Offshore schemes. What are offshore schemes? The right offshore technology

“Given the stupidity of most people, the widespread point of view would be more stupid than reasonable.”

- Bertrand Arthur William Russell, 3rd Earl Russell, English mathematician, philosopher and public figure.

“Delusion does not cease to be delusion from the fact that the majority shares it.”

- Lev Tolstoy

“The opinion of the majority is not always true. Not a billion flies, not two, not three, not even more will convince me that shit is delicious. ”

Joseph of Egypt

I would like to start this article with a parable about Hodge Nasreddin. Once upon a time, boys pestered Hodge. To get rid of them, he said that around the corner is a cart with apples. “Apples, apples !!!”, the boys cried out and ran for the alleged treat. Hodge looked after them for a long time, and then thought: “Strictly speaking, a lot of people cannot be wrong. If these pure, innocent children think that they give apples around the corner, then it is so! ” “Apples, apples !!!” cried Khoja Nasreddin and, picking up the floors of his dressing gown, rushed off after the boys.

Unfortunately, if in the modern world of the era of deoffshorization, you choose the wrong tax optimization scheme or use an illogical offshore solution - one of the most popular offshore schemes, just the one that the tax bite at once, then the explanation that you are a clean and innocent businessman You are unlikely to be helped. If you want to be like EVERYTHING, then you increase your chances of becoming one of those fish that get on the net, then you are unlikely to become that lucky dolphin that will float away into the distance cheerfully and without a scratch.

Each solution using offshore schemes must be developed strictly individually. Why do you think many tax optimization schemes for years and decades get away with large enterprises? Yes, because they create real legends for their offshore companies and companies from low-tax jurisdictions, which then turn into reality. For offshore companies, real websites, contracts are created, people are hired, real and virtual offices are opened, an offshore company logo is developed for invoices and contracts. If a company is registered, for example, in Panama, then the legend is thought through to the smallest detail. Up to the fact that paper for contracts is purchased in Panama. Gradually, such a company acquires real customers and offshore solutions no longer need to come up with legends. The circuit really becomes correct and logical.

Moreover, in the era of deoffshorization, many schemes are simply dangerous without changing their permanent residence and tax residency for the beneficiary. In other words, for the scheme to work, you have to add more and more flags from the same one that has been used by eternal tourists for more than sixty years.

Offshore schemes (solutions) legitimate tax optimization schemes are presented where offshore and foreign companies are competently used to work with foreign business partners. There are no standard schemes, but there are examples that are used by enterprises in a certain situation, taking into account the specifics of the activity. Each company has its own unique offshore scheme that takes into account the characteristics of the company and the specifics of its activities. Of course, professionals should be involved in the drafting of the scheme. Due to the fact that a huge number of factors have to be taken into account (tax residence of the beneficiary, plans for changing it, country risks, double taxation treaties and their conditions, tax information exchange agreements, plans for signing or ratifying such agreements, investor protection in jurisdictions , international banks that are willing to open accounts suitable for the client for the company included in the scheme and much more) preparation of decisions cannot be free. If a solution to protect assets or to select a bank account for the elementary tasks of small business or protect capital can still be offered, then offshore solutions for active, medium or large businesses can only be a paid service, as it will take several hours of work of a consultant.

The use of offshore, onshore with low tax conditions for foreign investors and midshores is quite legal even in the era of deoffshorization, so many companies and holdings began to use offshore schemes. From the point of view of an international investor from Russia, an offshore company is a tool for the safe use of international financial and investment services with additional protection from a local aggressive business environment. As you know, Russia and offshore companies are Siamese twins () and they won’t be able to cut without blood.

We will begin consideration of offshore schemes popular in Russia.

1. Export-import offshore scheme

It is divided into 2 types. First - export scheme, in which an offshore company acts as an intermediate link between a company from Russia and a foreign partner. This scheme is characterized by the use of reinvising - overstating or underestimating the price of a product. The essence of the export scheme is to purchase the exported goods by an offshore company at the lowest price and resell it to the final buyer in accordance with market prices. Non-taxable profit remains in an offshore company. In fact, the scheme operates as follows: the movement of goods from the seller to the final buyer directly, the passage of all financial flows through an offshore company.

Second view - import schemein the framework of which goods are imported into the Russian Federation through an offshore company with an increase in the price of the goods to reduce the profit of the company from Russia, or a decrease in the price of the goods when moving goods with high customs duties.

