The trust documents are prepared and delivered to the client after receiving the necessary informa­tion from the client. The trust documents include:

• Confirmation letter from the Trust Company

• Declaration of Trust

• Instrument of Share Transfer (without date)

• Share Certificates

• Pre signed resignation letters from the nominee directors and secretary of the company (without date)

There are two types of Powers of Attorney that the company can furnish the beneficial owner in order to establish a visible con­nection with and official authority from the company. (In addition to the ownership relationship which the client may not want to be visible). The Power of Attorney is issued upon written instructions from the client.

The first type is the general Power of Attorney with the company rendering all authority to the attorney to act on behalf of the company. This Power of Attorney is usually, but not necessarily, intended for the beneficial own­ers of the company.

The second type is a specific Power of Attorney with limited authority to perform specific functions on behalf of the company. A specific Power of Attorney is usually requested for the client's associates or members of his management and person­nel. Nominee directors usually issue the Power of Attorney for the period that their work as directors has been paid for.

3.4. Apostilled documents

Anyone who has had to conduct legal matters in one country on behalf of a person, legal or physical, residing in another, has probably faced the problem of the acceptability of these documents, and questions about their authenticity. The Hague Convention was signed on 5 October 1961 by a number of countries, in order to unify and standardize the method of legalizing documents issued in one country, for use in another. The apostille itself is a certificate issued by a govern­ment body of one of the convention member countries, confirming the authenticity and legality of the document to which it is attached. It is used regularly in cases where documents of a company must be presented for various things such as opening bank accounts, buying shares, or registering a rep office in another country. Apostilled documents are, in accordance with the rules of the convention, fully acceptable in such cases as genuine legitimate legalized true documents.

 3.5. Legalized documents

Another way of legalizing documents, in other words providing confirmation of the authenticity of the document to the party to whom the document is presented, is the legalization of the documents. This is done by the Embassy of the country where the documents are intended to be used. An original document is first legalized at the Ministry of Foreign Affairs of the country where it is issued; in other words the Ministry confirms its authen­ticity. Then the document goes

to the Embassy, which, accepting the confirmation of the Ministry, legalizes the document also. The Embassy, in cases where documents in the language of the recipient country are required, can also confirm the correctness of the translation of the documents. Thus, the end result is a document, the authenticity and legality of which is fully confirmed by the Embassy of the recipient country, and as such will be fully accept­able for legal transactions within that country.

4. ADVANTAGES OF OFFSHORE COMPANIES

Anonymity and confidentiality

The vast majority of the owners of offshore companies utilize nominee directors and nominee shareholders in order to maintain anonymity and confidentiality. There are many reasons for doing so, including:

• In most of the cases the offshore company is utilized as a third independent party having "arm length" transactions with the client's local market. In this case the two companies should not have the same director(s), since the same person cannot sign an agreement  between the two companies in his capacity of director in both companies!

• Most countries maintain the tax doctrine that liability for tax is determined according to the location of the management and control of the company. If it is evidenced that the registered directors and registered shareholders of a foreign company are located in the local market the income of the foreign company will be considered as the income of the local owners, for which they will be liable for tax.

• The clients want to maintain a low profile / anonymity for their commercial activities / accumulated profits / investments.

• In some countries according to the Central Bank regulations citizens are not allowed to open accounts in foreign banks, open up companies, hold shares, etc. The trust agreement system allows all the above actions within the legal framework.

As described above, all of the elements of a company's legal structure, such as shareholders, directors, secretary and legal address are clearly visible in the documents filed in the Registrar of Companies. The Registrar is a government Department respon­sible for the registration and maintenance of companies in the jurisdiction. It is usually under the control of the Ministry of Commerce. Files with all statutory documentation, such as certificate of shareholders, direc­tors, and so on are kept at the Registrar for all companies. The public has a right to view these documents without providing any reasons whatsoev­er, for a minimal fee. The law gives this right to the public so that people may make informed decisions as to whether to invest in any given company or lend it money. The reasoning is that since the shareholders have limited liability, the public should at least be able to examine the legal structure of the company prior to making an investment decision.

However, and fortunately for those of our clients who wish to conduct their business in anonymity, the legislature of most offshore jurisdictions also allows for nominee shareholders and directors to be used. In essence, this means that it is the nominees' names that are on public display, and not the names of the real owners. It should be taken into account that absolute anonymity is impossible in cases where there are criminal proceedings pending against the company. The names of the beneficial owners will be revealed only upon a court order from the Supreme Court. Some of the reasons for such proceedings may be dealing in narcotics, weapons, radioactive materials or other criminal activities. As a rule, inquiries from foreign tax or customs inspections have no jurisdiction over such companies and as such no information is revealed.

4.1.1. Nominee shareholders

are able to hold shares on behalf of the real owners thanks to the concept of trusts, which was origi­nally elaborated by English Common Law and goes back to medieval times. A trust is an arrangement whereby a person (physical or legal) called a trustee is the disclosed owner of property, but holds it on behalf of and for the benefit of another, called a beneficiary. A written instrument called a Declaration of Trust or a Trust Deed usually creates trusts. Any third party, which wants to find out the identity of the owners, will only see the names of the trustees.

