Economic substance and offshore companies

In general, most online offshore formation companies simply do not create your offshore company, and offshore bank account in the most efficient or correct way. This can leave you and your business open to risk. Use Trust Formations and do things the right way - first time!

The term ‘controlling mind’ means the actual physical place where the daily business decisions and operations are taking place. For example, many people wrongly assume (and I will use the UK in this example) that they can simply form an offshore company based in a tax-free jurisdiction to benefit from the zero corporation taxes in that particular country. This is not as easy as it sounds, and many incorporation agents entice you in with cheap offers of offshore company formation for a few hundred pounds. If someone wishes to avoid and reduce their profit taxes, then being drawn to these cheap offers may put them and their business at risk.

If the ‘controlling mind’ is based in the UK, then HMRC may stipulate that the Company falls into the UK tax laws and thus will be liable for any tax due on the Company profits. This is because of the day to day decisions being made within their jurisdiction and have every right to enforce this.

By removing the legal controlling mind offshore and by justifying that any sales revenue is coming from outside the UK, there are ways to reduce any tax liabilities in a correct and legal manner. Trusts are a legal vehicle and act as an example of correct structuring of an entity. But it must be done correctly, and under the advice of professionals such as Chris Burton Consultants.

Board meetings always must be held outside of the UK, meaning that the controlling mind is ‘Offshore’

The board of Directors should be positioned outside of the UK.

Banking, business income, customers, and physical offices should also be based outside the UK giving your business a legitimate offshore presence and not just a registered office based in say, The Seychelles for example.

Many service providers will allow you to simply form a company in a tax-free jurisdiction, charge you upfront and let you ‘get on with it. But this is placing yourself and your business at risk.

For any advice in respect to Offshore Company Formations, Offshore Banking, the uses of Nominee Directors and Shareholders and advice on complex offshore structures, contact us now on 01904 222306

Do not incorporate an offshore company without talking to us first!