Our clients in their own countries or on an international scale engage in activities in many diverse areas: art, agriculture, banking, brokering, chemical products, construction, distribution of goods, electronics, exporting, energetics, engineering, asset management, hotels, importing, insurance, consultation on investment questions, manufacturing, natural resources, petroleum and gas, specialised professional activities, real estate, project financing, retail sales, shipping, show business, and textiles.

Below are presented some instances where Finreda can help its clients. Apply the main principles to your company and see how we can help you.

INTERNATIONAL COMMERCIAL COMPANIES

International commerce is one of the most popular areas, which is used by companies founded in countries with a low taxation level. After involving an offshore company in international commercial operations, big possibilities for tax savings can arise. If an offshore company buys goods in one country and sells them to another country, the profit obtained from these transactions can be accumulated in an offshore company in an offshore business centre without taxation.

The Isle of Man and Madeira have become the most popular in carrying out commerce between the countries of the European Union. Both on the Isle of Man and in Madeira it is possible to register VAT payers, which is necessary for operations inside the European Union. For example, if a Manx company wishes to buy goods in France and sell them to Germany. This company gives its VAT payer number to the French firm so that a zero VAT rate is used in the sales invoice. In this case the French firm does not need to calculate VAT on the invoice presented to the Manx company. Then the Manx company, after obtaining the German firm’s VAT payer number, uses a zero VAT rate in its sales invoice.

This kind of transaction is usually impossible to perform through companies registered in other jurisdictions without founding a company branch or appointing a tax agent in the territory of the European Union and that can be complicated to do and have fiscal consequences.

The factoring (discounting) of debts or liabilities of a company resident in a country with a high taxation level through a company registered in a low tax jurisdiction can help in transferring funds to a low tax country.

Another ordinary instance is the use of an offshore company for large purchases of goods. Such a structure is usually created by a group of associated or independent companies in order to save money thanks to large scale purchases and low administrative costs. In addition, such an offshore structure can be effective in respect to taxes for residential activity schemes.

INTERNATIONAL INVESTMENTS

Both companies and natural persons constantly use offshore companies for holding investment portfolios. These portfolios can consist of company shares, bonds, monetary funds, and other investment products. Monetary funds held by offshore companies can earn tax-free interest on deposits or can be invested in mutual investment funds.

Some clients want life insurance and pension accumulation contracts to be prepared for their offshore companies.

Wealthy natural persons frequently use offshore companies as personal holding companies to hold investments in various markets and countries. Personal holding companies provide privacy, can help save the money spent to pay for specialised professional services, and can reduce other expenses connected with the founding and maintenance of various other alternative structures. In this respect, offshore companies are widely used for inheritance planning, accumulating and holding funds connected with the confirmation and validity of wills.

The selection of politically and economically stable countries for founding companies can reduce the risks, which companies and natural persons can encounter in their own and third countries.

PERSONAL SERVICE COMPANIES

Many people engaging in specialised professional activities such as construction, engineering, aviation, finance, computers, film production, and recreational services, can greatly reduce the amount of taxes payable after founding a personal service company in an offshore jurisdiction.

An offshore company can conclude contracts with natural persons concerning the provision of their services in other countries and the funds earned can be accumulated without local taxation in an offshore territory. Payments to a natural person can be structured in such a way that his income taxes are minimal.

HOLDING COMPANIES

Offshore companies and trusts are frequently used for investments in subsidiary or associated companies: open stock companies, private companies, and joint ventures. In many cases, the increase in capital arising from concrete investments can be tax-free. Taxes for dividends paid out can be reduced by using a company founded in a zero or low taxation jurisdiction, which has a double taxation agreement with the appropriate country. For example, a Mauritian offshore company can invest in Indian companies and use the advantages provided by the double taxation agreement concluded between the two countries. In addition, India has not established any tax for an increase in capital invested in the country.

INTERMEDIATE HOLDING COMPANIES

Many large corporations and companies, when investing in a country, which does not have a double taxation agreement with the investor’s country, found an intermediate company in a jurisdiction, which has an appropriate agreement. For example, Madeira holding companies are widely used for investments in the countries of the European Union since companies founded in Madeira can usually use the advantages of the EU Directives concerning the procedure for the taxation of subsidiary companies.

