The 'Facts' about Offshore Incorporations

by Peter International Financial Structures


Preamble

Much has been written about the Pro’s and Con’s of structuring your Company in a tax friendly jurisdiction. Of course the onshore tax authorities call such an act ‘Tax Evasion’ when in fact it is the ultimate tax planning tool for Canadian businesses if they are prepared to do it right. The intent of this bulletin is to provide the reader with some basic information about the advantages of incorporating Offshore – especially for those companies who operate on a global basis. This option is certainly not for everyone but for those individuals with companies servicing international markets such as web based e-commerce companies this option is well worth considering. The following information has been condensed in the interest of brevity but provides the reader with some interesting rationale for considering this astute long term financial tactic.

Investing Offshore

The conditions of poor government economics, punishing taxation and increasing threats of lawsuits within Canada have created a fierce determination by Canadians to reduce taxes and protect their assets by positioning themselves ‘Offshore’. What does the term ‘Offshore Investing’ mean? It is creating a new entity, such as an offshore international business company (IBC) or international financial structure (IFC). Once in place this vehicle can then be used to make investments or collect world wide revenues. For now let’s focus on the advantages of using an (IBC) as an investment vehicle. Some people believe they are investing offshore by buying foreign investments through their onshore-managed investment fund commonly referred to as allowable foreign content. However, what I mean by ‘Offshore Investing’ is by actually creating a new legally registered entity in a tax free jurisdiction.

The term ‘Offshore’ conjures up many different images. Offshore ventures are sometimes viewed as risky investments. However, in reality, offshore investing is simply creating a structure or entity in another country for the purpose of investing. The investments can be as simple as opening an interest bearing bank account or as risky as stock speculation and/or commodity trading. Offshore Investing is a financial trend spreading like a raging wildfire fueled by the ongoing restrictive taxes, lack of privacy and a desire to protect ones hard earned assets. The Vancouver Sun newspaper called it….. A ‘Sizzling hot topic for Boomers’. MacLean’s magazine labeled it as ……’Tapping into a fierce determination among many middle-and-upper-income Canadians to reduce their taxes and protect their hard earned assets’.

Due to the fact that Canada doesn’t have exchange controls (restriction of currency crossing borders), no one knows for sure how much money leaves Canada each year. However, economist Tom Naylor of McGill University in Montreal, an expert on international flight capital and author of the 1994 book - Hot Money and the Politics of Debt – estimates that tens of billions of dollars leaves Canada each year headed for offshore jurisdictions. It is estimated that one-third of the world’s wealth (over $5 Trillion) is managed or held in one or more of the 45 or so offshore financial centers.






The worlds largest banks are all involved – Barclays Bank’s – (11th largest bank in the world) most profitable branch is in the offshore jurisdiction of Jersey, Channel Islands. The Canadian Imperial Bank of Commerce earned most of its 2004 profits of $1.69 billion in its zero or low tax Caribbean operations, which allowed it to only pay $51 Million in taxes for the year. That’s a tax rate of 3% - if it’s good enough for the banks then its good enough for you – right? Imagine if you only had to pay 3% income tax – imagine how much more disposable income you would have to put into circulation? Furthermore, it is reputed that the Cayman Islands alone handles more deposits than any other country, except USA and Japan. In addition there are at last count 418 Banks and Trust Companies licensed to do business in the Bahamas, whereas Canada has only 84.

For years the world’s wealthiest families and individuals have used offshore strategies to achieve powerful benefits in estate, business succession, investment, asset protection and tax planning. Offshore investing can cut investment income tax to zero and it’s the absolute best estate planning tool in the world. It keeps your hard earned money away from creditors, lawyers, ex-spouses, frivolous lawsuits and anyone else who would like to get their hands on it. Investing offshore and becoming a tax exile is easy. If you can open up a bank account, you can invest offshore. The popularity of going offshore and the ease, with which we now communicate and do business globally, has really expanded this opportunity. Once the exclusive domain of the super rich and well informed – it used to cost a fortune in legal fees – offshore investing in today’s global economy is now available to people with as little as $10,000 or more to invest.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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