AMD said:
Who do you had to help you with the setup of all these entities?
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Have multiple separate entities (agents) that we used previously for the prior (now semi-defunct) corporation remnants.
Martin Everson said:
Ok but respond to substance of Nevis and Belize companies I also asked.
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Belize is a South American nation, separate subsidiary there that is for investment purposes.
Kitts no substance yet, and if there is substance then there is tax liabilities.
In Belize, the Income and Business Tax Act of Belize was amended in December 2019 removing tax exemptions on foreign-source income received by International Business Companies (Belize Corporations).
Belize IBCs are currently subject to a 1.75% tax of the chargeable revenue amounting to a sum greater than BZD 3 million, or 3% of the chargeable income amounting to a sum lesser than BZD 3 million. Note that tax is applied to gross revenue (deductible expenses do not apply).
Belize IBCs are required to submit tax returns and pay taxes annually, if they are not tax residents outside of Belize (which should be proven in the form of tax return or tax residence certificate from an overseas country).
Furthermore, the Belize IBC may be deemed to be carrying on an intellectual property business for the purposes of the Economic Substance Act, 2019.
Note that these generally apply to companies that are generating identifiable revenue from IP assets (as opposed to a company that uses its IP to carry on its regular commercial non-IP activity).
This means that Belize companies that are not tax resident elsewhere and are planning to exploit IP rights will need to:
- conduct their core income-generating activities in Belize (IP development, marketing, distribution)
- be directed and managed from within Belize (local board meetings, local directors)
- have an adequate amount of operating expenditures incurred in or from within Belize
- have an adequate physical presence (including maintaining a place of business or plant, property, and equipment) in Belize
- have an adequate number of full-time employees or other personnel with appropriate qualifications in Belize
The company could also potentially qualify as a ”˜high-risk intellectual property business', which consists of companies that are exploiting IP rights and:
- have not created such IP; and
- have acquired the IP from a company of the same group structure or from a third-party that has conducted research and development out of the country of incorporation.; and
- licenses the IP to a company(s) of the same group,
or does not carry out R&D, branding or distribution as part of its local core income-generating activities
These companies are subject to enhanced substance requirements. They will be presumed not to have met the economic substance test by default and will need to rebut this presumption. The economic substance and consequently reporting requirements are considerably high.
A considered ”˜high-risk intellectual property business' needs to produce materials to explain how the development, enhancement, maintenance, protection and exploitation functions have been under its control and the involvement of personnel who are highly skilled and perform their core activities locally.
Documentation that needs to be provided periodically includes detailed business plans that clearly lay out the commercial rationale for holding the intellectual property assets in the jurisdiction, concrete evidence that the decision-making is taking place in the jurisdiction, and information on employees in the jurisdiction, their experience, their contractual terms, qualifications and length of service.
Please note that the International Limited Liability Companies Act (ILLCA) still provides for a tax exemption for International LLCs, and international LLCs are not caught by the Economic Substance Act.
In Nevis, as provided in the Income Tax (Amendment) Act, 2021, a Nevis company which is not controlled and managed from Nevis and that does not have a permanent establishment in Nevis, is
not subject to taxes in Nevis.
A company that is controlled and managed from within Nevis shall be tax resident in Nevis and subject to 33% corporate tax on its worldwide income.
A company that is not tax resident in Nevis, but does have any of the following in Nevis, it would constitute a permanent establishment in Nevis, and income arising from such establishment subject to 33% corporate tax in Nevis.
A permanent establishment can be constituted if -
- the company has a place of business, place of management, a branch, an office in Nevis (e.g. employees working in Nevis); and/or
- the company has a dependent agent in Nevis who regularly exercises the authority to conclude contracts on behalf of the company in or from within Nevis.
There are other situations where a permanent establishment may be constituted such as construction sites, exploitation of mines, etc., which may not apply to your specific business activity.
All Nevis companies must submit an annual tax return regardless of whether they are subject to taxes or not. Accounts do not need to be submitted.
Therefore, it is relevant to understand where the Nevis company would be a tax resident of or whether it would constitute a permanent establishment outside of Nevis.
There is another relevant aspect which is where the intellectual property will be used. You mention that the LLPs will not be operated from within the UK. If the LLP constitutes a permanent establishment outside of the UK, one needs to understand whether withholding taxes on payment of royalties from such a permanent establishment to Nevis or Belize will be subject to withholding tax.