Cyprus has concluded double taxation agreements with many of the countries of Eastern Europe and the CIS; therefore, Cyprian companies are effective instruments in respect to taxes for investments in these countries.

OWNERSHIP OF REAL ESTATE AND LAND

The possession by a holding company of the ownership of real estate and land can frequently create conditions for tax advantages including legal avoidance of taxes on an increase in capital as well as inheritance and property transfer taxes.

If, for example, an offshore company, the real owner of which is a non-resident in the United Kingdom, acquires real estate in that country for investment purposes, the real estate being later sold to a third party, then the income from the increase in capital would not be taxable in the United Kingdom. In addition, by properly structuring the financing using a form of loan guaranteed by a mortgage, an offshore company can reduce the income tax on rent as a source of income.

EMPLOYMENT COMPANIES

Many companies use offshore companies for hiring employees working abroad. This helps reduce the administrative costs for the wages and travel expenses of the personnel as well as save on employee income and social insurance taxes.

INTELLECTUAL PROPERTY, LICENSING, AND FRANCHISES

Intellectual property including software, technical knowledge, patents, trademarks, and copyrights can be possessed by or transferred to the possession of an offshore company. After acquiring intellectual property rights, an offshore company can conclude licensing or franchise agreements with those persons around the world who are interested in using these rights. The income received on the basis of such an agreement can be accumulated in an offshore zone after properly selecting a jurisdiction; taxes for honorariums can be reduced by using double taxation agreements. The United Kingdom, the Netherlands, Madeira, Cyprus, and Mauritius are suitable jurisdictions for holding intellectual property.

LISTING ON STOCK EXCHANGES AND CAPITAL ATTRACTION OPERATIONS

Many large corporations seek to reduce their risk by transferring the active registered offices they possess from politically and economically unstable countries to offshore zones. Luxemburg and Bermuda have become the registered offices for many companies wishing to change the location of their activities.

Offshore companies are constantly being used to attract monetary funds when taking out loans and issuing bonds. These structures can reduce the taxes on the interest paid out at a source of income since other countries, for example, the United Kingdom, collect such taxes for interest paid out to non-residents for unlisted bonds. In such cases, it is also very important to consider double taxation agreements.

FINANCES

Offshore companies can be founded to perform the function of the management of the treasury of the companies of a single group. The interest paid inside the group can be taxable but frequently the tax rates for interest differ from the established corporate income tax rates. The interest payments reduce the taxable profit; therefore, the consolidation of the interest received in an offshore financial company can provide tax saving advantages.

Many large companies found connecting offshore companies to concentrate dividends from their subsidiary companies and to make maximum use of tax credits.

In some countries, losses from the conversion of foreign currencies cannot be written off as tax reducing expenditures. After founding a subsidiary financial offshore company, which experiences the losses from the conversion of foreign currencies and is later liquidated, the investments made and lost by the parent company can be included as an expenditure item.

Offshore companies are frequently used in foreign company acquisition structures, international company restructuring, real estate acquisition, when making other investments, and when carrying out other corporate financing projects.

Offshore structures are also used for leasing, especially in those cases where the offshore company has a good deal of funds, which, if they are not invested, must be repatriated and taxed at the high tax rates for corporate income.

MARINE AND AVIATION COMPANIES

Since the beginning of the 20th century, the use of offshore companies to register the ownership of commercial and passenger ships and yachts has become an important function of some offshore jurisdictions, especially Panama and Liberia.

Today many important offshore jurisdictions have modern commercial and passenger ship and yacht registration laws establishing small registration fees and not foreseeing any taxes on income received from marine shipping and chartering activities. These jurisdictions include the Isle of Man, Madeira, Jersey, Gibraltar, Cyprus, the Bahamas, Belize, and Mauritius.

It should be noted that the owners of passenger ships engaging in activities for a long time in European Union waters should see specialists concerning advice on VAT questions.

PRE-IMMIGRATION TAX PLANNING

The laws directed against tax avoidance, which many countries with high taxes possess, are primarily applicable to the long-time residents of those countries and seek to limit the actions, which their residents can take. These circumstances require very thorough tax planning in those cases where a person physically moves from one state with high taxes to another.