Even when international media has invested a great number of resources into making you think offshore companies are these obscure instruments used by criminals, there are plenty of approaches that should make think otherwise.
Of course, after the Panama Papers scandal, the general belief is that businesses working through offshore entities began to disappear. Nonetheless, the trend has done nothing else than grow, especially after legal consultants around the world realized how important it was to deploy proper strategies to their clients.
It was common for offshore companies’ owners to utilize fake profiles in order to remain secure maintain a sense of privacy, which is a practice that was neither necessary nor productive to the normalization of this particular sector of business.
For that reason, we at Centurion Capital have intended to offer our readers a clear and transparent approach to what this industry can potentially bring to your current state of affairs.
There is no doubt that there will be skeptics regarding this issue, as is a subject that tends to be polarizing. It’s particularly difficult to tackle the enormous effort made by media to put offshore companies in a bad place (more than often funded by governments that enrich themselves through ludicrous tax systems).
The silver lining is that now more than ever people have begun to understand how perfectly legal it can be to have this kind of financial instrument. And on top of the benefits inherent to the industry, there are positive externalities associated with it, like a greater ROI, second passport opportunities, and citizenship programs available.
One important thing to take into account is that financing should never be about moral compasses, as the world of business has never been about doing what’s best for anybody but you, your partners, clients, and associates.
This tends to be more helpful, as the real balance one should always let guide decisions must be that between what is legal and what is not, having morals play a more secondary role.
There is a common mistake regarding offshore financials, more than often related to putting the debate exclusively on moral grounds while neglecting the importance of lawful action. A given moral compass could pivot a decision when it comes to certain aspects of life, but when dealing with finances, the definitiveness of the law should prime over other types of argumentations. Therefore, we can forget about what is right or wrong for a particular individual, and focus on what is legal and productive for a capital strategy.
The latter is true, especially considering how different cultures and perspectives can be regarding morality, while legislation tends to be more concrete in what it’s actually right or wrong according to either national or international standards.
That being said, there is one particular aspect of this strategy that tends to be forgotten by investors: you can’t pretend to have an offshore company and don’t travel to the country in which you are doing business.
That dream of spending all the days of a year in your country while letting the company “do its thing” is going to bring you more problems than solutions. In the end, the thing is that you can’t just remain living where you currently are all year long and expect to manage a company abroad while benefiting from it.
Remember that if there is one fundamental element to the success of a strategy like this is that of transparency. If having that one mind, both you and your capital are on the track of maximizing benefits.
You definitely aren’t responsible for your birth nation but are directly accountable for the location of your financial strategy, one that should be based on what is best for both your assets and your family.
We certainly don’t have a say regarding our country of origin. Whether you are French, Chinese, or Russian, you didn’t choose it. However, establishing yourself in a different country, one that fits your purposes accordingly is indeed your responsibility. In other words, it all comes to picking the country that treats you as you deserve.
Let’s revise some of the reasons that explain why utilizing offshore companies can just be what you need, in which cases is particularly beneficial, and how they can optimize your current tax strategy.
USING OFFSHORE COMPANIES: THE LAW IS WITH YOU
As we have stated before, we shouldn’t let a particular moral compass guide our financial decisions. For example, there is a certain moral trend that accuses those that seek low-tax regimes as if they were the villains in a movie.
However, when one comes to think about it, there is a myriad of reasons behind a country wanting to offer low-tax opportunities for businessmen. More than often, countries offer these in order to attract capital, looking to potentiate their inner development and enhance their citizens’ life quality.
Because, after all, who are we to neglect Estonia or Latvia’s rights to present their tax regimes to the world? Baltic countries are precisely amongst those with the lowest taxation systems in the world, as they seek to maximize their development and join other European countries at their level.
This part of the world was previously attached (in some cases against will) to the Soviet Union, and now that they have willingly joined the European Union, the best way to modernize their societies is by introducing liberal-based policies.
Their logic is that attracting capital through low taxation is more efficient than implementing high-tax regimes in an already low-budget population. And it has worked! Because, in the end, what is inherently wrong with wanting to set up a business in Estonia, hiring Estonians, and participating in this country’s economic system?
