The structure provides a high level of credibility and is one of the most exciting Tax Planning opportunities currently available. This structure is sometimes known as the “fiduciary” or “agency” structure.
A major difficulty with many International Tax Planning arrangements is the fact that Invoices from Offshore Companies appear in the accounts of the Owner.
The Nominee Structure provides a solution to this in that all transactions are with an ONSHORE COMPANY!
A “Nominee Company” is formed in the United Kingdom which acts on behalf of an Offshore Company.The Offshore Company is the Principal in all transactions and the Nominee Company contracts for business and acts on the Offshore Company’s behalf rather like an Agent. All the advertising, marketing and promotion is done by the Onshore Nominee Company. Transactions are invoiced by the Nominee Company in its own name and the monies received by the Nominee Company pass straight to the Offshore Company. The Nominee Company is not collecting the money in its own right – it is collecting it on behalf of the Offshore Company. The ultimate customer is only aware of dealing with a normal company in a mainstream onshore jurisdiction. There is no necessity to declare the relationship between the Nominee Company and the offshore principal.
The only income the Nominee Company has is a fee for providing its services. The audit of the Nominee Company shows only its fee income and its expenses. The trading income does not generally form part of the accounts as this is only handled on behalf of the principal. The level of the fee paid by the Offshore Company to the Nominee Company needs to be chosen carefully. A rough guide would be 5% to 15% of the gross turnover. Expenses of the Nominee Company are set against this and tax will be paid in the United Kingdom on the resulting profit. The tax authorities then see a Resident Company with a Resident Bank A/C which is paying tax. This is much less likely to attract their interest than a zero-tax company. If questions are asked by the tax authorities about the structure, the Nominee Agreement between the Nominee Company and the Offshore Company provides sufficient protection. Both Companies (Onshore & Offshore) may NOT trade in their countries of incorporation.
Trading
The nominee structure is well suited to physical trading with invoicing being done by the Onshore Nominee Company and title in the goods being with the Offshore Company. The Offshore Company buys the goods and they are sold by the Offshore Company with gross income received back to the Offshore Company so that profits are made there.
Asset Holding
The nominee solution works just as well for property and share holding. The Offshore Company owns the asset and the Nominee Company acts like a property letting agent or a broker. Rental income is invoiced by the Onshore Company and received by it on behalf of the offshore principal. A fee is paid to the Nominee Company periodically, usually as a percentage of the rent collected.
The structure can also be used for the supply of services, consultancy, etc where the client does not wish to receive invoices from an Offshore Company.
Mr. A in Greece is buying construction products from various international suppliers. He wishes to centralise his international purchases through an offshore structure in order to access stable interest rates offered by international banks and in order to access all available international discounts; there may also be reasons of confidentiality involved. However, if his Greek Company purchases these goods directly from a British Virgin Islands (BVI) or Bahamas Company a tax investigation is likely to follow. Mr. A therefore utilises a Nominee Company to sell the goods on behalf of the Offshore Company into Greece.
Mr. B is selling electrical equipment from the Far East into North America. Mr. B is based in Europe and does his trading through an European Offshore Company. Some of Mr. B’s clients in North America tell him that they would rather not receive invoices from an Offshore Company, so Mr. B uses a Nominee Company to keep his clients satisfied.
Mr. C wants to own some real estate in his favourite European holiday destination, but using an Offshore Company might give him problems! He therefore uses a nominee structure to avoid tax problems in the holiday resort and his own jurisdiction!
Non-resident individuals or corporations only pay United Kingdom tax on their United Kingdom source income. The use of a Nominee Company does NOT cause a liability to United Kingdom for the offshore principal. Profits made by the Resident Nominee Company are taxed at the United Kingdom corporate tax.
Our firm can provide the ongoing administration of the companies at a statutory level only or at a fully comprehensive level to include the operation of the Nominee Company and its invoicing and banking.
The Onshore Nominee Company will need to have Audited Accounts prepared annually by an independent auditor. These are submitted to the tax authorities and provide the basis for computation of tax.
Generally a UK company must appoint an auditor and audited accounts must be filed with the Companies Registry within 9 months of the financial year end but companies with sales of under ¢G90,000 may be exempt from this requirement and those with turnover of less than ¢G350,000 need only produce abbreviated accounts with a special accountant’s report. An annual return giving details of directors and shareholders is required for all companies.
Where to incorporate: We recommend the use of the United Kingdom as suitable jurisdictions for the incorporation of your Nominee Company. The United Kingdom is one of the world’s major trading nations, thus lending credibility to the structure, but the use of a Nominee Company prevents access to this market.
Offshore Company (BVI) / UK Company :
Partnership (The UK company is controlled at 95% by the BVI one). The UK resident company is a minotity partner in a venture controlled and managed outside the UK and its activities are restricted to issuing invoices on the instruction of the offshore managing partner, the only liability to UK taxation would arise on its share of partnerships profits, say 5%.
Please, do not hesitate to contact us to receive more details.