For secure ownership the following documents are provided by the nominee shareholders to the beneficial owners of the company:

 1. The Declaration of Trust.

This document signed by the nom­inee shareholders certifies that they hold the shares on behalf of the beneficial owners and lists their responsibilities in doing so; they can not vote with the shares, they can not pay dividends, they can not transfer or mortgage the shares, they can not increase the share capital etc., except with the written instruction of the beneficial owners.

 2. A pre-signed Instrument of Transfer is a document by which the trustees in effect transfer the shares back to the beneficiary. This document is pre-signed by the trustees but not dated. All the owner has to do to remove the trustees from the legal structure of the company is to sign the Instrument as the acceptor of the shares and inform the Registrar of Companies of the change.

3. The original share certifi­cates that also belong to the beneficial shareholder.

Extracts from the Declaration of Trust:

" We undertake and agree not to transfer, deal with or dispose of the said shares or any of them except as the owners from time to time direct. And further to give full effect to the trust hereby declared we hereby deposit with the owners the certificate for the said shares together with a transfer there of executed by us in blank and we hereby expressly authorize and empower the owners at any time to complete such transfer by inserting the name or names of any transferee or transferees and the date of the transfer and to complete the same in any other particular.

And we declare that this authority is irrevocable by us.... And we further undertake and agree to exercise our voting power as holders of the said shares in such a manner and for such purposes as the owner(s) may from time to time direct or determine.

 Extracts from the pre signed instrument of Transfer:

"... and we (PPB INC trustee companies) hereinafter called the transferors as per declaration of trust dated (date) do hereby transfer to (names of client) here­inafter called the transferee, the shares shown in the schedule hereto held by us in the undertak­ing called (name of offshore company) to hold unto the said transferee(s) his / their executors, administrators and assignees..."

4.1.2. Nominee directors and secretary

Similar to the trustee (nominee) shareholders, nominee directors and secretary may also be used, in order to achieve full anonymity. These are individuals, or legal persons, who undertake the functions of these positions, in order to provide anonymity for the client. It is understood of course that these persons can not possibly be as familiar with the business of each individual client as the client himself is, and as such act only, and strictly, in accordance with the wishes and instructions of the client.

It should be pointed out that there is no such term as nominee in the eyes of the law. As such, directors even if acting as nominee, never­theless are legally responsible for the activities of the company. Therefore, directors should approach their posts with full awareness of the responsibilities and obligations that go with them.

For total control of the company by the client upon their appointment, the directors and secretary should give to the real owner resignation letters, signed but undated. Also the nominee directors and secretary must confirm that they are prepared to cease rendering their services upon a request from the owners. In this way, the owner may remove them from these positions at any time he sees fit. Thus, as we look at the nominee structure as a whole, the client is simultane­ously provided with total anonymity on one hand, and full freedom to effect changes in the legal structure of the company on the other. All the documents prov­ing ownership and anonymity, yet enabling him to alter the structure, are in his possession.

Extract from the undated and pre signed resignation letters:

" ... I hereby give you notice that I wish to render my resignation as a director of your company as from today, due to other commit­ments.... "

We have therefore considered the two issues that any client should normally consider;

• the secure ownership of the company for the client in relation to the nominee shareholders

• the ultimate control of the company by the client in relation to the nominee directors

It is also important that those making use of offshore companies with nominee directors and nominee shareholders retain an established and reputable management company like PPB INC to provide these services.

There are two additional agreements that govern the relationship between the management company, nominee directors and nominee shareholders on the one side and the beneficial owner and client on the other.

1. The first document is the engagement letter that lists all the work that the management company will carry out for the company, like accounting, auditing and filing the relevant tax applications if necessary, and sets out the responsibilities of the nominee directors and nominee shareholders to act in accordance with the clients' instructions.

Extracts from the engagement letter:

" ... in the provision of services referred to the above, we shall not be liable for any loss to the company however we shall be responsible if those losses arise because of any willful and individual fraud or wrong doing by our side"

 2. In the same manner that the above documents protect the client, the indemnity letter signed by the owners of the company will protect the nominee directors and nominee shareholders, in the event that the beneficial owners of the company engage in illegal, criminal and fraudulent activities that will in any way endanger the nominee officials of the company. It is quite logical for the nominee directors not to be responsible for matters beyond their control.

All client information is securely kept at the PPB INC head offices in Nicosia, Cyprus. All service and administration of the clients take place from the head office, in this way guaranteeing confi­dentiality and total discretion. No information regarding clients is kept at any office other than the central office in Limassol.

PPB INC POLICY

• We maintain confidentiality –We recognize confidentiality as a privilege and even within the firm we only divulge  sensitive information on a  need to know basis.

4.2. Low or no taxation

The offshore jurisdictions offered by us allow our clients to run their business in an atmosphere of very low taxation, or no taxation at all. There are many types of taxes imposed upon businesses in high tax jurisdictions, such as income tax, VAT, tax on turnover, tax on salaries, tax on dividends, municipal taxes, defense taxes, road taxes, fire-fighter taxes, real estate taxes, and so on.

