Offshore jurisdiction. Which business will benefit from offshore? From antiquity to the present day

An offshore is a company registered foreign citizens in a state with a favorable tax climate, but not actively operating in this country. From a legal point of view, there is nothing illegal in this, so they are actively used all over the world: according to rough estimates, about ten percent of all funds on the planet are concentrated there.

Background

How it works

Offshore - what is it, speaking in simple words? Some countries deliberately do not tax companies that are founded by foreigners. This allows you to attract cash flow into the country and employ the local population. Business owners register companies in these countries and pay only small fixed fees, which replenish the budget. And the main activity is carried out in their homeland.

This is possible only because, according to international law, a company is an independent entity and can only be taxed in the state in which it is registered.

Advantages

Limits and controls

Certainly, different states are trying to control the movements of funds floating abroad, trying to make these operations more transparent. For example, .

In Russia, this list serves to track currency movements and control the activities of banks. Ukraine has its own list with which companies’ expenses are checked. If funds for an expense item are transferred to an offshore location, the amount is not fully exempt from taxes, but only partially.

As long as there will be a difference between the tax conditions in different countries oh, there will also be an outflow of capital to the zone of least pressure from fiscal structures.

So, offshore in this sense is a completely natural phenomenon that will be used by people who are well versed in the laws of business.

What are offshore companies and how to work with them: Video

Since the 90s, rich Russians have moved offshore an amount equal to 75% of our country’s national income. According to analysts from the US National Bureau of Economic Research, our compatriots store more than a trillion dollars (about 60 trillion rubles) abroad. Russian analysts estimate the foreign assets of wealthy residents of our country a little more modestly - from 800 billion to a trillion dollars.

In 2017, RANEPA specialists conducted a study and put our country in fifth place in the list of main investors in offshore companies.

We constantly hear the word “offshore” on TV screens. It began to appear frequently in news releases starting in 2014. At that time, only the lazy did not talk about deoffshorization of the economy. In the understanding of many, offshore companies are something bad and illegal, a kind of secret business of the oligarchs. But is it? Let's find out in the article.

Terms and Definitions

Literally, the term “offshore” can be translated as “offshore”. It comes from the English offshore. This term began to be used in the world in the 50s of the last century; it came into use among Russians only in the 90s.

Big Dictionary edited by S. A. Kuznetsov understands by this term the territory of the state where significant tax benefits when conducting financial transactions.

The point is that you withdraw funds abroad, save on taxes because you do not share them with the state, and hide your work from government agencies. In some zones, a bonus is fast registration of citizenship.

An offshore company is also called a company operating in one country and officially registered in another. For example, if it operates in Russia, but is registered in Switzerland.

Firm owners transfer their business abroad for two reasons: to avoid taxes and to protect their business. Most often, large market players whose taxes amount to significant amounts are taken offshore.

How it works?

Let's say you decide to do business in Russia. You are required to pay 20% income tax. But if you register your company, for example, in Panama, you will not have to pay this money. It's a tempting offer, you'll agree. Of course, from spending on maintaining the company, on staff salaries, resources, equipment, etc. no one will free you. But if the turnover is significant, 20% is quite a lot of money, and not everyone wants to give it to the state.

What are offshore accounts?

Accounts opened in foreign banks a non-resident (a person who does not have citizenship of this country, but works in it as an entrepreneur) is called offshore. In essence, they are no different from the usual accounts in Russian banks - they also serve for storing, accumulating and withdrawing money.

The convenience is that you carry out transactions with money without government control, the risk of losing funds and making information about your financial situation public.

Which banks are called offshore?

An offshore bank is a credit organization that is registered and operates in an offshore zone. They come in two types. The first includes branches of major global banks. For example, National Westminster Bank, Barclays Bank. Their clients are companies registered in offshore zones and individuals who want to open accounts abroad. For the latter, a service such as Private banking is provided - individual service for very wealthy clients.

The second type is those created by businessmen themselves, as they say, for themselves. In the Seychelles and the Bahamas, this requires obtaining a license and opening a correspondent account with another bank.

Here are the advantages of creating a bank in an offshore zone:

• access to international financial flows and the international lending market;
• the ability to provide any currency for the external operations of your company;
• expanding the range of banking services for your business (use a nominee service, when all operations are carried out by a representative for the real manager, make transfers in foreign currency without thinking about purchasing it at an unfavorable rate, pay a lower commission than in Russian banks, open anonymous accounts);
• benefits (you need to pay a registration fee once, pay a license fee and a small income tax every year);
• ease of regulation (no need to purchase treasury bonds, monitor the size of the key rate, or maintain reserve limits);
• safe storage of your own funds (account anonymity guarantees that your assets will not be detected by Russian supervisory authorities).

Common features for both types of banks are servicing only foreign clients and a ban on transactions with residents of the country.

Offshore zone

It is called a tax haven, a tax haven, and a financial paradise. The essence is the same: this is a territory with a preferential tax regime for foreigners. Conditions are different everywhere. In some places, foreign businessmen are completely exempt from taxes, in others a minimum rate is set.

An offshore zone can be either the entire country or its separate territory. As a rule, the infrastructure there is developed: a foreign businessman can choose from hundreds of banks, there are branches of international trust and insurance organizations, business centers, offshore operations are served by financiers, auditors, accountants, and there is a functioning transport network. VIP clients (people whose capital is higher than the level set by the bank) can count on private banking - this includes 24-hour support in Russian, development of an investment strategy based on the client’s wishes and other services.

