A brief overview of lesser-known Offshore Jurisdictions – tax havens

Bahrain

An island kingdom off the coast of Saudi Arabia, Bahrain is one of the wealthiest nations in the world and one that combines low taxation with strict banking secrecy.

There is no corporate tax, no income tax, no capital gains tax, no exchange controls and no limitations on repatriation of funds.

Curacao

Curacao, a Dutch Caribbean Island, is known as an offshore financial center.

Estonia

The most advanced of all the former Soviet states, whilst other jurisdictions tax a company on its profits, Estonia only taxes on distribution of profits. It is an EU country with public records of company details, which makes bank account opening a lot easier.

Labuan

An autonomous province of Malaysia, Labuan is home to one of the few jurisdictions with legislation specifically about holding companies.

Maldives

There is no corporate tax here and only a single tax treaty with India.

Nauru

A Pacific Island northeast of Australia, the world’s smallest independent republic, with an area of about eight square miles and a population of under 10,000.

Niue

Niue is a small, self-governing state in free association with New Zealand and its offshore legislation was founded in 1994, same year as the Seychelles.

Samoa

Samoa is an independent group of islands in the South Pacific Ocean, between Hawaii and New Zealand.

The legislation is written in a way that makes it especially useful for asset protection stemming from Section 228 of the International Companies Act, which states how the company’s assets may be distributed in the case of a Specified Event.

St Helena and Ascension Island

St Helena and Ascension Island has been amongst the very few places on earth where it has not been possible to incorporate a company. This has changed, the Legislative Council has passed a Companies Ordinance, and a Companies Registry has been established in Jamestown, St Helena from June 2020.

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Where there are multiple tenants a Flat Management Company is normally used to protect the interests of the leaseholders. We can either incorporate the flat management company for you as a Limited Liability Company or Limited by Guarantee.

A Flat Management Company has its Memorandum and Articles of Association specially drawn up to allow the company to own, manage and administer a freehold property, which is normally divided into several dwelling units or flats, with each leaseholder owning a share in the company. The leaseholder will be obliged to transfer the ownership of the share to the new leaseholder when disposing of the property.

A Limited company explained

When a property is divided into a number of flats, each flat owner usually has a lease of their own flat but they may also hold shares in a management company that owns the freehold (or lease) of the entire building. Normally, the company’s constitution will say that shareholders who sell their flats must also transfer their shares to the new owners. This ensures that, at any given time, the limited company represents the interests of all the current flat owners.

Some limited companies do not have shares and are instead ‘limited by guarantee’. If your company is limited by guarantee, it means that the members have agreed to contribute to the assets of the company if it is wound up.

Reasons for a Limited company

One reason why residents of a block of flats would have a company is to own the freehold or head lease.

Freehold gives outright ownership of the property to the company. A Head Lease is a lease granted directly to the company, who may in turn grant subleases of the property/ or parts of it to the flat owners.

The company is also often used for collecting cash for carrying out repairs and maintenance to common parts of the property. Often it is a condition of buying a flat that the buyer becomes a member or shareholder of the company.

Role of the Limited company

Flat management companies typically manage common parts of the building. These costs are funded by the individual flat owners, who make periodic contributions into a pooled fund.

If your company just pays a few bills, perhaps for repair or maintenance, then these payments need not go through the company’s books. Less formal arrangements, may be satisfactory. The company could then continue to own the freehold (or head lease) of the property, but all its accounting transactions would be conducted elsewhere – the company would then be ‘dormant’.

The main requirements of this Act affecting flat management companies are that they file.

• Annual report and accounts
• Confirmation statement
• Changes in directors or registered office address

Members involvement in Company Management

Generally a company must hold at least one meeting of its members every year, known as the annual general meeting where the members elect and remove directors.

Set up a Flat Management company

We can set up a Flat Management Company/ Right to Manage company so, residents can jointly run a property, like a a block of flats. Please contact us to proceed.

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Professional Reputation

A limited company is not only legally established, but is also regulated. This inspires confidence in the company from customers and potential investors and creditors.

Company as a Separate Entity

As a limited company is seen as a separate legal entity , then if directorship or management changes then the company continues under new management. This offers security to employees and other members.

Advantages of a Limited Company

Tax Considerations

Operating as a sole trader means you are subject to personal income tax which, once income is over a certain amount, means your personal income tax is higher than corporation tax. Forming a limited company subjects your companies earnings to corporate tax only, hence having substantial financial benefits as profit will be higher as a result of reduced tax payments.

Insolvency

In the event of your company failing your liability is limited. Therefore, you are not personally liable for the companies debts giving the advantage of protecting you personally from bankruptcy. Your maximum losses are only what you invested into the company; your personal finances and assets cannot be touched by creditors.

Borrowing, Financing and Expanding

A limited company has access to both business loans and the ability to appeal for investment. In comparison to a sole trader, who must use personal loans and funds to finance the business, a limited company may apply for a business loan which banks are more likely to lend compared with personal loans.

Combined with the limited liability associated with a limited company business loans are a good method of financing. Appealing to outside investment, for example angel investors, means financing options are available with no interest payments. The investor, in exchange for their investment will be allotted shares.

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