When we speak about no tax, we mean it. Our no tax jurisdictions, such as Bahamas or Gibraltar do not impose any of the above taxes. A company registered in such a jurisdiction pays no tax whatsoever of any kind.

If we look at jurisdictions with low tax, we are talking always about a tax on the actual net income of the company. A jurisdiction with such a tax is Cyprus, where the tax is 10% on net income. Net income is calculated by subtracting from revenue all expenses incurred by the company in connection with the running of the business. This includes cost of goods sold, salaries, travel and hotel expenses, and entertainment of clients, professional fees, commissions and so on. There are no limits, other than reasonableness, for these expenses. Further, salaries themselves are not taxed at all if the company's personnel is located outside Cyprus.

Yet other jurisdictions, the Isle of Man for example, impose a fixed tax (STG750, or USD 1,275) on a company, regardless of its profits, or losses for that matter.

It should be added that the company as a legal person is a legal subject of the country in which it is registered. As such, it is subject only to the laws of that country, notwithstanding the citizenship of its owners, its field of activity or other factors. Moreover, it is not obliged to register with the Tax Inspection of any country other than the one where it is registered.

No wonder that thousands of businessmen and companies utilize offshore companies for international tax planning, including world renowned multinationals such as Pepsi Cola, Tetra Pak, Barclays, RJR Nabisco and others.

4.3. Exchange control

In all of our jurisdictions without exception, offshore companies are not subject to any exchange controls whatsoever. Say, if a company holds an account in a Cyprus bank, it can receive funds in cash or non-cash, in any currency, and also make payments to any person in any country, or make cash withdrawals, without any explanations or documentation whatsoever required by the bank. Thus, the company operates in a completely unrestricted banking environment.

4.4. Secure political and banking systems

after the emergence of newly independent countries on the territory of the former COMECON bloc there has been quite a number of bank failures, and outright pyramid schemes, which has cost the public an immeasurable amount of lost savings and earnings. Unfortunately the described processes have not ceased up to the time of the present publication. In summer - autumn 1998 Russia's economy was shattered by severe economic crisis. This depreciated rouble capitals and led to multiple losses and bankruptcies. The clients of PPB INC in their majority do not rely only upon their rouble accounts or state securities. It is the offshore structures' activity that allows a company to overcome the hardships of the crisis and stand against its consequences with greater success than its short-sighted competitors.

 Yet it is not only shaken Eastern European economies which are suggestive to businessmen regarding the achievement of safe haven status for their capital. Banking systems in most developed countries invariably are on the side of the tax inspector when it comes to the information access to client records. As such, securitization of one's business interests and assets has for years attracted businessmen and wealthy individuals long before Eastern Europe became a free market.

Jurisdiction categories: Cyprus, England, Delaware – USA, Bahamas, Isle of Man, Gibraltar.

 5. JURISDICTIONS

5.1. Making the right choice

When choosing a jurisdiction in which to register an offshore company, the client should very carefully consider the various parameters of different jurisdic­tions. One could of course collect over time volumes of materials and publications on the subject, yet likely the most effective and reliable way to make this decision is to consult with professionals dealing with this information on a day-to-day basis. PPB INC experts will be glad to assist you with this decision.

Some of the basic factors that potential clients should consider prior to the choice of the offshore jurisdiction of their company include the following:

• Suitability for present purpose and function of the company

• Respectability

• Double tax treaty network

• Legalization of documents with respective embassy and apostilled documents

• Tax regime of the offshore jurisdiction

• Set up and annual operating costs

• Disclosure requirements as per offshore jurisdiction

 

Suitability for present purpose and function of the company

Will a company registered in a particular jurisdiction fulfill the requirements of its future use? For example:

•   A client trading with European multinationals, will probably choose a company from a prestigious jurisdiction, such as England or Cyprus.

• A client wanting to use a company bank account for his savings, without any further operations whatsoever will choose one company from the easy and cheap jurisdictions (Bahamas, USA, Gibraltar).

• A client planning to conduct work for and on behalf of his offshore company on the territory of his own country or others, will choose a jurisdiction with the most favorable Double tax treaty.

• A client planning to reinvest part of his working capital in his local market will choose a jurisdiction with the most favorable Double tax treaty (Cyprus).

• A client planning to use the company for re-invoicing between two European countries and should choose a European offshore jurisdiction facilitating the registration of its companies for VAT applicable for the European Union (England, Isle of Man, Cyprus).

In other words, the client should make the jurisdiction match the way the company will be used, and not the other way around.

We have had in our experience cases of clients of other firms coming to us with their Cyprus companies, which were only used as receptacles of funds for further transfers to personal accounts, without any commercial arms length transactions, or documen­tation. Notwithstanding this simple working scheme they had to carry out annual audits, which entails an additional cost. An American or Bahamas company would have been more suitable to such clients, having no reporting requirements.

On the other side of the spectrum were businessmen who had purchased somewhere a Bahamas company ("good price!"), yet were completely unable to use it in their work as broker agents of negotiable instruments on the territory of an eastern European country. Without professional advice, it is easy to mismatch the advantages of a jurisdiction with the way the company will be used. We always help our clients to avoid this mistake.