For the state itself, attracting foreigners is beneficial because there is a constant flow of foreign investment into the local economy. This allows us to strengthen the financial system, develop business, etc. In particular, Cyprus has received $4.3 billion over the past 15 years. The money was used to develop the tourism business - the construction of dozens of hotels, the development of energy and healthcare.

You may be surprised, but in Russia there are such zones too. They are just called free economic zones. They are distinguished from other territories where business can be done by preferential currency, customs and tax regimes.

For example, such a zone operates in the Kaliningrad region. To understand how it works, let's give an example. Russia has established a single income tax for local and foreign companies – 20%. If a foreign organization is registered as a resident of the Kaliningrad special economic zone and participates in investment project, she may not pay tax at all on the profits received from this project for 6 years.

For Russia, special economic zones did not bring such an effect as planned. According to the Ministry of Finance, they turned out to be simply ineffective. Since 2006, 122 billion rubles have been allocated from the Russian budget to 33 territories; about 40 billion have been returned to the treasury in the form of customs and tax payments. 18 thousand jobs have been created, and more than 25 thousand were planned.

Despite the taint of illegality that this term has, it refers to completely legal operations carried out by companies and individuals registered in offshore zones. Without breaking the law, they minimize tax expenses, plan a budget, invest in the local economy, buy and sell real estate, register offshore companies, open new accounts, etc.

Offshore centers

In the business environment, this term is synonymous with an offshore zone. You may have heard another name - tax haven. A distinctive feature of offshore centers or zones is that the money of Russian entrepreneurs and individuals does not lie there idle. They work. Most often they are invested in highly profitable industries.

In Europe, this is the purchase and resale of real estate. For example, in Britain it was calculated that Russians account for every fifth property transaction. The cost of the real estate purchased by our compatriots was estimated at 880 million pounds.

In Cyprus, they are investing in the privatization of state-owned enterprises and investing in the Cyprus Science and Technology Park.

Offshore company

If you have registered your business outside the country where you live and intend to do business, and your goal is to escape government control and save on costs, congratulations, you are the owner of an offshore company.

They are created for several reasons. Let's look at them with examples:

• tax minimization. A businessman from Russia opens an offshore company, and then, already in the Russian Federation, creates a joint venture with this legal entity. The benefit is that, under the guise of a contribution to the authorized capital, you can import equipment from abroad into our country, which is not subject to customs duties. This is how BMW or General Motors work;
• concealment of information about the real owner of the company. For example, a Russian entrepreneur opens an offshore company that buys on the territory of the Russian Federation and becomes its owner. It will be difficult for competitors and raiders to find out the name of the real owner;
• capital protection. In Russia, a businessman can have his company seized to pay off his debt, his accounts seized, and the money stored on them seized. If the funds are in an offshore bank, this cannot be done - the deposits are protected by the state in whose territory the offshore zone is located.

Offshore activities

Offshore activity refers to operations in an offshore zone. This means depositing your money offshore, transactions with it, as well as withdrawal of funds.

According to the NBER Bureau of Economic Research, released at the end of 2017, about 8% of the funds of wealthy people around the world are stored offshore. This amount is equal to 10% of the world.

Offshore system

The offshore system is a general term that unites foreign investors, representatives of offshore zones, banks, and money transactions. In other words, this is a mechanism for avoiding the tax burden.

National governments and international economic companies are fighting it. Why do they need this? Offshore zones are simply their competitors in the struggle to allocate capital and receive taxes. It is quite natural that a business owner will choose a country that offers a simple company registration scheme and convenient working conditions, rather than staying in his own state, where he will spend much more time, nerves and money.

In essence, we see double standards: countries encourage the creation of offshore zones at home, but prohibit businessmen from using the same mechanism abroad.

Every year in Russia the black lists of states that do not enjoy trust are replenished. Simply put - those same offshore territories. In 2018 on the official list Russian ministry finances of 109 states. Among them are the Bahamas, Belize, Dominica, Liechtenstein, Maldives, Monaco. If you are caught in transactions with counterparties from such a state, increased attention from supervisory authorities cannot be avoided.

The history of offshore zones

Such schemes are as old as time. Also in Ancient Greece Businessmen, dissatisfied with high fees for transporting goods and profits from sales, conducted transactions in the so-called free trade zones. As a rule, they were islands - real havens for smugglers and enterprising traders. There, those who wished could make a deal without giving anything to the treasury.

Such schemes also worked on the territory of our state. The tribute that local elders collected from artisans, merchants, and wealthy peasants was sometimes an unbearable burden. In order not to pay it, they began to trade outside their native settlements, on neutral territory. Formally, none of the elders could impose tribute on such a transaction.

For the United States, offshore history began in the 18th century. Trying to escape the high taxes imposed by England, merchants operated through Latin America.

The term offshore itself has been used since the 50s of the 20th century. It appeared in the United States thanks to a press publication about a company that moved its office to another country to avoid close attention from American authorities.

This concept came to Russia in 1991, when the office of the Swiss company Riggs Walmet Group opened in Moscow. It became the first company offering to register a business in a tax-free zone. Then it cost $5,000 – 8,750 thousand rubles. At that time - a lot of money.

