The structure provides a high level of credibility and is one of the most exciting Tax Planning opportunities currently available. This structure is sometimes known as the "fiduciary" or "agency" structure.
A major difficulty with many International Tax Planning arrangements is the fact that Invoices from Offshore Companies appear in the accounts of the Owner.
The Nominee Structure provides a solution to this in that all transactions are with an ONSHORE COMPANY!
A "Nominee Company" is formed in the United Kingdom or Ireland which acts on behalf of an Offshore Company.The Offshore Company is the Principal in all transactions and the Nominee Company contracts for business and acts on the Offshore Company's behalf rather like an Agent. All the advertising, marketing and promotion is done by the Onshore Nominee Company. Transactions are invoiced by the Nominee Company in its own name and the monies received by the Nominee Company pass straight to the Offshore Company. The Nominee Company is not collecting the money in its own right - it is collecting it on behalf of the Offshore Company. The ultimate customer is only aware of dealing with a normal company in a mainstream onshore jurisdiction. There is no necessity to declare the relationship between the Nominee Company and the offshore principal.
The only income the Nominee Company has is a fee for providing its services. The audit of the Nominee Company shows only its fee income and its expenses. The trading income does not generally form part of the accounts as this is only handled on behalf of the principal. The level of the fee paid by the Offshore Company to the Nominee Company needs to be chosen carefully. A rough guide would be 5% to 10% of the gross turnover. Expenses of the Nominee Company are set against this and tax will be paid in the United Kingdom or Ireland on the resulting profit. The tax authorities then see a Resident Company with a Resident Bank A/C which is paying tax. This is much less likely to attract their interest than a zero-tax company! If questions are asked by the tax authorities about the structure, the Nominee Agreement between the Nominee Company and the Offshore Company provides sufficient protection. Both Companies (Onshore & Offshore) may NOT trade in their countries of incorporation and the Onshore Nominee Company can REGISTER for VAT in Ireland or the United Kingdom, facilitating trade within the EU.
Mr. A in Greece is buying construction products from various international suppliers. He wishes to centralise his international purchases through an offshore structure in order to access stable interest rates offered by international banks and in order to access all available international discounts; there may also be reasons of confidentiality involved. However, if his Greek Company purchases these goods directly from a British Virgin Islands (BVI) or Bahamas Company a tax investigation is likely to follow. Mr. A therefore utilises a Nominee Company to sell the goods on behalf of the Offshore Company into Greece.
Mr. B is selling electrical equipment from the Far East into North America. Mr. B is based in Europe and does his trading through an European Offshore Company. Some of Mr. B's clients in North America tell him that they would rather not receive invoices from an Offshore Company, so Mr. B uses a Nominee Company to keep his clients satisfied.
Mr. C wants to own some real estate in his favourite European holiday destination, but using an Offshore Company might give him problems! He therefore uses a nominee structure to avoid tax problems in the holiday resort and his own jurisdiction!
Any assets should be in the ownership of the Offshore Company.
If physical goods are sold, these are owned by the Offshore Company and sold for it by the Nominee Company. Title remains with the Offshore Company.
Money is received into a bank a/c, possibly offshore, in the name of the offshore company and controlled by the directors of the Offshore Company.
A second bank a/c, usually offshore, is opened to receive the fee income of the Nominee Company and to handle the payment of its expenses.
We recommend that the two companies have different directors and shareholders.
Contracts with the Nominee Company must be signed outside its country of incorporation. If the company is trading in Europe, it will need to register for VAT.
It is preferable that the directors of the Nominee Company live OUTSIDE the jurisdiction of its incorporation although one resident director will soon be required in Ireland. The directors of the Offshore Company should also be non-resident. We can provide suitable directors subject to certain safeguards.
Non-resident individuals or corporations only pay United Kingdom tax on their United Kingdom source income. The same applies in Ireland. The use of a Nominee Company does NOT cause a liability to United Kingdom or Irish tax for the offshore principal. Profits made by the Resident Nominee Company are taxed at the United Kingdom or Irish corporate tax. The extraction of
residual profits from the Nominee Company's activities may result in a liability to withholding tax, although planning can be undertaken to reduce or eliminate this. The client still has, of course, responsibilty to pay tax in his own country.
Our firm can provide the ongoing administration of the companies at a statutory level only or at a fully comprehensive level to include the operation of the Nominee Company and its invoicing, banking and VAT arrangements.
The Onshore Nominee Company will need to have Audited Accounts prepared annually by an independent auditor. These are submitted to the tax authorities and provide the basis for computation of tax.
Our Nominee Package
Incorporation and administration of a United Kingdom or Irish Company to act as nominee.
Incorporation and administration of an Offshore Company - usually in BVI or Bahamas - to act as principal.
Preparation of a suitable Nominee Agreement between the parties.
Registered Offices for both companies.
Directors and Secretary for both companies if required (subject to conditions).
Opening of bank a/cs onshore and offshore for the structure together with provision of signatories if required.
VAT registration for the Onshore Company.
Full invoicing and bookkeeping facilities if required.
Introduction to suitable auditors
Full corporate documentation - corporate kit, completed minutes and registers, printed share certificates, seal etc.
DHL or UPS delivery of documents
Where to incorporate: We recommend the use of both Ireland and the United Kingdom as suitable jurisdictions for the incorporation of your Nominee Company. The United Kingdom is one of the world's major trading nations, thus lending credibility to the structure, but the use of a Nominee Company prevents access to this market. Currently the tax exposure of a United Kingdom Nominee Company is lower than that of its Irish equivalent, but with Irish tax rates being progressively lowered to 12.5% by 2003 this will shortly change. Both options may be attractive to different clients for different reasons.
The Next Step...
Call us to discuss your plans and to ask for a fee estimate. We will send to you an incorporation questionnaire to set out your precise needs and will then proceed with the incorporation of the companies, the execution of the Nominee Agreement, opening bank a/cs, appointing directors, etc, keeping you constantly advised of progress.