Respectability

The higher the profile of the offshore company will be the more important the respectability issue is. In the opinion of many professionals, jurisdictions are split into three categories, or groups.

5.1.1. Tax havens

The cheapest, and easiest to define, are jurisdictions which have no taxes at all, and no accounting requirements. Because they have no accounting requirements, in other words, they do not expect companies registered there to account in any way for their activities, they are considered as not having any supervision over the affairs of their companies.

5.1.2. Respectability without accounts

The second category is considered more respectable, due to its location. Locations such as Gibraltar (part of England), USA, Delaware, or the Isle of Man (Great Britain) are themselves respectable, or are situated in Europe, and as such are considered as more reputable than the first group.

Yet, they also do not require accounts, or levy taxes. As such, they are quite easy and cost effective to operate, although they also usually do not give the advantage of a treaty network.

5.1.4. Prices

An important, and at the same time least important factor in choosing a jurisdiction. We know of many examples where businessmen registered companies based on cost considerations alone, buying in effect a financial instrument of limited use, and were then forced to purchase a company from a respectable jurisdiction with universal capabilities.

If the reader compares the additional profits he plans to receive with the help of the new company, and its cost, he will see that they are in a different league.

The company should be a trustworthy, universal and respectable financial instrument with many capabilities. And, if you agree with us, in that case there is no need to even consider dubious offers of companies for "USD399". It is easy to buy or sell such a company, but who needs a useless pack of documents of questionable origin?

 5.2. Double Tax Treaty Network

If one of the functions of the offshore company is to invest in Russia or other Eastern European countries or any other country or to render services to companies in these markets the double tax treaty network which the offshore jurisdiction maintains is of utmost importance.

What are the double tax treaties all about?

The main purpose of a double tax treaty between two countries is the avoidance of double taxation of income received accordingly in one of those countries by a company registered in another country.

The treaties in most cases follow the model treaty of the Organization for Economic Co-operation and Development (OECD), modified where appropriate to take into consideration the particular characteristics of each contracting state. They deal with the issues of residency, permanent establishment, and relief from double taxation; dividends, interest, royalties, non-discrimination and all other issues dealt with in modern tax treaties.

The existence of these treaties combined with the low tax paid by offshore companies can offer tremendous possibilities for international tax planning. Cyprus is in a unique position when compared with other offshore financial centres because of its wide and increas­ing list of countries with which it has concluded double tax treaties. The treaties Cyprus has with Russia and a number of Eastern European countries are of particularly favorable terms.

5.3. JURISDICTIONS

5.3. I.CYPRUS

General Information

Cyprus is an island in the south­eastern part of the Mediterranean sea with a population of 700,000. The main language of the island is Greek with English being the pre­dominant business language. The capital of Cyprus is Nicosia, which is located in the centre of the island.

Corporate Legislation Source

Company Law 1948, Cap 113, amended

Tax Regime

All Cypriot companies which have the status of Cyprus resident pay income tax at 10 per cent on the taxable profits.

Double Tax Treaty Network

Cyprus has concluded double tax treaties with the following countries:

Austria, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, Poland, Romania, Russia, Slovakia, Sweden, Syria, United Kingdom, United States and Yugoslavia.

Reporting and Statutory Requirements

 All Cyprus offshore companies have to:

• File annual returns to the Registrar of Companies

• Prepare, audit and file annual financial statements

• Prepare and file provisional and final tax declaration

• To send a notice to the Department of Internal Revenue, confirming the non-resident status of the company.

Special Considerations

• Bank Reference for the Central Bank of Cyprus. The Central Bank of Cyprus requires bankers' references for the beneficial owners of the Cyprus offshore companies. A bank reference provided by fax to PPB INC as shown below is adequate:

"To whom it may concern, We hereby confirm that (give the names of the beneficial owners) are well known to us and in our opinion of good financial standing and trustworthy persons. The above information is given without any responsibility on the bank or any of its officers"

• There is no entrance visa requirements for the citizens of Russia

• Working residence Permit Cyprus is the only offshore region that entitles the owners and management of its offshore companies and branches to apply and obtain the permit to live and work from Cyprus with their families and dependants, subject to certain criteria and with the condition that they derive all their income from their activi­ties overseas. The applicant must be over 25 years of age and be a director of the company.

The company must have purchased or rented office in Cyprus, and the individual must have accommodation.

5.3.2. ENGLAND

General Information

Independent monarchy, constitutes the United Kingdom together with Wales, Scotland and Northern Ireland. Population is 47 million people, with English as the official language.

Corporate Legislation Source

Section 249, Financial Act 1994

Tax Regime

Where established that the English company has its place of residence in a country with which the UK has an appropriate double tax treaty ( e.g. Cyprus) the English company will have no tax liability in the UK but instead will pay taxes on its place of residency ( e.g. Cyprus at 4,25 % on taxable profits).

Double Tax Treaties

A branch of the English company is established in Cyprus which can utilize the wide and favorable tax treaty network of Cyprus with Austria, Bulgaria, Canada, China, Czech Republic, Denmark, Egypt, France, Germany, Greece, Hungary, India, Ireland, Italy, Kuwait, Malta, Norway, Poland, Romania, Russia, Slovakia, Sweden, Syria, United Kingdom, United States and Yugoslavia.