Schemes for using offshore companies

Now there are dozens of them. Let's briefly talk about a few of the most interesting ones.

Scheme #1: Export

In this scheme, the offshore company acts as an intermediary between the Russian manufacturer and the foreign buyer of the goods. To evaluate the benefits, consider the option in which the intermediary seller is not an offshore company and pays taxes in the Russian Federation.

The manufacturer set the price for the product at 500 USD. The seller added a markup of up to 600 USD. The foreign buyer paid him 600 cu, as a result the seller made a profit: 100 cu. minus 20% tax = 80 USD

Now the same option, only the seller is an offshore company. The profit will not be 80 USD, but 100 USD, since you will not have to pay taxes.

Scheme #2: Attracting agents

The advantage of this scheme is that from the outside it looks like an ordinary international transaction, unrelated to offshore ones. This option is suitable for those who do not want to “shine” the name of their offshore company.

Let's say you have an offshore company and you want to conclude a deal with a Russian company - buy timber from it and sell it to a foreign buyer. The Russian company agrees in principle to the deal, but does not want to risk getting caught collaborating with an offshore company. And you don’t particularly want to appear in contracts and other documents. Then you sign an agreement with a company from the UK - it acts as an agent for a small fee, usually 5-6%.

According to the documents, the counterparty of the Russian enterprise is a certain British company (which also reports to the British tax authorities), but in reality you are conducting the transaction. Advantages for an offshore company - zero tax, no reporting required. The benefit for the UK company is receiving remuneration. She also does not pay taxes on profits; according to UK law, she must pay tax only on agency fees.

Scheme #3: Card linked to an offshore account

You can withdraw money from your accounts using a linked card. It can also be anonymous, just like the account. Even if the card is not anonymous, the holder’s data is not shared with anyone.

The meaning of the scheme is that you transfer money received from counterparties from your account to a card and use it for personal purposes in any city in the world (usually international cards).

Commissions on offshore bank cards are fixed and not percentages of the transaction amount. This makes transferring large amounts of money profitable.

Scheme #4: Construction

An offshore company enters into a contract for the construction of a sports complex. The issue price is 100 thousand dollars. According to the papers, the mining company acts as the general contractor. She hires a Russian company as a subcontractor, which actually carries out all the work. According to the subcontract agreement, the foreign company must pay the Russian company 50 thousand dollars.

The customer transfers 100 thousand dollars to the general contractor. The offshore company does not pay taxes on this amount. She, in turn, transfers 50 thousand dollars to the subcontractor - for work, equipment, materials, etc.

In this scheme, both the offshore and the Russian company are often owned by the same person. Instead of a Russian company entering into a contract directly with the customer, an intermediate link is introduced - an offshore company that collects profits and does not pay taxes on them.

If a Russian company had immediately acted as the general contractor, it would have received $100 thousand minus 20% tax = $80 thousand. And in the scheme using an offshore, the total profit was: $50 thousand (settled in an offshore account and not taxed) plus $40 thousand ($50 thousand received by the subcontractor, minus 20% tax) - $90 thousand.

Scheme #5: Services

You withdraw money under the guise of payment for any service. You can transfer money to an offshore account under a service agreement, thereby avoiding the sidelong glances of tax authorities. In practice, it is very difficult to verify whether it was actually provided.

Let's say you are the owner of an offshore company in Cyprus that is engaged in IT development, as well as an organization in Russia whose main activity is auditing. To legally withdraw money from your Russian company to a Cypriot company account, you enter into a service agreement. The contractor for this is a Cyprus offshore company. For example, the subject of the contract may be the maintenance of an audit program for a PC. The cost of the service is 1 million rubles.

You transfer this amount to the company's account in Cyprus. From the outside, the transaction looks legal, despite the fact that in fact no services were provided.

This scheme is used if the owner of a company wants to take his money abroad and hide it offshore. For example, if he is in debt to a creditor, and his accounts can be seized at any time.

Scheme #6: Loan repayment

This is one of the most simple circuits. You withdraw money offshore under the guise of paying off a loan. To do this, you attract business partners, perhaps one of your relatives, who transfer amounts monthly to your offshore account. To avoid tax claims, you can draw up a receipt claiming to have received a loan.

This way you can gradually withdraw your money abroad. For example, if you plan to withdraw an amount of 12 million rubles abroad in a year, draw up a loan agreement under which you are the lender, and a Russian company (yours or owned by a friend or relative) is the borrower. The loan amount can be 11 million, another 1 million in interest. Determine the payment schedule according to which payments will be made - for example, 1 million rubles per month.

This scheme is used if the owner of the money fears for its safety in Russia. The reason may be attacks from raiders, demands from creditors, etc.

Categories of offshore zones

Offshore zones are divided into groups according to several criteria. One of the classifications is based on territoriality:

• offshore companies in Europe - Andorra, Luxembourg, Malta;
• islands - the Caribbean, the islands of the Pacific and Indian oceans;
• administrative regions - Kalmykia, Panama.

There is another division:

• countries and islands are free economic zones. These include the Seychelles, the Bahamas, etc. This category is characterized by an underdeveloped economy and political stability. The authorities do not force foreign businessmen to report profits, and the tax replaces an annual fee that does not depend on turnover and revenue;
• states with a binary form of entrepreneurship. These are Luxembourg, Switzerland, Cyprus. They can operate offshore and so-called onshore companies - which operate at the usual tax rate. You will be fully or partially exempt from taxes, but you will have to report profits. This category is characterized by significant control by local authorities.