The main thing in export-import schemes is the rapid movement of money. However, given the current work of the banking sector and currency control in Russia, this requirement is sometimes impossible to provide. Therefore, the bank account of an offshore company in a foreign bank is a solution to this problem.

Sending goods across the border - Transfer of money for goods - Accumulation of net profit

2. Agent offshore scheme

The meaning of the agent scheme is the signing of an agent agreement by an offshore company and the UK company Ltd. The English company pays tax on its remuneration (5% of the turnover) and timely submits the necessary reports to the UK tax authorities, and the net profit is stored in the account of the offshore company. This scheme excludes any involvement in offshore operations.

Signing an agency agreement - Accumulation of net profit

Note: An offshore company and a company in the UK should not belong to the same ultimate beneficiary

3. Extended agent offshore scheme for trading within the Russian Federation

Goods and cash pass through a company of the Russian Federation, acting as an intermediary between the companies of the seller and the buyer. This company is an agent of a Cyprus company, receiving a remuneration from the turnover of funds in the amount of 5%, that is, the main profit is transferred to the Cyprus company. A Cyprus company pays tax on income in accordance with the current double taxation treaty - 10%. Further, there are 2 options for organizing the operation of the circuit:

1) Overpricing of a Cyprus company.

2) Adding a classic offshore company. Then the Cyprus company is an agent of an offshore company and taxes are levied on 5% of the turnover fee. As a result, net profit accumulates in an offshore company.

Despite the complexity of this scheme in practical application and the appearance of a number of questions about the profitability of VAT deduction, the emergence of a permanent representative office of a Cyprus company, this scheme has the right to life.

Signing an agent agreement - Using a double tax avoidance agreement - Accumulating net profit

4. Non-resident scheme in the UK

This scheme is to use a company registered in the UK as non-resident for tax purposes. When managing and controlling the work of an English company from the territory of another state, with which it has signed double taxation avoidance agreements with the section “connection interruption point”, the English company is not subject to taxation on the profit received from a non-British source of income. It is recommended to use Cyprus in this scheme. When using such a scheme, a UK company obtains a certain status - “double resident”, which provides the opportunity to choose a country for paying taxes. The main requirement is that the governing bodies and beneficiaries of the company must be physically located in Cyprus. If Cyprus is chosen as the tax residence of a UK company, it is possible to use the provisions of double tax treaties concluded by jurisdictions with other countries.

Signing a contract - Providing an invoice - Transferring funds - Managing the company's activities, including a bank account, reporting and invoices -Use of a bilateral agreement to avoid double taxation

5. Offshore scheme used in international transport

In most cases, this scheme is used by transport companies engaged in international transportation. By using the provisions of double taxation agreements between Russia and other jurisdictions, tax costs can be reduced. Consider the example using Cyprus. Based on the signed tax agreement, the company does not pay taxes in the Russian Federation, and tax costs in Cyprus can be minimized by using a Cypriot link company with a classic offshore company.

Provision of transportation services - Transfer of funds - Use of a double tax treaty

6. Offshore scheme used in leasing operations

Companies use this scheme to purchase and further import equipment into the country. An offshore company and a resident company in Cyprus are being established for these purposes. An offshore company issues a loan to a Cypriot company that purchases equipment and enters into a leasing contract for a period of 3 years with a Russian company and uses a double tax treaty between the countries.

After the fact of the equipment being leased, the Russian company pays Cyprus lease payments to the Cyprus company. The Cyprus company transfers the funds of the offshore company as repayment of the loan and interest on it. As a result, the Russian company receives a completely legal channel for transferring money to offshore.

Transfer of funds - Transfer of equipment - Making lease payments - Repayment of the loan and interest on it - Using a double tax treaty - Providing a loan

7. Offshore scheme used in construction activities

There are two types of this circuit. In the first type scheme, the Cypriot company plays the role of a contractor, receiving from the customer full payment for construction services. A Cyprus company and a Russian company conclude a contract according to which the Russian company acts as a subcontractor and performs the entire list of construction works. All cash payments are made through a Cyprus company, a contractor, where the main profit settles.

Control of work and supply of necessary equipment, materials - Transfer of payment for construction work - Implementation of construction work

The second type of scheme implies that the contractor is a Russian company, and the subcontractors are Cyprus companies. The customer transfers the funds of the Russian company for the provision of services in full. The company of the Russian Federation, in turn, distributes the work among subcontractors. Net income will be in the account of Cyprus companies.