Reporting and Statutory Requirements in England

All UK non-resident companies have to:

• File annual returns to the Registrar of Companies

• Prepare, audit and file annual financial statements

• Send a notice to the Inland Revenue establishing its non residency

Reporting and Statutory Requirements in Cyprus

• File annual returns, tax declaration and financial statements

Special Considerations

• Bank Reference for the

Central Bank of Cyprus. The Central Bank of Cyprus requires bankers' references for the beneficial owners of Cyprus offshore branches, with the same content as for Cypriot companies.

• Respectability England is not an offshore jurisdiction. The no tax liability in the UK is achieved through the application of the double tax treaty it maintains with Cyprus. This facilitates the client to utilize a non-offshore European company but at the same time pay taxes at nominal offshore rates. This structure is very suitable for high profile activities that require utmost respectability.

• Nominee company The English company can also function as a nominee company in conjunction with a pure offshore structure. The English company conducts business for the benefit of the counterparty, on the basis of an agency nominee agreement. In this case the English company performs this function for a certain amount of profit, expressed in the agree­ment as a certain percentage of the turnover. English tax of 21 % to 33 % depending on the amount is paid by the English company. The remaining profit is transferred to the counterparty, and the client pays tax, if any, in accordance with its jurisdiction.

5.3.3. UNITED STATES OF AMERICA

General Information

The latest developments in US corporate legislation have created a unique opportunity in the field of international tax planning for non-US taxpayers to use an American entity as a company totally exempt from taxation.

An LLC, or Limited Liability Company, differs from all other US corporate entities. It is neither a corporation nor a partnership, yet it has benefits drawn from both of these. It combines the advantage of limited liability of corporations with the pass-through principle of taxation associated with partnerships. The owners can be any foreign physical person or corporate entity.

Tax Regime

According to the new IRS regula­tions, as from the first of January 1997 LLCs automatically receive pass-through taxation treatment. Pass-through taxation means that all profits and losses are passed on to the partners or members. In this way, the company is not subject to taxation, because the taxes are imposed on the owners or members.

This can prove especially advan­tageous for an LLC that meets the following criteria:

• it pursues no trade or business in the US

• its members are non- resident aliens or foreign companies

• it has no fixed place of business within the USA

If the LLC meets these require­ments, then neither the company, nor the members of the company are subject to taxation in the USA on their profits.

Double Tax Treaties

Although the US has a wide ranging network of Double Tax Agreements, non-resident companies which do not pay tax in the US, and do not have a tax i.d. number, do not qualify for these treaties.

Reporting and Statutory Requirements

Generally, an LLC is subject to the bare minimum of reporting, namely a legal return and the payment of a nominal govern­ment fee once a year.

Special Considerations

An American LLC is an excellent vehicle for tax planning since it attracts no negative reaction associated with pure offshore centers. However, it can not be used for business transactions with American entities without attracting American tax.

Below we give an example of Delaware, one of the most popular states for company formation.

 5.3.4. DELAWARE, USA

General Information

The state of Delaware is located on the Eastern Coast of the USA 100 km from New York. The state of Delaware implemented a zero State Tax rate in order to encour­age American and Foreign companies to relocate or locate their offices and activities from other American states to Delaware and thus increases employment in their state.

Corporate Legislation Source

General Corporation Law of Delaware

Tax Regime

There are two main types of income tax collection in the US. One is at the federal level, and all companies without exception are liable to this tax, and the other is at the state level. The State has the power to set the level of this state tax. Delaware has set it as zero, thus creating significant tax advantages for American companies registered there. Companies belonging to non-residents, and not having any activities on US territory, also do not pay the Delaware State tax, and by virtue of being non-resident, fall outside the scope of federal tax legislation. As such, they are not taxpayers in the US and pay no tax.

Double Tax Treaties

Although the States have a wide treaty network, non-resident companies do not qualify.

Reporting and Statutory Requirements

Delaware companies have to file an Annual Franchise Tax report and pay the Franchise tax

Special Considerations

The above description of a US company with limited liability with 0% state tax is very attrac­tive to clients planning specifically to do business in or with the USA. It is precisely this zero state tax which has attracted over 60% of the 500 largest American corpo­rations to relocate to this state. An LLC however is perfectly suit­able for clients interested primari­ly in a completely no tax US corporate vehicle, without activi­ties in the USA. Thus, Delaware may be said to be ideal for both US and non-US activities. It is one of the cheapest and easiest jurisdictions to operate in. Delaware companies cannot open up accounts in American banks or have trade relations with other American companies.

5.3.5. BAHAMAS

General Information

Bahamas is an independent state within the British Commonwealth with a population of 262,000 and is situated southeast of Florida (US). The government is committed to continue to provide a no-tax regime with simplified incorporation rules. The official language of Bahamas is English. A modern Registrar building has recently been completed, at a cost of USD 1.25 million.

Corporate Legislation Source

International Business Companies Act of 1989.

Tax Regime

$US250 p.a.. State Tax. The tax is paid for each calendar year, and must be paid by 30 April in order not to incur penalties.