ENHANCED LEGAL FRAMEWORKS
Who hasn’t had to deal with a highly inefficient financial system that keeps delaying the constitution of a company? Wouldn’t be nice to pay just a bit more taxes in order to gain systematic efficiency?
That is exactly the case of many non-European businessmen that are attracted to EU countries just because operational efficiency is something as valuable as low taxes. Estonia, for example, offers the best of both worlds: a great level of access in terms of its financial and judicial institutions, and a great tax system for foreigners.
SAY GOODBYE TO CAPITAL GAINS TAX
There is a myriad of countries out there that offer foreigners great opportunities regarding capital gains taxations. Some go as far as to completely remove it from its systems, although such information is not the current intention of this written piece. However, we encourage you to reach out to our team to find further guidance on the matter.
DOUBLE TAXATION AGREEMENTS
Even as these kinds of treaties aren’t as common as we wish, there are plenty of chances out there to maximize our profits by working in two separate countries at the same time. For more information, we ask again for you to reach out and ask our experts.
Now that we’ve arrived at a more financially-driven part of the reasoning, we can kindly ask our moral compass to be open-minded. Of course, I myself have no problem at all, as after years in the business I’ve come to realize we aren’t doing anything more than optimizing our strategies without breaking a single law.
That being said, you should understand that there are many explanations behind an individual’s decision of safeguarding their assets through an offshore instrument, whether it is protecting them from plaintiffs, ex-partners, attorneys, or creditors.
There are countries where you could sue somebody just for the sake of it, which has led many companies to bankruptcy unjustly. For example, a lawsuit is started every 30 seconds in the United States. That’s more than 2,000 per day, which is absolutely despicable, unproductive, and more than often unjustified. However, if you have a company in Singapore, you have to post a bond in order to start a lawsuit against someone.
And one could say: but aren’t you limiting the possibilities for real lawsuits to come through? Yes and no. Yes, because it’s bureaucratically more difficult and also no because it is still perfectly doable.
PRIVACY AND SAFETY
There is a general belief that privacy is directly related to wanting to hide one’s information and that the reason for the secrecy is due to some kind of illegal or immoral activity. However, as you should already know, that isn’t always the case.
To put a clearer example, one time I had the opportunity to work with a client from Ukraine who explained to me how when any Ukrainian national gathered more than €1,000,000 in a bank account, criminals would threaten their families.
When you think about this, and how a situation like this can present to so many people in so many countries, isn’t obvious that a degree of secrecy is more than necessary to increase self-protection?
Following the same example, a given Ukrainian could be looking to open an offshore company just to escape their hostile national environment. The tax element might not even be a factor guiding the decision but of wellbeing.
Even, in this case, setting up a foreign company in the United States could be called a form of offshore instrument, as the intention to pay taxes is there, but with the condition of being safe from others. Therefore, secrecy should not be something people seek and be judged when achieved.
ENHANCED BANKING SYSTEMS
There is a trick when it comes to accessing some of the world’s greatest banks, and that is how easy through offshore financing planification.
You could be Moldavian and have little to no access to some of the financial opportunities already benefiting hundreds of thousands of businessmen out there, but thanks to these instruments, you only have to travel and start your venture in the right place.
That, of course, is not a golden rule. You could be thinking of opening a company in a country like Vanuatu or the Cook Islands and evidently limit your banking possibilities. But if well assisted, you can find amazing banking options in no time.
TAX-NEUTRAL PLACES ARE IDEAL FOR INVESTMENT
If you are setting up a company that is nurtured by several sets of capital, coming from different sources and countries, you more than likely need a tax-neutral place to start. That is, of course, if you don’t like being limited by tax impositions of each one of the countries involved in the process.
The British Virgin Islands, for example, is one of the most popular choices amongst businessmen when picking a tax-neutral country to start a multi-partner venture. This is true especially concerning its friendly investment legislation, as neither of the associates of a given company will ever have to face bureaucracy-related headaches.
WHAT MAKES OFFSHORE COMPANIES AN ILLEGAL PRACTICE
Ever since having a numbered Swiss bank account became the financial instrument per excellence to avoid taxes, especially for those escaping U.S. taxes, it has become an obligation to report any earning.