If you need high level privacy - welcome to Belize. This is a country in the Caribbean Sea, two hours' flight from Miami. An offshore company can engage in any activity in this state, except for the purchase and sale of real estate and transactions with residents.

Seychelles is a classic offshore zone. These are islands in the Indian Ocean. According to unofficial statistics, up to a thousand businessmen buy offshore companies there per month. To register a company, you only need a passport. You will not be allowed to own real estate, otherwise you have complete freedom. An additional advantage is that all the property of any company registered in the Seychelles is protected from encroachment by foreign states. That is, they will not be able to arrest him for debts accumulated in Russia.

The British Virgin Islands are located in the Caribbean Sea, near Puerto Rico. Historically, this is one of the first offshore zones. Now about 40% of all offshore companies in the world are registered there. To register, you only need one shareholder and one director (this can be the same person); no one is obligated to report to the state. There is an interesting condition. The names of offshore companies should not contain anything that refers to the British crown, government or ministries.

Despite the fact that Singapore in the full sense of the word is not an offshore zone, many businessmen choose this Asian country to open a business. And that's why. You can register a company there in a couple of days. Singapore is one of the world's financial centers; huge flows of capital pass through it, which means you can count on a financially successful transaction. In 2014, Singapore was named the #1 country for ease of doing business (Doing Business Report by the World Bank). You may qualify for a reduced tax rate.

Hong Kong, an island in Southeast Asia, is a great place for those who don't like taxes. Here foreign businessmen are exempt from them. But to operate, you must have a representative living in Hong Kong. He will handle reporting and store information about the management of your company.

If you want to register a business in Europe, pay attention to Cyprus. This island has the lowest tax rates in all of Europe - 12.5%. By purchasing an offshore company in Cyprus, you will become the owner of a full-fledged European company, which will give your business status. However, there are some limitations. The minimum authorized capital is 1700 euros. If you are going into insurance business, financial transactions, to provide banking services, you will have to obtain permission.

Comparative table of characteristics of offshore zones

Let's compare the conditions offered by classic offshore zones.

Where are the conditions better?

Each offshore zone has its own conditions. It is impossible to say categorically where they are better or worse. It depends on your goals. If you want to avoid taxes altogether, choose classic offshore jurisdictions; if the turnover is not so large, and the main thing for you is to protect your assets, opt for midshore jurisdictions - countries with partially offshore legislation. These include Cyprus.

In 2017, Cyprus became the most popular offshore zone among Russians. 30% of Russian direct investment was directed there. Last year alone, investments amounted to more than $15 billion. This amount was announced by RANEPA.

How to choose an offshore zone?

Island offshore zones are more popular. This is due to the well-established opinion that the islands are not affected by economic and political crises, since they are remote from the mainland.

But if your plans include not just storing funds in offshore accounts, but their subsequent withdrawal and sale, the islands are not suitable for you. All trade is carried out on the mainland, and there is no point in registering a company on the other side of the world and transferring money there and then doing business on the continent.

If the speed of settlements is important to you, consider the time zone in which the offshore zone is located. An excellent option would be the British Virgin Islands. The difference with Moscow is minus 7 hours. The money you send from Moscow at 10 a.m. will arrive in a bank account in the Virgin Islands at approximately 7 a.m. that same day. At 9 o'clock, when the banks open, you will already be able to use the funds.

However, if you want to conduct business in Russia, the Virgin Islands are not suitable. In this case, choose an offshore zone in a country with which the Russian Federation has an agreement regarding double taxation. Such agreements were signed, in particular, with Cyprus and Singapore. In this case, you will not have to pay taxes in Russia. That is, if your company is registered in Cyprus and you do business (and therefore make a profit) in Russia, you will have to pay tax only once - to the budget of Cyprus.

Pros and cons of offshore companies

Protection from raider attacks, intrusive inspectors from government agencies, avoidance of reporting and paying taxes - this is precisely why many businessmen go offshore. They are confident that by transferring money to accounts abroad, they acquire a 100% guarantee of their safety. Unscrupulous politicians tend to go abroad to hide their income from prying eyes. But is everything so rosy? Let's look at the pros and cons of offshore companies.

The benefits include:

• simple registration of a company - collect a minimum package of documents, rent a simple office, and you are the owner of an offshore company;
• tax evasion;
• minimal or no reporting;
• entering the international market;
• the ability to manage your business remotely;
• protection of assets from raiders and competitors (if the director of securities is a resident of a foreign country, ill-wishers simply will not find your company);
• anonymity.

Among the disadvantages are:

• the risk of losing preferences at home due to cooperation with offshore business;
• increased attention supervisory authorities in case of illiterate work;
• deterioration of reputation - many large companies refuse to work with companies conducting underground activities.

First, let's figure out how this area is regulated in the world. There are several large programs created to identify criminal companies and their financial fraud. For example, Interpol maintains contact with world banks and monitors particularly large transactions. The same organization investigates economic crimes on a global scale.

In addition, the activities of offshore zones are regulated by the Financial Action Task Force (FATF). It fights the laundering of criminal proceeds and the financing of terrorism through offshore companies. It includes representatives from more than 30 countries.