Transfer of payment for construction work - Implementation of construction work

8. Offshore scheme used in production activities

Under this scheme, payment for the producer’s raw materials and production services is carried out by an offshore company. Most often, the lowest prices are set for production services. The goods are shipped to the agent by the manufacturer. The agent, in turn, sells the goods to the end customer for agent fees. The remaining money is transferred to an offshore company.

Transfer of funds - Transfer of goods - Supply of raw materials

9. Offshore scheme used in insurance

Offshore companies are also used in insurance and reinsurance operations. Consider the principle of the circuit. An insurance company is being established in the Russian Federation to register a reinsurance offshore. These two organizations are jointly and severally liable for insurance risks. A Russian company insures in Russian currency all its property, including property with a minimal chance of damage and death, in a Russian insurance company at inflated rates. These risks are reinsured in an offshore company. As a result, the Russian company receives a legal channel for transferring money to the territory of the offshore.

You can also establish a company in Cyprus, which takes an loan from an offshore company to lend to a Russian company. The company of the Russian Federation repays the loan regularly in equal installments and pays interest on the loan that is not subject to taxation in accordance with the current agreement on the avoidance of double taxation. A Cyprus resident company transfers the funds of an offshore company to a reinsurer. As a result, the transferred money is stored in the account of the offshore company in the form of repayment of the loan and interest on it, insurance premiums.

Conclusion of an insurance contract - Conclusion of a reinsurance contract - Conclusion of a loan agreement - Transfer of funds for insurance - Transfer of funds for reinsurance - Loan - Repayment of a loan with interest on it

10. Offshore scheme used in trading on the securities market

This scheme is used when working on stock markets, Forex, exchanges, buying shares to optimize dividend tax on shares, income tax after the sale of shares, participation in the capital of the enterprise without appearing in the register of shareholders.

There are 3 varieties of this scheme.

1) Classical: Profit from Securities - Investing in Securities

2) A Russian company acquires shares in an offshore company, the account of which subsequently holds money. Cash Transfer - Stock Sale

3) Entering into the scheme of a company from a prestigious and low-tax jurisdiction reselling the securities of a Russian company will increase the status of the transaction.

Cash Transfer - Stock Transfer

11. Offshore scheme used in the provision of a number of works and services

This scheme is used in the provision of research, design, development work, as well as marketing and advertising services. Net profit is immediately transferred to an offshore company, and the cost of providing services is included in the cost, therefore, income tax is reduced. However, the use of this scheme requires a good knowledge of regulatory and legislative acts on income tax in terms of costs included in the cost. The competent use of the scheme is also important, so that if necessary, it was possible to prove the fact of the provision of services.

There are 2 varieties:

2) Entering companies from prestigious and low tax jurisdictions in the scheme will increase prestige and efficiency.

Service Delivery - Money Transfer

12. The offshore scheme used when registering new enterprises, as well as paying dividends

This scheme is used by foreign investors who want to establish an enterprise in the Russian Federation with the participation of foreign capital.

The parent company in Cyprus registers its subsidiary in the Russian Federation with most of the foreign capital. Dividends paid by the "daughter" of the parent company are taxed in accordance with the current agreement on the avoidance of double taxation only in Cyprus in the amount of 5%. Using an offshore company can minimize taxation in Cyprus.

Transfer of share capital - Payment of dividends - Use of a double tax treaty

13. The offshore scheme used to pay interest on a loan

The principle of operation of this scheme is to pay interest by a Russian company on a loan issued by a Cyprus company, which is not subject to taxation due to the provisions of the current double taxation avoidance agreement. In turn, a Cyprus company pays interest on a loan issued by an offshore company. No source withholding tax in Cyprus.

Loan issue - Payment of interest on a loan - Use of a double taxation avoidance agreement

14. Offshore scheme used in the payment of royalties

An offshore company is engaged in the development and registration of a trademark in the Russian Patent Office and then sells the rights to use it to a Cyprus resident company. The Cypriot company, in turn, transfers the rights to use the trademark to a Russian company with a subsequent obligation to pay royalties. A Russian company pays royalties to a Cyprus company. It is worth noting that when using the provisions of the double taxation treaty, these royalties are not taxable in Russia. A Cypriot company transfers funds to an offshore company minus agent fees. The payment of royalties from the point of view of the company of the Russian Federation is included in the prime cost, and due to the increase in the prime cost, profit tax is reduced.