Double Tax Treaties

No double tax treaty network.

Reporting and Statutory Requirements

Bahamas companies have to file annual returns to the Registrar of Companies.

Special Considerations

Bahamas companies allow the provision of bearer shares. Even if the company issued bearer shares, the state authorities demand that a real registered company's agent, usually an advocate, must be present on the island. He must be aware at any moment who holds the shares of the company. In this respect, the registered agent fulfills a function similar to that of the nominee shareholder. He is aware of the identity of the beneficiary, although the beneficiary's identity is not shown in public documents. The transfer of ownership of such a company is effected by physical transfer of the bearer shares, and the notification of the registered agent regarding the change. Certain banks avoid dealing with bearer share companies, since the ownership cannot be ascertained with ease at any given time.

Bahamas is a region with a very small population, a relatively small local economy and a well-known offshore centre. Therefore a Bahamas company may not be suitable for third party transactions and re-invoicing especially in consideration of its distance from the European market.

 5.3.6. ISLE OF MAN

General information

The Isle of Man is a self-governing island within the British Commonwealth located between England and Ireland. The local government began promotion of the island in the 1970's, and it is now estimated that over 35% of the national income are from the finan­cial services sector of the economy. The legal system is based on the English common law type, and as such the main principles of compa­ny legislation are fully applicable.

Corporate Legislation Source

Common Law - Companies Acts 1931 to 1986

 Tax Regime

Isle of Man non-resident compa­nies (its directors being located overseas) pay an annual fixed charge of STG 750. Isle of Man resident companies (its directors being located on the island) pay an annual fixed tax charge of STG 300.

Double Tax Treaties

Isle of Man has no network of double tax treaties.

Reporting and Statutory Requirements:

Isle of Man exempt and non-resident companies have to file annual returns to the Companies House.

Special Considerations

Isle of Man is an island with a population of around 70,000, a relatively small local economy and a well-known offshore centre. Therefore an Isle of Man company may not be suitable for third party transactions and re-invoicing.

At the time of going to print, certain changes in the Isle of Man legislation are being anticipated. Non-resident companies, as described above, may no longer be delivered. Instead, exempt companies with local directors still exempt from progressive tax, but a slightly lower fixed tax, will be allowed.

 

3.7. GIBRALTAR

General Information

Gibraltar has retained the Status of a British Crown Colony. it has an area of 6,5 square km, a population of 28,000 and is situated between Spain and Morocco. The official language is English, and it has English Common Law legislation mirror­ing the English Companies Act of 1929.

Corporate Legislation Source

UK Common Law 1929 Act, introduced locally as "The Companies Ordinance"

Tax Regime

Gibraltar tax exempt companies pay no tax, but pay a small fixed duty.

Double Tax Treaties

Gibraltar has no double tax treaty network.

Reporting and Statutory Requirements

All Gibraltar companies have to file annual returns to the Registrar of Companies

Special Considerations

• Although Gibraltar is a part of the European Union it is excluded from the EU VAT legislation.

• Gibraltar is a region with a very small population, a relatively small local economy and is a well-known offshore centre. Therefore a Gibraltar company may not be suitable for third party transactions and re-invoicing.

• Gibraltar is currently

undergoing slight adjustments in its approach to offshore business. Namely, the Gibraltar Financial Services Commission has issued a number of circulars regarding registration rules for companies with certain sensitive names, or clauses in their Memorandum. 

5.3.8.BRITISH VIRGIN ISLANDS

British Virgin Island – are considered as British territory, of more than 50 islands , 95 Km east of Puerto-Rico. Total size of the islands – 155  km x 60 km and population 21000 people. The main island is Tortola, with a population of 13500 people. The capital is Rod-Tauna on Tortola. Traveling to islands is easy both by air or sea. Main entrance points are Puerto-Rico and American Virgin Islands. The territory is politically stable with a high level of internal administration.

Corporate legislation source

International Business Companies law of 1984

Type of registered companies – LLC

Share capital terms – no minimum limitations for IBC

Tax regime – no taxation. Payment of annual sums of 300 USD for IBC with share capital up to 50000 USD and 1000 USD for IBC with share capital more than 50000.

Company registration Procedure – formation of the subscriber in the presence of witness, performance of the signed memorandum and association agreement to the registrar and signing of the documents by a registered agent.

Potential shareholders – the registered agent

Registered office and agent -  is a must in BVI – For IBC a copy of the shareholder certificates must be kept in the registered agents office.

Director & secretary – a minimum of I person as a director. Secretary is not obligatory. The director and the secretary can be non-residents. Nominees could be used in both cases.

Auditing & Accounting – not obligatory

Exchange control -  no exchange controls

Recommendations – needed. 2 recommendation letters from professionals such as lowers or auditors.

 

5.3.9. SEYCHELLES

Seychelles are the “Tax Heaven” for the Europeans, Americans and Asians. They are an independent state with a stable administration. The main languages are English and French. There is no Exchange control and tax treaties with other countries.

 

Corporate legislation source

International Companies Low - 1994

Type of registered companies – IBC

Share capital terms – 5000 USD – minimum share capital issued 1 USD

Tax regime – no taxation. Payment of annual license 100 USD.