There are plenty of financial institutions, both national and international ones, that are just waiting for somebody to make a mistake when reporting income and come with absurd penalties. Not for nothing more than 100 countries have signed the Common Reporting Standard agreements (CRS) in which financial information must be shared in order to combat illegal practices.
You should understand that tax evasion and tax avoidance are completely different things. The first practice includes hiding the very nature of your capital, lying to authorities, and be constantly running with a bag of cash, so to speak.
Tax avoidance can be done under proper guidance and consists of the legal design of a strategy in which your capital is both generated, administered, and taxed in a different country than the one you were born in. We believe the difference between both practices, and why one is illegal and the other one isn’t, has been cleared.
In that sense, tax avoidance is perfectly legal (and quite common) among businessmen, especially when the strategy is argued under valid reasoning according to either organizational or managerial focuses. In other words, when it responds to the desire to accomplish a functional improvement of the company’s development. Whether is moral or not, that is up to you to consider. In my personal opinion, such a compass shouldn’t be taken into account, as we are not evading taxes nor committing a crime in any shape or form.
Neither you nor we are fools here. We already know criminal enterprises are a deeply illegal practice. However, the media lead thousands to believe that only this kind of person is the one after offshore finances, as these instruments are ideal when laundering money or hiding corruptly-generated capital. Of course, everything from escaping authorities, operating under corrupted means, financing criminal organizations or getting revenue from illegal activities will lead you to jail. The media has linked these activities with offshore companies, and of course, some criminals utilize these vehicles to keep committing crimes. But that doesn’t mean the vehicle itself is illegal.
The real deal here is that there are many businessmen all over the world with well-earned fortunes that don’t need to be taxed because they were born in a particular place. Living overseas is a common thing, and if moving to a better country will guarantee a better life quality for these capital-holders, there’s absolutely nothing illegal there.
It’s obvious that authorities will want you to register your money in a tax inferno like Italy, where they can force you to pay a fortune just by docking your yacht there. But what is exactly illegal in registering your assets in a country that will cost you 10 times less? Absolutely nothing, despite what some politicians and media organizations tell you.
As you have probably noticed, there are more reasons why offshore companies are legal and perfectly legitimate than those pointing towards obscure directions. This is because media tends to sell more by targeting criminal activities, they are noisier and better for their objective of keeping audiences in suspense.
However, if you are a legitimate businessman or capital holder, one would have to have a great imagination to think about how to mess up (legally speaking) an offshore company. There are, of course, plenty of details related to banking options and countries with the greatest opportunities that should be addressed by experts.
As you can probably tell by now, many of the reasons to constitute an offshore company are perfectly valid and legal. A set of reasons are legitimate through any lens they are judged from and are even tax-neutral Some, on the other hand, are legal but could tend to be morally disputable. And only a few are illegal.
My personal opinion is that the moral compass should be used in other aspects of life, and rather the legal point of view should be the one to prioritize when deciding on financial issues. This, of course, isn’t the case when discussing it with people that are seeking to get free money from the state, or by politicians that will literally finance themselves through high-tax-sourced revenues.
You have to take into account that your country doesn’t want you leaving, especially if you are a valid asset to the economy as a whole. Even if you are in full compliance with international standards of tax avoidance, they will make everything difficult. For that reason, it is of the utmost importance for you to be accompanied by an expert team of consultants and legal experts ready to aid you and defend you and your interests, always following rules while constructing a path that is both simple and effective.
And that is precisely why we encourage you to contact our team of associates to guide you in this path towards maximizing and protecting your assets. Join the team of Centurion Capital and let yourself go of any financial burden!
Warning: The content of this article does not constitute legal or tax advice. It is provided for general informational purposes only and not for the purpose of offering any warranty or guarantee. As laws change frequently, personalized professional advice is absolutely necessary.
Article written by: Fabrice Barra is a cosmopolitan entrepreneur, lawyer, fiduciary and author, one of the world’s leading experts on offshore strategies, corporate haven, international investments and global mindset lifestyles. He is the personal trusted advisor of well-known entrepreneurs, UHNWI, Forbes Global 2000 companies, professional sportsmen, aristocrats, celebrities, investors, people with a net wealth of 7- to 8- or more figures, and he has access to a network of influential people around the world.