Transfer of trademark rights - Payment of royalties - Use of a double tax treaty

Naturally, popular schemes are adjusted by time and professionals substitute others instead of some popular jurisdictions, not only because of the needs of a particular client, but also depending on changes in tax rates, the political situation in the country, and even sometimes climatic force majeure. Sometimes the choice falls on atypical jurisdiction for the registration of companies, since the typical for a certain period of time shows increased attention from the tax. And sometimes, after consulting, you find that the country that you considered classic offshore is not in the Offshore Lists of the Ministry of Finance and the Central Bank of your country. Take advantage of our experience, which we have acquired for a lot of money for many years. If you have questions about creating a working offshore solution that will lead to problems, please consult an e-mail [email protected]

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You can often hear that offshore companies are companies through which they illegally withdraw money. ” What is illegal here and why is it so popular?

Offshore companies are completely legal companies, otherwise they were not so common in the world, why is there such an attitude towards them? But this is precisely why, having registered in another state, they cease to be taxpayers in the Russian Federation.
In general, the world of offshore practice has been applied for a long time and quite successfully. But in Russian legislation there was a void regarding offshore companies, or rather there was no such thing at all. On November 24, 2014, an offshore law was passed that aims to reduce money laundering and increase budget revenues.
Only this law tightens, but does not prohibit working with offshore companies, therefore, offshore schemes also remain relevant. Let's consider in more detail what is offshore?

Is it offshore?

Offshore companies are administrative-territorial zones or entire states that provide preferential tax treatment for foreign business, respect for confidentiality of information about business owners or other trade secrets, a simplified accounting system or its complete absence, and quick registration of a business.

Offshore companies are different and provide benefits and confidentiality in different ways. A more detailed classification of offshore companies can be found in the article:.

Who needs offshore?

The use of offshore companies is mainly resorted to by large enterprises, companies, in order to avoid paying large taxes in the territory of their state.
Also, using offshore companies is beneficial for companies engaged in the sale of imported goods, or providing export-import transportation.
In general, any international activity involves working with large cash flows, so setting up an additional company in the offshore through which transactions will be made and to which services will be paid or the main profit transferred will be a good way to save capital.

Legal offshore schemes!

Depending on the specifics of the company, a special suitable offshore scheme is being developed. There are companies on the services market that offer the development of an offshore scheme and document support, company registration. Consider some popular schemes that do not contradict Russian law.

How to reduce taxes when exporting goods?

Example. The company exports abroad domestic goods with a cost price of $ 100 with a margin of $ 120 per piece. Profit per item $ 20. Tax she must pay 20% - this is $ 4.
If you apply an offshore scheme and organize an offshore company as an intermediary between a Russian company and a foreign one, the situation will unfold as follows.
The company sells the goods at the very low price of the offshore company (their own), i.e. at $ 102 and the profit is $ 2. The tax will be $ 0.4.
At the same time, an offshore company buying from a Russian company will not pay additional VAT, which is very profitable. Then an offshore company resells a foreign one at a normal price of $ 120.

Scheme of avoiding high taxes when importing goods!

Example. A foreign company sells goods at a price of $ 100. A Russian company wants to resell this product for $ 150. The profit is $ 50, and she will pay a profit tax of 20% - $ 10.
If you use an offshore scheme, the situation will be as follows.
A foreign company signs a contract with an offshore company (drawn up for you), also sells for $ 100. An offshore company specifically inflates and resells the Russian one at the highest possible price at $ 140.
Resale of goods is planned for the same price of $ 150, respectively, the profit will be only $ 10 and the tax will be $ 2 already.
Additionally, you can conclude an agreement on the provision of services between an offshore and a Russian company, for example, for transportation, safe custody, which will increase overhead costs and reduce the profit of the Russian company and reduce tax deductions.

Tax cuts through an additional agency agreement!

Conclusion of an additional agency agreement with a company registered in a country with low taxation.
By countries with low taxation we mean not classic offshore zones, but states with a loyal tax policy and low income tax for non-residents. Such countries cannot be classified as classic offshore companies; here it is necessary to keep records, submit them to the tax inspectorate and pay constantly low taxes. For example, to such countries include England, Sweden.

