therefore encompass the IBC, the CSL, SITZ companies.
White List Jurisdictions:
OECD) “White List” jurisdictions may require much more for a company to be considered as domiciled in the country. Some examples:
- Cyprus: According to the Income Tax Law 118(I) of 2002, (Section I, Article 2), a company is resident in Cyprus, if its management and control are exercised in Cyprus.Although “Management and Control” is not a term defined in the Cyprus Tax Legislation, to achieve tax residency and substance, the Cyprus Tax Authorities take into consideration the following factors in general:
- The composition of the Board of Directors.
- Where the Board Meetings take place and whether major decisions are properly taken during these meetings.
- The place where the discussion and approval of the Financial Statements takes place. • The Board of Directors must have control over the bank account which must be situated in Cyprus.
- The place where the seal of the company is authorized to be used.
In order for an entity to establish its tax residency, it should submit a “Tax residency certificate request and questionnaire for legal entities” to the Tax Department.
- Luxembourg: Resident companies are defined for tax purposes as companies that have their legal seat or central administration in Luxembourg. Corporate income tax is levied on worldwide income and capital gains of resident companies. The legal form of a corporation (legal person) is not the decisive factor for taxation. In general, any economic entity realising income that is not directly taxable in the hands of the partners or members is subject to corporation tax.
- United Kingdom: In most circumstances, an entity will be tax resident in the UK where it is incorporated or managed and controlled in the UK. If the entity is managed and controlled in the UK, but incorporated elsewhere (or vice versa) then the residence of the entity may be determined by treaty, or the entity may be ‘dual resident’, a tax resident of more than one country or jurisdictions.
- New Zealand: A company will be a New Zealand resident for tax purposes under New Zealand law if any of the following apply:
- The company is incorporated in New Zealand.
- The company has its head office in New Zealand.
- The company has its centre of management in New Zealand.
- The company’s directors, in their capacity as directors, exercise control of the company in New Zealand, even if the directors’ decision-making also occurs outside New Zealand.
In some cases individuals may also find it may be necessary to become a Director or Secretary of their company and even reside in their company’s jurisdiction, so as to become tax resident in that jurisdiction. This may be especially the case if the individual comes from an OECD “White List” jurisdiction.
De-offshorisation and substance
Some jurisdictions have a policy of combating the relocation of capital or business interests to offshore accounts, in foreign countries that are known to be tax havens. Initiatives from various countries or organisations around the world have been stepped up to fight redundant or figurehead companies, such as the Russian de-offshorisation laws or the OECD Base Erosion and Profit Shifting mission.
The need for circumventing de-offshorisation laws is a very important goal for a businessman. This is achieved by the implementation of a correct corporate structure, with sufficient and acceptable assets and means that can justify the nature and capacity of the company’s business activities. Therefore when a company is domiciled in a tax haven jurisdiction it may be vital that it has a substantial rather than a nominal presence in its country of registration (to create “substance” in the jurisdiction). Implementing this can lead to significant benefits, including minimizing disputes or findings by other tax authorities (usually from the country of residence of the Ultimate Beneficial Owner) about the reasons for the establishment and the legitimacy of the operations of a company that has been moved or registered in a tax haven jurisdiction. Therefore an international organisation’s holding or other company should ideally have local working offices, with physical presence. It must also employ local staff and directors that can prove that they have knowledge and expertise in the activities the set up and administration of the company group and actually partake in the decision-making process
A popular jurisdiction in which corporations set up their European headquarters is Cyprus, mainly because it has the lowest corporate tax rates in Europe click here for Tax Regime in Cyprus, but also for many other commercial reasons. click here for more on why set up a business in Cyprus
Our Domiciliary Services
We offer a complete range of domiciliation services for international clients in many jurisdictions. Moreover, we offer additional services that may aid a company to convincingly prove that it is a tax resident of its founding jurisdiction, and avoid paying tax to another jurisdiction.
- Registered Office Address: We can provide you with a registered office in Cyprus in the heart of the capital city of Nicosia. Furthermore, via our associated service providers, we can provide you with an address for the registered office of your company in other jurisdictions. If you are not resident in Cyprus or in one of the jurisdictions structured for your specific needs and you do not have a physical presence in them, then ideally you would like to have a prestigious office to offer a domicile to your company.
- Virtual Office Service: If you are not resident in Cyprus or in one of the jurisdictions structured for your specific needs or your businesses are located globally you may still need to establish a corporate presence in that jurisdiction especially for tax residence reasons. With our Virtual Office Service you can professionally run your business at a minimal cost locally without renting costly office space or even hiring any local employees. Our Virtual office Service is a cost effective and easy method to considerably help and ease your effort to do business offshore. It is easy to set up and has all the characteristics of an operating and fully functioning office. This allows you to reduce traditional office costs whilst maintaining business professionalism. [hyperlink Secretary and Administration Services]