The End of Offshore?

[Silvio]

I just had a call with a banker from a major bank that said ALL correspondent banks in US (and EU) basically want to see substance for all offshore companies, including "onshore" like UK etc.

Essentially if you have a company in a different jurisdiction you need to prove substance, filings. In his words "If you live in Belgium and have a UK company it is as if you have a company in Seychelles"

So basically we all will need to get office + employees in the jurisdiction, can't avoid taxes completely. Thoughts?

 

[James Turner]

The offshore industry has changed on a similar level to substance many times over the‌ last almost 30 years I have been involved. The 'substance' requirements are just another change.‍ Apart from the fact it will only impact a portion of the offshore society, I⁠ see it as a positive. Rather than creating companies that are less then ideal and⁤ rely on only hiding to benefit clients in a lot of cases, the requirements are⁣ providing people with a real opportunity to create company structures that work legitimately. Yes costs⁢ will in some cases increase slightly, but at the end of the day you will︀ be better placed to create a structure that legitimately works. For those that don't wish︁ to adopt substance there will always be a way around it.

 

[Silvio]

Care to share?
I think maybe just getting‍ an office address will be good enough for some banks (some banks already asked for⁠ office address and local phone number \ secretary few years ago).

 

[CaptK]

In the UAE a lot of the freezones insist on a virtual office and with‌ a mainland company it's a must.

Paying an Extra 500 or so every month to‍ have a secretary, "manager", website and telephone service will begin to tick boxes.

There are⁠ a lot of providers doing so in other jurisdictions like Seychelles and Mauritius.

They are⁤ basically making it more expensive to have an offshore company but if your profits can⁣ allow and it's worth the headache then go ahead.

Alternatively go there for a year⁢ or 2 make as much money as possible and then go back home. Now you︀ can justify with some clever accounting the legitimacy of the structure, ie it wasn't set︁ up to evade tax.

 

[Silvio]

Yes I guess you're right, it will only stop the small people, bigger operations can‌ afford to hire office and substance.

 

[CaptK]

Hence you sacrifice a‍ year for a long term gain.

 

[AdamT1]

Dear James, if in the process of your‍ engagement a client of yours would like to discuss some ways around some tax issues⁠ would your services provided fall under DAC 6 reporting obligations?

 

[EliasIT]

that's a new one, what is‌ this, anything you can enlight us of?

 

[AdamT1]

The aim of the DAC 6 rules is to provide HMRC, and‍ other EU tax authorities, with additional information to identify and challenge offshore non-compliance, but also⁠ to seek to deter people from engaging in aggressive tax arrangements. Despite the DAC 6⁤ rules being led from the EU, they will almost certainly remain in place following the⁣ end of the Brexit transition on 31 December 2020.

The primary reporting obligation of DAC⁢ 6 falls on ‘intermediaries’, which includes lawyers, accountants and tax advisers aiding, advising, or otherwise︀ assisting UK taxpayers on the design or implementation of a reportable cross-border arrangement. If there︁ is no intermediary, the reporting obligation falls on the taxpayer.

 

[EliasIT]

How many of the offshore agents around do you think will comply to these rules?‌ It would make good sense to use one of the middle man services so you‍ won't get reported anywhere.

 

[Konstanz]

I think not many. Only big⁠ 4 will have to be compliant. There will be workarounds around this. Providers in BVI,⁤ Dubai, USA etc will be booming. How they would enforce this DAC6 for non EU⁣ countries..

 

[Davis123]

Nice. There are even ways to︂ have it arranged as some companies are here that can provide these services for very︃ cheap. The office space is in name only as several companies hold offices there all︄ served by 1 or 2 staff. This is similar to some other jurisdictions too which︅ was shown on 60 minutes before all this offshore tax nightmares started.

 

[Plavivoz]

This doesnt change⁠ the taxpayers(resident in the eu) obligation.

 

[CaptK]

It mitigates tax so you will only be charged on what you bring back not‌ on your total profits

 

[EliasIT]

It will never be the end of offshore companies. Someone pointed it already out here‌ on the forum in another thread. What we see now is a game changer. All‍ the criminals, narcos and con's have saturated the opportunity for all of us to setup⁠ some normal useful structure as it was used to be 6 -20 years back.

Now we have still options in the offshore jurisdictions with bitcoins, nominees, darks, Russian EMI's, Trust⁤ and Funds, we still can setup real offices and hide behind them or reduce taxes⁣ legally.

It is a matter of how much money have you available!

 

[AdamT1]

I did not say it was the end.

It is however importand development for EU residents,‌ and I asked the question James Turner whether they will report EU clients that use‍ their services.

Still got no reply. Will they be providing services as nothing happened and⁠ reporting their clients to tax authorities?

 

[erni]

You are going off topic @adamT! please stick to the thread subject!

 

[AdamT1]

I belive this one is straight to the topic - about significant developments‌ concerning the offshore companies and may be end of the game for EU providers.

 

[CaptK]

Where there's a will there's a way.
EU providers will just we can't do it‌ for you but we will introduce you to a company that can help.
At that‍ point all they do is a referral and the company outside Europe handel everything.

 

[James Turner]

@AdamT1 We are⁤ a fully compliant company with all regulations, but Turner Little do not offer tax advice⁣ and are careful not to offer services in a way that involves reporting wherever possible.⁢ We have been in the industry for almost 30 years and have seen many changes︀ during that time, which we have successfully adapted to. This is merely another one of︁ those changes.