With the world wide moves to monitoring flows, International tax planners are often finding that the use of companies in tax havens impractical in some circumstances. This has caused them to examine the use of low tax countries, as well as a number of other more innovative solutions. We have highlighted a number of these options below as a way of meeting these challenges:
- Non-Resident Companies.
It is possible for a company to be incorporated in the UK, and yest to be considered UK non-resident. This happens when it is considered to be resident in another country by reason of the fact that the effective management and control of a company is carried out in another country which has a Double Tax Agreement with the UK. The treaty would specify that the country of residence of the company is that in which the effective management and control is based.
This concept offers useful tax planning opportunities where use can be made of countries with low corporate taxation rates. Examples of these are:Mauritius, Cyprus, the Netherlands, Portugal and Switzerland.
In order not to be liable to UK tax (other than on UK source income) the company would have to obtain a Certificate of Residence from a competent authority in one of these countries.
It is therefore possible to use this concept to offer a respectable and reliable legal personality, together with relatively low taxation. The exact rate of tax will obviously depend on the treaty country used.
- UK Agency Company
It may be possible to introduce a UK registered company to act as the nominee of an offshore one and to transact business on its behalf. This can deal with some of the problems encountered in trying to trade with an offshore company.
This relationship is structured by entering into an agency agreement between the two parties. This should be in writing and should be executed outside of the UK. So too should all trading contracts so as to ensure that no actual trading takes place in the UK.
The offshore company would then pay a market related commission to the UK company for its services, and the UK company would be subject to UK tax on the commission. All cash flows would take place via the UK companies bank account.
- UK Holding Companies
UK holding companies offer a number of advantages. However, they are subject to UK corporation tax on their profits, including distributable foreign profits. Tax on foreign distributable profits is normally extinguished by claiming foreign tax credits underlying those profits if the foreign corporation tax rate is 33% or more.
UK Holding Companies do not have to pay any withholding tax on dividends that they distribute. This will enable an intermediate holding company for a non-EU parent to receive foreign investment dividends from an EU resident subsidiary free of withholding tax under the EU Parent/Subsidiary Directive and then pay these dividends free of UK withholding tax to an offshore holding company.
Care needs to be taken to ensure that there is no liability to UK CGT, but this can be managed.
International headquarter company status requires that one of the following conditions must be met:
- No more than 20% of the ultimate owners of the company may be UK resident persons at any given time during the accounting period and each member must own at least 5% of the company.
- The company must be owned throughout the period by a foreign held company. (80% of the share capital of the foreign held company must be held by non UK residents).
- The company must be owned by another company which is not UK resident at any time in the accounting period or the previous 12 months and whose shares are traded on a non-UK stock exchange and not traded on any UK exchange during the accounting period or the previous 12 months.
Some pointers regarding UK Companies:
- Shares must be registered
- Single shareholders are allowed
- No par value shares are not permitted.
- Minimum of one director.
- Corporate directors are allowed.
- Maximum disclosure to authorities.
- Nominee shareholders permitted.
- No restriction on location of meetings.
- Registered office must be in the UK.
- Company names may be in any language and must have the suffix Limited or, in the case of a public company, Plc.
If you require more information on the use of UK companies, please download our more detailed note below by clicking here.
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- South Africa Information Sheet
We are able to offer a complete package of services in relation to South African companies. This ranges from incorporation, to banking, Income Tax and VAT registration, accounting, audit management etc, as well as running a local office if required. South Africa's tax system is fairly onerous, but it does have advantages as a springboard into Africa, with whom it has an established and developing double tax treaty network. There are also no exchange controls applicable to non residents.
- Nevis
Nevis was discovered by Christopher Columbus in 1493. It is one of the Lesser Antilles in the Caribbean. After being a British Colony from the 1600's, Nevis became independent in 1983 when it joined the Federation of St. Kitts and Nevis. It is a part of the British Commonwealth, and contains a respected democracy.
The legal system is based upon English common law. There is a high court and a regional Court of Appeal. The ultimate appellate court is the Privy Council in London. Nevis provides a friendly tax environment including exemption for offshore companies, limited partnerships and trusts from any tax.