Organization economic development and Cooperation (OECD) was created to coordinate economic policy different countries. It controls the tax systems of offshore zones and monitors laws in this area.

The banking sector is directly regulated by the International Association of Professional Bank Security Officers. The EU Organization for Combating Commercial Crime brings together 49 countries that exchange information on economic crimes. There is also an Offshore Banking Control Group. It organizes cooperation between countries to combat money laundering in offshore zones.

As for Russia, there are conflicting opinions about offshore companies. A number of politicians believe that only criminal funds are stored abroad and the phenomenon of offshore companies must be eradicated. Others suggest fighting only scammers and leaving conscientious businessmen alone. There is no agreement on this issue yet.

In 2014, Russia ratified the Convention on Mutual Administrative Assistance in Tax Matters. The participating countries, of which there are currently more than 70, share information and even conduct joint tax audits.

In the same year, our country adopted the Law on Controlled Foreign Companies. People called it anti-offshore. The bottom line is that persons owning foreign companies or shares in them were required to report this to the tax service.

After the adoption of this law, the creation of offshore companies for Russians who want to remain within the law became practically meaningless, because they still have to declare all transactions abroad.

FAQ

Despite the fact that there is a lot of talk about offshore companies, this area remains rather vague for ordinary businessmen. We will answer frequently asked questions.

Open an offshore company yourself or buy a ready-made one?

When choosing between creating or buying, consider your plans. If you are really going to conduct large-scale activities and are looking forward to millions in turnover, create a company yourself. When registering a business from scratch, you can choose your own direction of activity and come up with a name.

If you need a company to transfer funds or are limited in time, consider purchasing a ready-made company. You can buy offshore in a day. The advantage is that you can become the owner of a company that has already proven itself in the market.

Do you have to be a millionaire?

There is a widespread belief that only people with exorbitant wealth have offshore companies. This is wrong. Indeed, there are states where there is nothing for a person with a capital of less than a million dollars to do, but there are not many of them.

Some offshore banks, for example in Cyprus, allow you to invest $100,000 or even $1,500 as a minimum deposit. This makes them accessible to small and medium-sized businesses, people who want to “hide” their inheritance from the state, etc.

How to open an offshore company?

Let's give an example step by step instructions:

1 Select a jurisdiction. Pay attention to the minimum authorized capital, taxation system and other conditions.

2 Come up with a name. It should not coincide with an already existing company in an offshore zone (you can check this using the register of legal entities on the website egrul.ru). There are also restrictions on names that can be misleading - “bank”, “trust”.

3 Collect a package of documents.

4 Pay the registration fee, fees and charges if necessary.

5 Register your company in the registry and obtain the status of a legal entity.

6 Open an account.

To open an offshore company, you will need:

1 Charter of the company. It contains the type of activity of the legal entity and the rules of its work. All founders must sign the charter. Signatures must be certified by a notary.

2 Agreement on opening a company. It distributes shares between the founders, indicates the form of management, financial accounting rules, and features of corporate relations within the company.

3 Order on the appointment of a manager. This may be a nominal or real director. The order indicates the full name and official position.

A license may be required. But not all companies need it. For example, in Belize you cannot engage in insurance and banking activities without it.

The prepared documents must either be handed over to the agent who is responsible for registering the company, or sent directly to the state registry of the offshore zone. In each country, this government agency is called differently. For example, in Panama it is the Panama Register of Enterprises. Documents are reviewed there within two days.

After completing registration, you will be given a package of documents:

• certificate of incorporation;
• charter and constituent agreement with an apostille (the apostille must be affixed if you intend to use these documents outside the offshore zone);
• extract from the register of legal entities;
• resolutions on the issue of shares and general power of attorney.

As for duties and contributions, their size depends on the offshore zone. When registering a company in Belize, you only need to pay the authorized capital (and confirmation of payment is not required), there are no fees. And in Panama, in addition to paying for the authorized capital, you will need to pay an annual fee of 300 USD. In Cyprus, stamp duty is 80 euros. This amount will need to be paid for each property transaction.

How much does it cost?

The price depends on the company providing intermediary services and the specific jurisdiction. To open an offshore company in the British Virgin Islands, you will have to pay 750 euros or more. For Greece, Spain, the Netherlands, Denmark, Austria and Liechtenstein, prices are higher - 14,000 euros. Offshore in Belize and Cyprus will cost 2,500 euros, in Panama - 3,500 euros.

What is deoffshorization and why is it needed?

In simple terms, deoffshorization is the return of capital and investments from abroad to the control of the Russian Federation. This is necessary to replenish the Russian treasury and support the economy. To do this, laws on taxation of income of foreign companies operating in Russia are written at the highest level.

A large-scale deoffshorization campaign was launched in the Russian Federation in 2014. Its goal was to reduce the number of offshore organizations, reduce the flow of money flowing abroad, and prevent Russian companies from evading taxes. Russian businessmen were required to declare foreign business and pay taxes on profits. However, the process began only in 2016. The share of Russians whose wealth exceeds $1 billion who notified the tax authorities about their foreign accounts has increased from 10 to 40% since May 2016.

To “persuade” businesses to stay in Russia, the authorities are introducing tax breaks, the same special economic zones, holidays for small businesses, which are promised no inspections for three years, etc.

