Since 2009, when new regulations related to transparency and information exchange were put into force, nearly 160 jurisdictions have cancelled banking privacy. Can fiscal authorities and third parties gain access to the information about offshore company owners? This question cannot be answered in a straightforward manner, as some states have closed company registers and do not automatically exchange their residents’ fiscal information while others have company registers open to the public in accordance with the OECD and European Commission requirements.
Wherever you register a company – be it Malta, the BVI or Seychelles – you will have to hire a registration agent. Both the agent and the bank where you open a corporate account must have the information about the company beneficiaries. The KYC and Due Diligence requirements oblige them to acquire this information.
Let us find out if the tax authorities of your home country and your competitors gain access to the information about your offshore company ownership. We will also list the countries where company registers are still closed to the public even though this can change soon.
Who is a ‘company beneficiary’?
Generally speaking, the company beneficiary (or the Ultimate Beneficial Owner, UBO) is the person who owns the offshore-registered company de facto. It is the person who makes key decisions and who benefits from the company operations.
Different national states will have slightly different definitions of the word ‘beneficiary’. In some countries, the holder of the controlling block of shares will be deemed the company UBO. However, in Malta, for example, anyone who has 25% or more of the company ownership shares is considered its beneficial owner. The term ‘Ultimate Beneficial Owner’ or ‘Company Beneficiary’ can refer to the following groups of people:
Private individuals who directly or indirectly control legal entities registered abroad;
Individuals in whose interest the company makes the deals and signs contracts;
Individuals who hold company ownership shares in the amount that allows them to vote at the meetings and participate in company management;
Individuals in whose interest a trust or an investment fund is established.
In the case of the trust/ fund, not only the owner can be considered a UBO but also the trustee, the protector, the founders, and all other individuals who benefit from the activities of the trust/ fund.
In accordance with the corporate and labor legislation of most EU countries, the share certificate shall carry the name of the shareholder. Previously, many investors preferred to use nominee services in order to keep their company ownership confidential.
Under the current conditions, the company beneficiaries have to identify themselves to the bank and the registration agent anyway. For this reason, nominee services are sinking into oblivion.
How can you keep your company ownership confidential?
Offshore company owners can remain anonymous by using the services of professional company directors. Nominee shareholders and directors make acquiring banking services extremely difficult so using them is not the best solution today. Previously, bearer shares were another popular instrument of keeping the company ownership confidential but most countries now disallow issuing them. Some offshore jurisdictions still allow bearer shares but in all likelihood, this is going to change soon.
Let us see what schemes still work allowing the offshore company owner to remain anonymous.
- A trust where an LLC acts as the trustee;
- A multi-layer structure where the offshore company acts as one of the layers;
- An investment fund with a corporate director;
- An offshore corporation with a professional director.
We caution you against registering an offshore company with the purpose of evading taxes. Sooner or later, the tax authorities of your home country are going to find out who the true company beneficiary is through the automatic fiscal information exchange system.
It makes sense to register an offshore company if you want to face fewer bureaucratic berries when setting up the company, or if you want to diversify your assets geographically, or if you want to keep your company ownership unknown to your competitors, raiders, or ex-spouses.
It is important to realize that the fiscal authorities can gain access to the company beneficiaries’ information at any time. They are an authorized government body that has the right to request this information even from a closed company register. You also have to bear in mind that the number of national states that automatically exchange fiscal information is constantly growing. A few jurisdictions are still refusing to do so but they come under a lot of pressure on the part of the international community so chances are they are going to surrender soon and start playing by the common rules.
Can fiscal authorities and third parties acquire information from a closed register?
Some offshore jurisdictions manage to preserve closed company registers but they are under a lot of pressure. Information can be obtained from a closed register only on a court decision and the court will make such a decision only if the request is well grounded. A company can be suspected of being involved in some criminal activities, for example.
Third parties are unauthorized to request information about company beneficiaries in the countries where the company registers are closed.
On the other hand, most European countries have company registers that are open to the public. This means that your competitors can learn who the company owner is without any restrictions if they know what website to log on to.
As far as taxes are concerned, evading them has become impossible. You have to bear the following things in mind:
- An offshore company cannot avoid paying taxes: it is taxed in the country where it obtains incomes in any case.
- If you register a non-resident IBC in an offshore jurisdiction, you will not be able to use the double taxation avoidance agreements even if such agreements have been made.