The scheme is as follows: between such a company, for example, we register it in Switzerland, and an offshore company signs an agency agreement.
A Swiss company receives a fee for the services provided, for example, 10% of the turnover. The profit remains in the offshore company, and a small legal tax is paid on the income of the Swiss company.

Proven leasing scheme for the industry!

It is necessary when it is planned to import imported production equipment and other expensive tools, fixed assets.
We register an offshore company and a company in Cyprus (between the Russian Federation and Cyprus, agreements are signed for the abolition of double taxation).
An offshore company gives a loan to a Cyprus company, which in turn buys all the equipment and transfers it to a Russian company under a leasing agreement. A Russian company transfers leasing payments to a Cypriot company, which in turn transfers payments for an issued loan to an offshore company. Thus, the Russian company easily transfers funds to the offshore.

How to reduce taxes on dividends on securities and foreign exchange trading!

The scheme is used to reduce taxes when paying dividends or income tax on the sale of securities.
Here, an offshore company acts as an issuer of securities, the shares of which are bought by a Russian company, thereby finance goes to the offshore.
As an increase in confidence in transactions for the purchase of shares in an offshore company, you can add an additional link, like a foreign company (registered in a country with low taxation), which initially buys shares of an offshore company and then resells it to a Russian one.
Also, an offshore company can trade through a broker and pay tax only on dividends, and do not pay income tax.

How to make money on the provision of marketing, consulting, scientific, research and other services?

For such services, the company pays dearly to an offshore company. There will be less suspicion if the company is registered not in a classic offshore, but in a country with low taxation. Be sure to confirm that the services were provided in full.

There are other offshore schemes - these are for insurance companies, financial, international transportation companies and other enterprises that operate on a large scale in one country or want to enter international markets, and also work with foreign companies to provide services, import and export goods.
Each case must be considered individually, taking into account the specifics of the situation.

Free economic zones of Russia: the main platform for attracting investment!

In legal terminology, the definition of offshore began to be used in the 50s of the XX century in the USA from the moment of publication of an article about one company known at that time, which moved its head office to another country and thereby avoided increased attention from the US government.

In the article we will talk about what it is and about the principles of working with it.

Key Terms and Definitions

Literally, the term offshore is translated from English as “offshore”, that is, outside the country, therefore it is of an economic-geographical nature.

An offshore zone is a state or part of it - a region, a state on whose territory there are special conditions for registration and doing business by non-residents, that is, citizens of other countries.

The emergence of these zones is due to different approaches in the tax policy of states, the lack of unified international laws. In essence, any state whose tax policy compares favorably with the policy of the home country can be an offshore zone for conducting business activities of a non-resident.

As an economic phenomenon, such schemes appeared even in Ancient Rome, when traders, trying to reduce their tax expenses, circumvented or traveled around the territory with high duties, conducting trade on neighboring islands.

Today, an offshore company is considered one that does not conduct its business in the country of actual registration, and its owner is a non-resident, that is, a citizen of another state. For example, an American who has registered his company in Cyprus, but is primarily active in the United States, becomes the owner of an offshore company.

Offshore business includes companies that engage in a variety of activities - trading, financial, construction, manufacturing. You can highlight the main characteristics that will classify the enterprise in this category:

non-residency of the owner in relation to the country of registration;
commercial activities are conducted outside the country of registration;
simplified registration procedure;
confidentiality and anonymity in relation to the owner of the company;
absence or significant simplification of currency and financial control of activities, accounting and audit;
low taxation or replacing it with a single fixed fee.

Offshore zones

Offshore zones or, as they are more correctly called, jurisdictions are a state or territory in which tax incentives for non-residents are applied and registration of a legal entity is simplified. They are conditionally divided into three categories:

island territories - usually small islands in the Caribbean, Indian and Pacific Oceans;
european states;
administrative divisions in the USA, Malaysia and some other countries. Some experts include Russian territories here - Kalmykia and Altai Territory.

The emergence of offshore zones was historically and geographically determined. In the 1970s, the island colonies of Great Britain gained independence and became independent states. But at the same time they faced the problem of insufficient budget financing.

Since all these states are island and often have a small territory, their economy and industry are poorly developed, mining is very limited. As a colony, they received subsidized assistance. Having lost it, governments had to think about alternative sources of filling the state treasury, an acceptable solution was the registration of companies in offshore.

Many European countries also have similar problems of budget financing and simplify the system of taxation and registration of enterprises in order to attract foreign capital.

