An IBC/off-shore company is a company that is set up in another country (jurisdiction) outside of where it carries on its main activities or operations, and it can have its bank accounts in another country outside of where it is set up.  Set up is simple, straightforward and can be inexpensive.

Example:

Jurisdiction                   Belize

Operations country       UK

Bank account              Switzerland

Choosing the right jurisdictions

The right jurisdiction might be influenced by the type and where in the world business will be conducted; and the tax issues for the shareholders, including the existence of double taxation treaties between the shareholder’s tax residency and the juristic diction of the company.

Many jurisdictions have an exceptional reputation and are well regarded by the finance industry and regulators, whilst some jurisdictions are regarded less favorably.  Recent and planned changes to OECD rules and not least US law, mean that most jurisdictions have changed and are continuing to change their regulatory frameworks.

Legitimate uses of IBCs companies

• International trading
• Reducing tax liability
• Asset protection
• Protection of intellectual property
• Succession planning
• Confidentiality
• Yacht registration

Benefits

IBCs companies have the following features which may be beneficial:

• Taxation:  In some jurisdictions IBCs are not taxed however they may have to pay flat rate annual government fees (Belize $100)

• Simplicity and Reporting:  Nil or minimal reporting is often required

• Legal and asset protection:  Some jurisdictions have strict restrictions on allowing a court to obtain or divulge company information.  In some jurisdictions local law takes precedence over that of the country there the company is sued. For example under Swiss law it is illegal to disclose banking information about a Swiss Company.

• Fees:  Some jurisdictions impose much higher fees to incorporate than other jurisdictions.
• “Maintenance fees” for a company’s annual renewal vary greatly from service provider to service provider but will reflect the cost of local government fees and other disbursements.

• Anonymity:  The Company is a separate legal entity, so name of the Beneficial Owner will necessarily appear in documentation.  However anti-money laundering regulations require banks to have an understanding of the ownership of the company.
• Financial assistance:  IBCs companies are usually not prohibited from providing assistance for the acquisition of their own shares.

Disadvantages

• IBCs companies are sometimes prohibited from conducting business or hiring staff employees in their jurisdiction of incorporation.
• Certain countries have anti-tax haven legislation which makes it difficult to conduct business in those countries using an IBC.
• Where a Shareholder of an IBC dies, it can be necessary that the will is admitted to probate in the offshore jurisdiction.  This will add cost and delay in executing the will.

Illegitimate uses include; Financing of terrorism; Money laundering; Tax evasion; Fraud; Confidentiality (for criminal activities); Evasion of creditors