Do offshore companies benefit or harm Russia?

The basis of any economy is taxes. Everyone pays them - citizens, private entrepreneurs, companies. Thanks to this, the state budget is replenished, social programs are implemented for young and large families, salaries are paid to public sector employees, pensions, etc.

When an offshore company is created, the state is deprived of 20% of taxes that it could pay to the treasury of the Russian Federation. Of course, there is no benefit for our country from offshore companies, and the only harm is in the loss of income.

In the understanding of many, offshore companies are associated with something criminal. But this is not always the case. Just because you have a company registered in Panama or the Seychelles does not make you a criminal. However, due to large quantity tax breaks and high levels of anonymity, offshore accounts and firms are often used to launder money obtained illegally. If your income is legal, there is nothing to fear.

Why are states so vehemently fighting the offshore system if, in essence, there is nothing wrong with it? The fight is not against offshore companies as such, but against the abuses associated with them. You can really get into trouble and find yourself under sanctions - these are restrictions on transactions, constant checks, problems with counterparties at home. For example, you will not be allowed to participate in any government procurement in Russia if the business is registered in an offshore zone.

Using an offshore bank can be compared to buying goods in a foreign online store: no one will prohibit you from doing this until you start buying huge quantities for tax-free sales.

Where and how to buy a “ready offshore”?

This is done through intermediaries. First, you select a jurisdiction, then contact a representative of the company that provides assistance with registration. There are many such offers on the Internet, but you should only trust trusted market players. It is better to buy offshore, as they say, based on acquaintances or reviews from partners.

You will be required to pay a fee to the intermediary, a package of documents and a visit to a meeting with a representative of the offshore zone. Before purchasing, make sure that you are not being offered an offshore company from the Ministry of Finance’s prohibited list.

When turning to the services of an intermediary company, be careful and look at exactly what services it offers you. If this is just a consultation without selling a ready-made offshore company, don’t waste your time. To understand which companies are best avoided, let’s give a real-life example.

The businessman turned to an auditing firm, which offered assistance in choosing an offshore zone. Such a consultation (which did not include the purchase of an offshore company) cost $15,000. The client was given a 15-page expert opinion. They spent the next three weeks trying to figure out the patterns. As a result, it turned out that the proposals do not take into account the peculiarities of the legislation of the Russian Federation and offshore countries; there is no adaptation to specific types of companies or transactions. Another six months have passed, and the development of the final scheme is still not completed.

Is it necessary to visit a free economic zone to register an offshore company?

You do not need to be personally present when registering an offshore company. It is enough to send your representative to the country, who has the right to sign legally important papers. His tasks will include renting an office, opening an account, and negotiating with representatives of the offshore zone. By the way, it is better to come to negotiations with your lawyer who understands international law. The representative must have everything with him Required documents. This is information about the directors and shareholders of the company, papers on the appointment of directors, declarations, powers of attorney.

There is another option. You can meet with a representative of an offshore bank in the country you are interested in without leaving anywhere - right in Russia. In both cases, you will have an interview where you will need to talk about yourself, your business, its specifics, and expected turnover. The bank will definitely ask who is on the list of your partners, where you ship the goods, and what transactions you have completed recently.

What is Offshore money?

On the Internet you can find advertisements about earning money through the company Offshore Money LLC. These are just scammers who offer “content” in exchange for a small commission. You must deposit a couple of thousand rubles, and in return you will allegedly receive about 17 thousand into your account. This company has nothing to do with offshore companies.

What does liquidation of an LLC through an offshore provide?

Liquidation of an LLC, according to all the rules, is a rather long and complicated procedure. If the company has debts, it will have to pay everything and report to the tax authorities. Therefore, many people use the option of closing offshore. In essence, this is the re-registration of an LLC to a foreigner.

You hold a meeting of the founders and choose one of two options: sell part of your capital to a citizen of a foreign country or provide him with a share. Both methods are absolutely legal.

After this, the previous founders leave the LLC, and a new director is appointed. Everything takes a little over a month. If you follow this scheme, the tax office will not have any questions.

The downside is that after such “liquidation” the LLC will remain in the register of legal entities. Therefore, there is a risk that the founders may be held liable.

“Offshore” or “offshore” - which is correct?

It is correct to write this word with one f, despite the fact that in the American original there are two of them - offshore. Offshore with one F appeared back in the 90s in the dictionary of the Russian Academy of Sciences. Modern dictionaries give the same spelling.

However, on the Internet you can also find this option - “offshore”. Russians like it better. This can be judged by the search results - search engines issue 5 times more queries specifically for the word “offshore”.

There are also the following incorrect spellings of this term: offshore, abshore, upshore - this is incorrect to write, you need to write offshore.

Conclusion

Offshores have long become part of the global economic system, and there is no escape from this. When used correctly, they will become an effective tool for minimizing costs and protecting your business. By acting illegally, you can fall under serious sanctions from regulatory authorities.

The advantages are that you are provided with comfortable conditions for business activities, information about your company and its - under reliable protection, competitors from abroad simply won’t get you, you won’t be afraid of raider attacks.

However, having an offshore company, you may encounter low level trust from counterparties, you may be boycotted by state-owned companies and banks.