- In most countries, you have to inform the local tax authorities about owning a CFC (Controlled Foreign Corporation) and having a bank account abroad.
- Even if you register an offshore company in the country that does not automatically exchange fiscal information, you have to keep the tax authorities in your home country informed about it as they can gain access to your financial information on a special request anyway (see above).
Since the Due Diligence procedures were made obligatory, it has become impossible to register an offshore company for any illegal purposes.
If you are an UBO of an offshore company, you have to fulfil all the fiscal and corporate obligations that exist in the country of your tax residency.
Thus, it would be wrong to think that all you have to pay when registering an offshore company is the registration duties and the registration agent fee. A registration agent does not have the right to set up a company unless he or she has complete information about the company founders and beneficiaries. Even where the company register is closed, your data will be available to the registration agent and the bank. Besides, Offshore Pro Group is going to have this information too if you apply for our intermediary services. We guarantee that we are not going to disclose your personal information to any third party.
The registration agent can disclose the company owners’ information only on a court decision. You will have to trust the bank and you cannot do much about it. As far as unauthorized third parties are concerned, they cannot access company ownership information simply because they want to.
If case your offshore company gets involved in a court trial or finds itself in a suchlike situation, the following official bodies are authorized to request the information about the company owners:
- Financial intelligence bodies;
- Law enforcement agencies;
- National agencies combating money laundering and terrorism financing;
- Any official body authorized to impose the KYC rules;
- Tax administrators;
- Judicial bodies;
- State audit bodies;
- Financial analysis department;
- Security agencies, and so on.
A closed company register will keep your information safe only from your competitors, greedy relatives, and raiders.
If we talk about open company registers, we have to note that registers in different countries make different amounts of information available to the public. One jurisdiction will disclose detailed information about the company owner while another one will disclose only the names of the company founders and that is all.
Offshore company beneficiaries’ information and the company accountant
Disclosure of the offshore company owner’s personal information is another important issue to consider. The accountant does not have to identify the company beneficiaries (such as the owner’s spouse of children) only until the moment when payments are made to them. When a trustee pays dividends to any person, for example, the accountant will have to know who this person is.
Here are the basic facts that you have to know pertaining to the relationships between the offshore company owner and the company accountant:
- The company/ trust/ fund accountant has to identify the persons to whom payments are made. All other possible company beneficiaries are of no concern for him/ her.
- The accountant shall have mechanisms of identifying the people who directly control the business activities that the company carries out.
- Company UBO’s need to be identified both in the case when the company is registered in the name of a private individual and in the case when a corporate entity acts as the company founder.
- If the offshore company is registered in the name of a corporate entity, the accountant shall have complete information about the purposes of the company (fund, trust) establishment.
We have only considered standard situations above. We practice an individual approach to each particular client and his/ her personal case. Our experts will gladly assist you in building up a business structure that allows protecting the confidentiality of your information in the most efficient way. We would like to stress once again that an offshore company should not be thought of as an instrument of tax evasion. What you can use it for is transferring part of your assets to a more stable state where your business will not be dependent on the whims of your home country’s rulers and economic fluctuations. In addition, it is quite easy to launch a new business with an offshore company as such a company can be registered within a few business days on the condition that you supply all the necessary application documents.
Please get in touch with us via email, WhatsApp, or our live chat if you would like to clarify any issues related to registering an offshore company and keeping your ownership information confidential. We will be pleased to be of assistance to you.
Can the tax authorities in my home country find out that I own an offshore company?
Yes, they can if the country where your offshore company is registered automatically exchanges fiscal information with other national states. If the country where your company is domiciled is not a member of this group, your tax authorities can request the information from the bank where your company has a corporate account. The list of countries working by the CRS (Common Reporting Standards) and exchanging fiscal information is constantly growing, so you cannot conceal your offshore company ownership from the tax authorities in your home country.
Can third parties gain access to offshore company owners’ information?
No, they cannot, in case the company is registered in a jurisdiction where the company register is closed to the public. In this case, the information about the offshore company owners can be disclosed only to official bodies on a court decision. Third parties can gain access to the information only in the countries where company registers are open to the public. They can use official websites to find out the information about any company owners.
Does the company accountant need to know who the offshore company beneficiaries are?
If the company has to keep accounting records, the accountant has to know who the company UBO’s are. However, this applies only if direct payments are made in the names of the company beneficiaries. In case a legal entity acts as the company founder, the accountant also has to be able to identify the true company beneficiaries.