Registered office and agent -  is a must .

Director & secretary – a minimum of 1 director and 1 secretary. The director must be a non-resident.  Nominees could be used in both cases.

Auditing & Accounting – not obligatory

Exchange control -  no exchange controls

Recommendations – not needed.

 5.3.10. NETHERLANDS

Type of registered companies – Private or Public Liability Companies

Registrar -  Ministry of Justice

Tax regime – Holdings are “free” of Corporation Tax

Auditing & Accounting – Annual reports and accounts is a must. Audit is a must for companies with assets more than 5000000 NLG or with turnover more than 10000000 NLG. Tax treaties with Russia, Ukraine, Bulgaria and Rumania

Company structure-  minimum of 1 director. The directors can be non-residents . Nominees could be used. Minimum of 1 shareholder. Secretary / agent is a must.

Registered office and agent -  is a must .

Recommendations – is a must 

Incorporation Time for All Jurisdictions

PPB INC maintains a stock of newly registered companies that are available for the client upon request. Alternatively PPB INC will form a custom made company for the client in two to three weeks. Clients can take delivery of the statutory documents, bank account and stamps of the company on the same day. Legalized documents, if applicable, take from 2 to 5 working days to dispatch.

6. WORKING SCHEMES and USES or an OFFSHORE COMPANY

We are convinced that our clients come to us already with specific plans for their future company in mind. After all, no one knows better than the client the intricacies of his business. We also believe that each client needs and deserves a custom made approach to his business, so that the optimum decision may be made as to the right set-up for him. However, certain general suggestions may be useful at the initial stage of choosing a jurisdiction, and as such we set out below the main business areas where offshore companies are useful.

6.3. Investment

Most countries if not all have withholding taxes. These taxes are imposed on income earned on or from the territory of that country by foreign persons, and this income is taxed at source prior to repatriation. The size of these taxes varies, but is most often between 15 and 20 percent. This, admittedly, is a sizeable amount. Double tax treaties exist which allow for a reduction, and in some cases, elimination of this withholding tax. For foreign investors investing in Eastern Europe for example, it would make sense to channel their investment through a country with such a treaty with the investment-recipient country. If this intermediate country has low taxation, then the net result is the avoidance of withholding taxes, as well as avoidance of the dividends being taxed upon their receipt in the investors' country. A very good example of such an intermediate country is Cyprus, with its network of double tax treaties with over 25 countries,with zero withholding rates in most cases. It is no wonder, that in accordance with official statistics of the Russian govern­ment Registration Chamber, Cyprus holds the 3th place in terms of monetary value of foreign investments into Russia.

6.4. Finance

An offshore company is able to give a loan to a related company located in a high tax area, with tax deductions for interest pay­ments. In this way, both inward investments from a foreign entity is achieved, which may be advantageous due to foreign investor protection laws, as well as tax savings on the deducted interest.

6.5. Intellectual property  

Intellectual property, such as copyrights, trademarks, software or titles may be sold offshore, for later resale or lease or fran­chise to the home country at a substantially higher value. As such, the bulk of the profits arising from the utilization of the intellectual property are realized offshore, with minimum tax implications.

 

6.6. Negotiable instruments

 This area of offshore utilization relates to Cyprus specifically. Certain clauses in its double tax agreements allow for brokerage and agency services to be conducted in other countries, without being viewed as permanent establishments and as such not being liable to taxation. This scheme is particularly advantageous in conjunction with goods and services, which are not vaitable, and liable only to income tax. One such example is trading in negotiable instruments, where substantial profit may arise, especially in developing, volatile markets. Use of a Cypriot offshore company and its eligibility for the double tax treaty allows for the avoidance of income tax in such cases.

6.7. Real estate

Being a premises owner allow to IBC most times to avoid different taxations. In most countries there is no difference between legal or physical person ownership.

6.8. Insurance

Some jurisdictions allow the registration of insurance companies and create the necessary conditions for them to exist with low or zero income taxation. Registration of insurance companies is much more complicated but the results worth it.

6.9. Banks

Banks can be registered in different jurisdictions with limited internal licenses and can operate in zero taxation regions. Bank registration is complicated and expensive. PPB INC LTD has the experience for the registration of banks.

6.10.Shipping 

Certain countries, such as Cyprus for example, allow for the registration of shipping companies who can operate without any income tax liability. Furthermore, such countries try to offer competitive terms as regards ship registration, over­seas maritime services, and gen­eral ship management matters.

As said before, the uses of offshore companies are multifaceted, and they probably should not be viewed as one tool for a particular job. Rather it is like a financial "Swiss army knife", which has many uses and applications.

 

In what bank can I open an account?

Over 5000 banks are currently operating in the world, ranging significantly in factors such as size, dependability, age and conservatism. Regarding the latter, quite a few well known banks have chosen to follow the policy of a private club, opening and servicing accounts only for well known companies, and rejecting to do banking business with clients unknown to them. PPB INC is able to offer to our clients well known banks having a ranking in the World Bankers Almanac, as well as a security risk ranking of A- or better.