Obviously, there is no point in demonizing offshore companies. World countries are fighting not so much against them as against unscrupulous businessmen and politicians who hide their illegal earnings. Now all conditions are being created to solve the problem of criminalization of offshore companies. Perhaps in the future this term will lose its negative meaning.

Video for dessert: Dangerous ride through the Brazilian slums

I have already mentioned the concept written above several times in my blog - it seems that the time has come to understand it in more detail. What is offshore in simple words? In general, the concept of “offshore” comes from the English offshore - “outside the shore”, “outside the borders” and appeared around the 50s of the twentieth century. To the question of how to write correctly: offshore or offshore, the answer is this: in the Russian version, spelling a word with either one or two letters “f” is considered equally correct. Briefly, classic offshore companies can be defined as states (most often islands) with a preferential tax regime - and companies registered in these states may legally not disclose their actual founders and owners. Sometimes the term “offshore” does not mean countries, but the offshore companies themselves. As a concept, the offshore zone principle has deep historical roots - even the ancient Greeks avoided selling their goods in Athens, and medieval merchants sold wool in Flanders, and not in neighboring England, where taxes reduced profits from sales to zero.

In general, in many minds the word offshore has a rather gloomy aura - on TV you can often hear references to the theft of funds transferred to offshores. In fact (as follows from the definition above) offshore companies have the useful function of preferential taxation and capital preservation, which can be used in an absolutely civilized manner. An example is investment programs using the unit linked method, showing how knowledge of the characteristics of individual offshore companies can be used to increase capital. But unfortunately, in the Russian practice of forex brokers, registration in those offshore zones, whose regulators essentially do not control the activities of supervised institutions, was and is used exclusively as an evasion of responsibility when organizing financial pyramids. On the other hand, in this way it is possible to protect a completely legal Russian business from raider takeover - so the concept of offshore is very “contextual” and should be considered within the framework of a specific situation.

Characteristic features of offshore companies:

• No income tax is paid, or is paid at the minimum rate;

• Financial reporting and audits are not required and are not carried out (but not always);

• Anonymity of data about the real founders of companies and their actual owners (beneficiaries);

• Ease of attracting foreign investment;

• Confidence in the safety of your capital

Drive full list offshore is extremely tedious - in addition, the question often arises of what exactly is included in this concept. Classic offshores include: British Virgin Islands (BVI, BVI), Belize, Vincent and the Grenadines, Dominican Republic, Bahamas, Marshall Islands, Seychelles, Nevis, etc. However, there is also the concept of European offshores (Liechtenstein, Switzerland, Luxembourg), which offer tax incentives only for certain types of activities, require accounting and auditing of companies. The Isle of Man and Guernsey are offshore under British jurisdiction and legally provide investors of companies registered on the islands with either trust or multi-tier capital protection, while maintaining tax benefits. Finally, another group of offshores includes some US states and even regions Russian Federation(Kalmykia, Altai). There is no single list of offshore zones. At the same time, depending on the level of implementation of tax standards and control, offshore zones are divided into “white”, “gray”, and “black”. The latter are completely closed to external control. Moreover, as of 2015, all offshore companies except Nauru and Niue are on the OECD “white” list.

How do offshore companies/schemes work?

In practice, offshore schemes work something like this. Let’s say there is a certain businessman who owns a large enterprise X in Russia. The businessman buys/opens a certain offshore company Y in an arbitrary offshore (you can buy a turnkey company in just a few hours. The cost of the service is from 1 to 15 thousand dollars, and You can register your own company in a period of 7 days to 3 weeks). After which the products of enterprise X are sold to company Y at the minimum price, which ensures the minimum income tax paid in the Russian Federation (20% rate). And only then Y sells the goods to the final buyer at the actual price, and no tax should be paid.

However, sometimes a nuance arises related to customs legislation, namely a list of reasonable prices - this sometimes forces a businessman to look for the optimal price, which will be inside the customs corridor. X can also hire a company in another country as an agent (agency scheme), act as a contractor by concluding an agreement with a subcontractor (construction scheme), act as a carrier of goods (transport scheme), etc. Typically, offshore company X is registered under the name of a “nominee” founder – i.e. to a person who owns a company on paper, but in fact does not have the rights to manage it. In fact, the company is managed and profited by the businessman himself, who is called the beneficiary. It is no secret that among them may be the highest officials in Russia. Only the bank in which the offshore company’s accounts are registered plus the registration agent who organizes the offshore registration knows about the real ownership of company X.

A businessman’s rights to own an offshore are secured by a special declaration called a trust declaration or beneficiary declaration. According to this declaration, the nominal shareholder (founder) owns the assets of the company on behalf and in the interests of the businessman. In addition, it is stipulated that the nominal founder must obtain the consent of the real owner to transfer assets to the offshore company. As a result, all rights, as well as dividends and profits of the company belong exclusively to the businessman. His expenses essentially include offshore registration, possible small annual fees from the island state (in fact, together with the fee for registering companies, this is the main source of the latter’s income), as well as fees for legal support to the registration agency. Most likely, they will be more than covered by the profit received by the company. In total, according to rough estimates, there is 11.5 trillion in offshore zones. dollars of capital, which is approximately three to four times more than in all hedge or exchange-traded funds in the world at the moment.

