Offshore Business Banking

Onshore governments are taking an increasingly keen interest in offshore companies. Andy Coyne looks at the consequences for investors

Offshore companies have had a bad press over the years. Like offshore trusts they are tax advantageous, asset protection vehicles but their ‘off-the-shelf, few-questions-asked’ nature has led to suspicions - not always unfounded - that they are sinister, watertight structures, harbouring the proceeds of unspeakable deeds (or simply used to dodge taxes).

What hasn’t helped in this regard, is that fiduciary services are, by their nature, difficult to regulate. Indeed, the Edwards Review of UK Offshore Centres, carried out for the UK Home Office a couple of years ago, highlighted this area as a weakness of regulation, even in sophisticated offshore centres such as Jersey, Guernsey and the Isle of Man. He recommended that offshore companies should be as tightly regulated as fund management or insurance, and to that end the jurisdictions mentioned have either introduced regulations, or are in the process of doing so in this area.

Offshore Business Banking - Company Formation Industry

Onshore regulators have also been taking a closer look at offshore companies through so-called look-through legislation. Many countries have now enacted such legislation which, as its name suggests, looks through the structure - company, trust etc. - to link the underlying assets with the beneficial owner. The most commonly cited example of this is Spanish property.

Offshore Business Banking & Expatriates Living In Spain

This particular trick works thus: If you own a UK property through an offshore company, when you come to sell you are selling the shares in the company, rather than the property itself and these are not liable to UK stamp duty, saving you a tax bill of 3 or 4 per cent on the value of your property. However, even if you decide to establish an offshore company in this tougher regulatory environment - and we’ll come to the reasons why you should consider doing so in a moment - you will be spoilt for choice.

Offshore Business Banking - Company Formation

You may have seen company formation specialists advertising in publications such as this one or in in-flight magazines, and off-the-shelf companies can be provided in as many as 100 jurisdictions.