How is the bank account opened?

PPB INC will provide to the bank all the necessary documentation for the account opening, and fill out the specimen signature cards with the client. After the bank gets all the documentation, it provides us with an account number for the company showing all the account particulars.

How is the account operated?

Clients operate the account from a "distance". In other words, they give instructions to the bank over a modem or fax, in writing. As long as the bank receives clearly readable and correct instructions, the payment or other transaction is executed the same day.

How are my funds protected from unauthorized access?

Most of the banks introduced by PPB INC issue its clients test key codes. These codes are unique for each client, and are designed for the purpose of preventing unauthorized access to the account. The client receives these test key codes in a sealed envelope directly from the bank by DHL, and must keep them in a secure place.

How are credit cards issued, and operated?

Cards are issued by the bank against the blocking of a deposit in the amount of USD 10,000. On top of that, the client must deposit a sum of money, which he would like to have access to through the card. Cards are issued always with the person's name on it. Only one person can use the card. Corporate cards can also be issued, with the company's name appearing together with the person's name. You can use the card to withdraw cash at cash machines all over the world, in a bank, and also use it for payments and purchas­es at any merchant or commercial point which accepts Visa or MasterCard.

How does the registration process take place?

PPB INC needs certain information from the client in order to form a company. This information includes names and addresses of shareholders, their choice of bank, who will be the signatories to the bank account, what person is authorized by the Power of Attorney, what additional documents might be required, and whether there are any other special instructions as regards the company. All of this information is contained in our questionnaire and other working documents in our registration pack, which is filled out by the client together with one of PPB INC staff, or our representative. The documents are then sent to us by e-mail or courier. PPB INC then does the necessary legal work to prepare documents and open bank accounts, and dispatches the working company to the client by DHL.

How fast can it be done?

Ready companies by definition can be received by the client upon payment. The additional documents, such as trust documents, and bank account test key codes, are then dispatched by DHL within 2 working days. If additional documents are ordered, such as legalized translations, 6-8 working days should be added to the process. If a company is custom made, with the client's choice of name, then PPB INC completes the process within 2-3 weeks.

What documents are need­ed from the shareholders?

The shareholders, or the owners in other words, must give to PPB INC the information necessary to form the company. As regards documents, only photocopies of their passports are required, for the opening of the bank account. There are no other documents needed for any of the jurisdictions except Cyprus. In the case of Cyprus, a bank reference on the beneficial shareholders is required from their bankers. The reference should be from a bank in the city where the owner resides. This reference should be provided to PPB INC so that we may get the permission of the Central Bank of Cyprus for the company to operate with an offshore status. The purpose of this reference is to prove to the Central Bank that the owners of the company are indeed foreign­ers. This information is kept strictly confidential, and in fact its disclosure would be a violation of banking regulations of Cyprus regarding client confidentiality.

How can I conclude contracts on behalf of the company?

PPB INC can prepare a General Power of Attorney from the company, which the client can use to represent the interests of the company in any country. The Power of Attorney allows one to open bank accounts, buy property, conclude contracts, hire staff, represent the company before government organs, and generally to do all things neces­sary to run the companies' affairs. When the client has this Power of Attorney, he can legally work on behalf of the company in any country in the world. If the client requires the signa­tures of the nominee directors, this can also be arranged for an additional fee.

Where are the seals of the company kept?

Two stamps are made for each company. One is a rubber ink stamp, which is kept by the client and used by him in daily work. The secretary of the company keeps the other one, which is a pressure seal, by law. It is used for authenticating share certificates, notes of directors meetings, etc.

What are the annual maintenance costs for a company?

The annual maintenance costs of running the company consist of several parts. The first part, which is fixed, is the cost of the nominee (anonymity) structure. The second part is the cost of bookkeeping and audit, for those jurisdictions witch require it. The third part is the fees charged on a time basis for any extra work not mentioned above, such as consultancy, legal assistance in visa procurement, credit applications, banking work, or any other matter.

How is the bookkeeping and audit done?

For jurisdictions, which require it, such as Cyprus and Ireland, PPB INC prepares all the necessary financial statements tor the client, based on documentation provided by him. The client then approves the statements and the tax payable, if any, and the statements are then passed for audit. PPB INC arranges for the audit to be carried out, and then submits the audited financial statements to the relevant government authorities. As such, PPB INC undertakes the entire bookkeeping and auditing cycle, and the client is only responsible to supply the relevant accounting documents, and approve the accounts as well as settle the related fees.

What documents are needed from the client by the auditors?

In order to prepare the accounts of the company, the PPB INC -accounts department must receive from the client all documentation relating to the movement of funds on the bank accounts of the company. Every amount going to or coming out of the company bank account must be supported and explained by a document. Basically, this system is not, and by its nature and purpose, can not, be different from any other accounting system.

The documents in question might be invoices or contracts. The client should also keep the invoices for things like airline tickets and hotels, as well as other expenses incurred in the course of the companies' business activities. Once all the documen­tation is supplied to PPB INC, we can prepare the accounts.

How can I sell the company?

If a client wishes to sell the com­pany, this is a relatively simple and uncomplicated procedure. PPB INC has standard consent