Offshore

Should you need an offshore vehicle for you investment project or any other purpose – we will advise what best suits your purpose. More often the so called “substance” will have to be created for the offshore legal entity that has no physical operations.

All of the offshore jurisdictions offer at least one type of company but often they offer several types of company. The different types of company vary from jurisdiction to jurisdiction offering different tax benefits and limiting some activities. Companies are most commonly limited by shares or by guarantee, some are hybrid companies that are limited by both shares and guarantee.

Offshore companies are used predominantly to:

Protect assets in different jurisdiction by establising a holding company
Transfer the ownership or sell/buy shares with greater confidence
Execute shareholder and other agreements under foreign law
Separate personal debt from business debt
Limit liability and provide anonymity
Raise capital and plan rates/taxes
International expansion

When you own stock in Russian entities, either as a stockholder in a Russian corporation or a member of a Russian limited liability company, profits earned in Russia may be paid to investors as dividends. Stockholders may declare profit distribution on a quarterly basis, every 6 months or annually. Please note that foreign investors may be subject to double tax treaties entered into between Russia and their state of residence. Many tax treaties allow foreign investors to pay income tax on dividends in the state of their residence. If foreign investors – either non-residents or foreign business entities – decide to pay tax on dividends in Russia, they should pay 15 % income tax on distributed profit.

For borrowing capital bear in mind that Russian thin capitalization rules limit the deductions for interest payments by imposing a debt to equity ratio of 3:1. If interest on any debt exceeds the threefold ratio to equity, it will not be deductible for tax purposes.

Controlled Foreign Companies (CFC)

Exemption from CFC taxation set out in paragraph 7 of article 2513-1 the Tax Code of Russian Federation. One of these conditions is the residence of a CFC in the country (territory) that facilitate the exchange of information for tax purposes with the Russian Federation.

The List of States and Territories not providing exchange of information for tax purposes (active as of January 1st 2017)

By order of Russian FTS (Federal Tax Service) from 30.09.2016 № MMV-7-17/527@ of the FTS of Russia approved is the following List of States (territories) that do not provide for the exchange of information (which takes into account not only the presence of the proper agreement, but the existence of negative practices of interaction with competent authorities of foreign States on the exchange of information):

The list contains excluded and new state and territory (compared to original draft document) that do not provide adequate exchange of tax information with Russia, so it is used in order to impose the obligation to pay the profit tax of foreign companies (CFC) controlled by Russian taxpayers in Russia. If the state or territory where the controlled foreign company (CFC) operates is included in the list – then a tax credit cannot be applied (i.e. the controlling Russian resident will have to pay Russian tax on the profits of this CFC).

Not later than October 1 of each year Federal tax Service of Russia will revise the list to reflect the changes in the international regulatory framework and practice of exchange of tax information with specific countries. We suggest using some of these jurisdictions (UAE as example) for international trade and for holding companies owning Maltese or Cypriot companies especially if you have accounts in European banks.

State / Cost of Registration TerritoryCost of Registration
1. Abkhazia 1. Anguilla / 2250
2. Austria 2. Aruba
3. Angola 3. Bermuda
4. Andorra / 9800 4. British Virgin Islands / 1990
5. Antigua and Barbuda / 2950 5. Virgin Islands (USA)
6. Afghanistan 6. Gibraltar / 3390
7. Bahamas / 2600 7. Greenland
8. Bangladesh 8. Guam
9. Barbados 9. China: Hong Kong / 2500, Special Administrative Region (Hong Kong SAR), Macau / 5200
10. Bahrain 10. Comoros Union: the island of Anjouan
11. Belize / 1790 11. Malaysia: Labuan Island
12. Benin 12. Montserrat
13. Bolivia 13. Curacao (Dutch part)
14. Bosnia and Herzegovina 14. The Republic of Niue
15. Brazil 15. Puerto Rico
16. Brunei 16. The Cayman Islands / 6200
17. Burkina Faso 17. Cook Islands
18. Burundi 18. The Turks and Caicos Islands / 2250
19. Bhutan 19. The individual administrative units of the United Kingdom of Great Britain and Northern Ireland, Isle of Man and the Channel Islands (Guernsey / 11700, Jersey/ 12330, Sark, Alderney)
20. Vanuatu / 3250 20. St. Maarten (Dutch part)
21. United Kingdom 21. Taiwan / 8150
22. East Timor 22. Faroe Islands
23. Gabon
24. Haiti
25. Guyana
26. Gambia
27. Ghana
28. Guatemala
29. Guinea
30. Guinea-Bissau
31. Honduras
32. The State of Palestine
33. Grenada
34. Georgia
35. Djibouti
36. Dominica / 2100
37. The Dominican Republic
38. Congo
39. Zambia
40. Zimbabwe
41. Israel
42. Jordan
43. Iraq
44. Yemen
45. Cape Verde
46. Cambodia
47. Cameroon
48. Kenya
49. Kiribati
50. Colombia
51. Comoros
52. Costa Rica / 4500
53. Côte d’Ivoire
54. Laos
55. Lesotho
56. Liberia
57. Lebanon
58. Liechtenstein / 12900
59. Mauritius
60. Mauritania
61. Madagascar
62. Malawi
63. Maldives
64. Malta
65. The Marshall Islands / 2200
66. Micronesia
67. Mozambique
68. Monaco / 7900
69. Myanmar
70. Nauru
71. Nepal
72. Niger
73. Nigeria
74. Nicaragua
75. The United Arab Emirates / 3000
76. Oman
77. Pakistan
78. Palau
79. Panama / 2700
80. Papua – New Guinea
81. Paraguay
82. Peru
83. The Republic of the Congo
84. Rwanda
85. El Salvador
86. Samoa
87. San Marino
88. Sao Tome and Principe
89. Swaziland
90. Seychelles / 1390
91. Senegal
92. Saint Vincent and the Grenadines
93. Saint Kitts and Nevis / 1990
94. Saint Lucia / 2390
95. Solomon Islands
96. Somalia
97. Sudan
98. Suriname
99. Sierra Leone
100. Tanzania
101. Togo
102. Tonga
103. Trinidad and Tobago
104. Tuvalu
105. Tunisia
106. Uganda
107. Uruguay
108. The Federated States of Micronesia
109. Fiji
110. CAR
111. Chad
112. Switzerland
113. Ecuador
114. Equatorial Guinea
115. Eritrea
116. Estonia
117. Ethiopia
118. South Ossetia
119. South Korea
120. Southern Sudan
121. Jamaica

If you want to protect your business from infringement by third persons to prevent conflicts with the tax authorities or to give the company the right to inheritance, you can use bearer shares. In this case, the stock does not specify the name of its owner. There are a number of offshore jurisdictions that permit the issuance of bearer shares. These include offshore zones in Panama, Seychelles, Switzerland, and British Virgin Islands. The bearer shares of the beneficiary are issued for the person who creates and owns of the company.

Another safe way to use offshore jurisdictions is when ownership of shares issued for the nominee shareholder. They are drawn to the individual or legal entity that will own these shares formally in favor of the beneficiary. In fact, ownership of the company will belong to its real owner. In this case nominee shareholders and the beneficiary enter into a trust agreement, which lists the basic rights and obligations of both parties.