You also need to consider whether you have existing private banking relationships that can support such structure. You are proposing a substantially complex structure which completely lacks economic rationale, and whose corporate layers are incorporated in very opaque jurisdictions, and therefore, it will be deemed of very high risk for most banks. If you do not have existing private banking relationships, it will be substantially complex to open bank accounts for each corporate layer of the structure. For mid-size and large banks to onboard such structure, in principle, at least a relationship of EUR/USD/CHF 5,000,000 would be requested by the bank - and even in small offshore banks it would be complex to get accounts.
You also need to consider that when it comes to person of significant control filing with the UK Companies House, you may still be deemed as the person of significant control and therefore, your details made public. We suggest you reading guidance about PSC at
PSC requirements for companies and limited liability partnerships
When it comes to the trust, in order to better assist you, could you kindly provide more details about -
- whether the trust shall be discretionary or non-discretionary
- whether the trust shall be revocable or irrevocable
- description of the assets that will need to be held in trust
- nationality and tax residency of the settlors, controllers of the trustee (only if private trust company, see below), protectors, and the beneficiaries
- relationship between settlors and beneficiaries (e.g. children)
Please note that the Trustee of a Cook Islands trust may be either -
- a professional trustee (licensed trust company)
- a private trust company
A Private Trust Company is a company that is set up exclusively to act as Trustee. For instance, if you wish to appoint a non-regulated person as Trustee, we could set up a Private Trust Company in the Cook Islands (it should be in the form of an International Company in the Cook Islands) to act as Trustee of the Structure. Alternatively, a Professional Trustee can be provided to manage the assets of the Trust.
A Professional Trustee is a company who is issued a Trust Company License, and is regulated and supervised by the Financial Supervisory Commission.
The turnaround time for settling the Trust would largely depend on the number of revisions required for the Trust Deed. Considering that 1 or 2 revisions are requested, the Trust may be settled within around 2 weeks. Incorporating a Private Trust Company generally takes one week (which can be done simultaneously while preparing the Trust Deed).
The underlying trust fund of a Cook Islands Trust is generally structured as a Cook Islands LLC.
LLCs are a construct of US law. They are a hybrid between a partnership and a corporation. Like companies limited by shares (and unlike partnerships), LLCs have legal personality and the liability of its members is limited up to the (unpaid) capital commitment, whereas, like partnerships (and unlike companies limited by shares) ”“ LLCs are governed by a contract between the members (the LLC Agreement). Cayman's LLC Act is flexible in terms of how the LLC shall be governed, leaving most of its terms up to the LLC Agreement concluded between the members, much in the same way as with LPs and their LP Agreements.
LLCs' ownership is divided into membership interests. LLCs affairs are managed by a board of managers who is generally elected by the members of the LLC. As advised above, the LLC agreement is the governing document of the LLC, governing the terms of the LLC and the rights, obligations of and overall relationship between the members. The LLC Act provides greater discretion to the members of the LLC on how such LLC ”“ as opposed to more rigid statutes applicable to companies limited by shares.
For instance, matters such as capital accounts and variation of economic entitlements between different classes of members, among others ”“ are generally more simply adapted and/or managed according to the needs of the members than in companies limited by shares.
Furthermore, the LLC agreement may limit and/or eliminate managers' fiduciary duties to the LLC (unlike directors of companies limited by shares, who have a fiduciary duty towards the company)
LLCs also provide for greater asset protection given creditors cannot seize or force a sale of the member's interest. Nor can the member's creditor vote the interest of the debtor-member. Furthermore, a Cook Islands LLC provides charging order protection. A charging order impedes a creditor to become a member of the LLC, being statutorily forbidden from accessing assets of the LLC. Instead a creditor may only get a charging order which entitles him or her to only distributions made from the LLC to you, the debtor and that's only if and when distributions are made.
From a tax perspective, LLCs are fully exempt from taxes, whereas International Companies (corporations) are subject to tax at 20% on their income. Please note that taxation may not be relevant when an International Company acts as Trustee, as generally no trustee fees are paid out to such PTC (a PTC does not conduct Trust business with the public).
^ What one of our agents have come back with