P.S. While in the world only about 1% of companies in Europe and America are registered offshore, in Russia this process is widespread, with the result that sometimes entire large industries (such as metallurgy) end up in the hands of companies registered in Cyprus or the Virgin Islands islands. Therefore, on January 1, 2015, Russia passed a law on deoffshorization, according to which profits over 50 million rubles received by an offshore company and placed at the disposal of a Russian taxpayer are taxed in Russia. For smaller amounts, it will be enough just to declare your profit.

At this point, what are the differences between a structure that is not an offshore company? and an organization registered in a preferential tax zone are more than significant. It is this fact that encourages many entrepreneurs to open companies in offshore zones.

Types and essence of offshore zones

Offshore zones have become quite popular among large companies, and not only others. By them we mean a country or part of it in which there is no This means that companies registered in such a territory will not have to pay taxes. But for this you need to fulfill certain conditions, which usually boil down to the payment of an annual fee and the absence of activities in the territory of this jurisdiction.

Such zones can be divided into three key groups:

First. This group includes those jurisdictions in which there is no financial reporting and low taxation. Moreover, companies registered in such countries can count on a high level of confidentiality. Such zones are used as a final point where funds from various organizations are accumulated.

Second. In this case, we are talking about territories that are characterized not only by tangible financial benefits, but also by financial reporting. It is in jurisdictions of this type that financial and economic transactions can be carried out, but on the condition that they will be carried out within the framework of one state. Examples of such zones include Cyprus, the states of Wyoming and Delaware (USA).

Third. This group of offshore territories includes Western European countries that use an international agreement regarding the absence of double taxation. They provide various companies with the opportunity of residence, with the right to subsequent management by non-residents of the country. The characteristics of this group are relevant for the UK, the Netherlands, Belgium, Luxembourg and Switzerland.

What is an offshore company

Based on the above information, it is not difficult to draw the following conclusion: an offshore company is a company that has gone through the registration process in a jurisdiction where there is preferential taxation and there is no exchange control. It is also worth understanding the following fact: such legal entities are managed by non-residents of the offshore country. And besides, they do not carry out any economic activity on the territory of the state where they are registered.

Continuing to understand what an offshore company is, it is necessary to pay attention to the need for an intertrust agreement for the legal entity that was registered in a preferential tax zone to fully operate in other countries.

Why register offshore companies

There are several good reasons justifying the existence of legal entities of this type:

Participation in business. For many companies engaged in foreign economic activity, acceleration of financial flows and simplification of work with documentation are relevant. Such organizations also use offshore zones to protect their financial resources from possible illegal claims of fiscal authorities. In fact, such a company acts as an intermediary, connecting the buyer conducting international business and the seller who has registered entity in an offshore zone.

Storage of funds. There are many businessmen who have managed to accumulate significant sums and are interested in both their safety and the free movement of their own capital internationally. In this case, it’s time to remember what an offshore company is. By opening such a legal entity, the owner of an enterprise or, say, a bank, will be able to maintain confidentiality (no one will know that it was he who opened the company), not depend on the political situation in the state in which his business operates, and save significantly on taxes.

Import of fixed assets. Zones with existing tax incentives are ideal for relocating the fixed capital of enterprises. Let's say there is a need to import a certain production line. To reduce the amount of tax payments, this line is purchased in the name of an offshore company, after which it is contributed as an authorized capital.

It is obvious that for many Russian businessmen it is extremely profitable to move capital to countries with tax breaks and the absence of financial reporting.

If an entrepreneur does not want to independently register a legal entity in a preferential zone, he can study the list of offshore companies that have already been created and put up for sale.

How are things going in Russia?

Perhaps not everyone knows this, but within the CIS there is also a territory within which there are significant tax benefits. We are talking about the Kaliningrad region. At the same time, Russian offshore companies can be registered even by non-residents of this region.

Owners of similar companies in other zones have the opportunity to purchase and sell valuable papers in Russia. To conduct such transactions, you will need to act on behalf of a foreign investor, which can be your own offshore company.

How to find out an offshore company

There are several ways in which you can determine in which jurisdiction a particular organization is located:

Use the data available on the company’s official website (view the details and compare with the list of offshore zones).

Submit a request to the organization for information relating to its owners. But such a privilege is available mainly to government agencies.

Use media resources. Some journalists may have information about who owns a particular company.

Company registration

When determining, it is important to touch upon the issue of its registration. In general, this algorithm cannot be called complex. To begin with, the entrepreneur determines the name of the company, after which the local registered agent begins to take certain actions.

If no matches are found in the proposed name, the process of registering the Memorandum and Articles of Association begins. Afterwards, the entrepreneur is appointed as the first director, and he also signs a document according to which the agent does not have his own interests in the company and does not claim its property.

Management process

The ability to manage a company is either a director or an attorney who acts on the basis of a power of attorney. In this case, only a bank account can be used as an asset. It is they who, in fact, will have to manage. This can be done through software or by fax. As for opening an account, this process can be carried out personally by the entrepreneur or an intermediary.

At the same time, participation in offshore companies implies periodic checks by the bank to ensure compliance with the described line of business and the actual turnover on the account. It is also possible to open an account in a Russian bank. In order to take advantage of one of the regimes available to non-residents of the Russian Federation, you will have to obtain accreditation and register with the tax office.

Conclusion

Based on the above information, the creation of an offshore company can be defined as one of the most effective tools for doing business, especially international. We are talking about favorable conditions for currency transactions and tax planning.