They include Switzerland, Austria, Liechtenstein. Companies registered in these countries have a positive reputation and a high level of customer confidence. However, these countries have more stringent tax systems, statutory accounting and auditing in comparison with island ones.

The island zones include Seychelles, Bahamas, Virgin Islands, Bermuda, Cayman Islands, Cyprus, Panama, Trinidad and Tobago, Dominican Republic other. The peculiarity of the island zones is the complete absence of income tax and dividends, a cheap and simple registration procedure, the complete confidentiality of the owners, but at the same time the dubious reputation of the company.

Offshore company registration

As noted above, the opening of firms in free economic zones is very simple, for this it is not even necessary to stay in this country. Now these issues are hindered by specialized companies that analyze such zones, make a comparative description to simplify the choice of a country, deal with legal and financial issues - as a result, the client receives a ready-made enterprise in just a week. In such firms, you can buy an existing offshore company with a history and "experience" of work.

Saving owners can also easily register a company on their own, for this it is necessary:

First, conduct an analysis of countries and determine the most favorable tax conditions for a kind of activity.
Secondly, to organize a secretary bureau, which will play a representative role, and rent a room for it, thereby obtaining the legal address of the enterprise. If the owner wants to stay completely in the shade, he can, as shareholders of the company, attract local residents who willingly agree for a small fee.
Thirdly, it is necessary to pay the state registration fee, the size of which on island zones varies from 50 to 800 US dollars, and in European countries it can reach several thousand.

A ready-made company can be purchased for $ 300, but the maximum price can exceed $ 10,000. The registration fee must be paid annually, in addition, in some countries, a single flat tax system is applied. Therefore, maintaining an offshore company for a mid-level entrepreneur has no economic benefit.

There are also certain restrictions on activities, among which one can single out a ban on doing business within the country of registration. This provides some financial stability to the state and eliminates the risk of economic takeover by international companies.

Advantages and disadvantages of working offshore

Offshore companies are created to achieve certain goals:

minimization of the amount of taxes and fees;
concealment of a financial transaction;
concealment of company owners;
removal of “criminal” capital from the country;
concealment of the owner’s real income;
lack of currency and financial control.

The scheme for minimizing the amount of taxes paid is simple - suppose that in country X the amount of income tax is 20%. An enterprise in country X, while trading, receives $ 1 million in net profit, of which it pays $ 200 thousand to the state treasury.

The same company can sell goods to an offshore company at a lower price, making a profit of $ 200 thousand, and offshore, reselling the same products, gets the rest of the profit - $ 800 thousand. Income tax in country X is paid in the amount of 40 thousand dollars, in offshore zones it is equal to zero. The result - the company saves 160 thousand dollars, which it can receive in the form of a loan from a foreign company.

The same schemes are used for tax evasion, personal income tax, various duties and excise taxes.

The insurance scheme can be considered on a real-life example of the well-known multinational corporation Phillips. Kingston Captive Insurence Insurance Company was registered in Bermuda, with Phillips operations insurance as its main business.

The manufacturer of well-known equipment transferred to this company most of its profit as an insurance payment, thereby reducing its taxes, and “Kingstone Captive Insurence” annually credited Phillips for the same amount. It is reliably known that under this scheme Phillips saved more than 18 million US dollars.

The big advantage of offshore companies is transaction secrecy and owner information confidentiality. In many countries, government officials are forbidden to engage in entrepreneurial activity in order to avoid lobbying for dubious and unprofitable legislative projects.

By registering a company in Seychelles, a deputy or official receives guarantees of complete anonymity and can calmly promote his business activities, while avoiding taxes and declaring his income as an individual.

According to expert estimates, more than 12 trillion dollars is stored in the accounts of offshore banks, which is about one third of the general condition of all millionaires in the world.

Lack of currency control It allows you to profitably conduct transactions on the securities market and currency exchanges, approximately 80% of such transactions are carried out in offshore zones. Lack of accounting and statutory audits leads to complete misinformation about the nature of the company’s activities and paves the way for criminal operations and transactions. The disadvantages of doing business in offshore zones for companies are reduced to the restriction of such activities by the state.

Impact on Onshores

Offshore activities negatively affect onshore states. Onshore is a company that is registered in the territory where the bulk of its activities is concentrated. There is open bookkeeping on a full-tax scheme. This is the exact opposite of offshore. Such states suffer mainly from under-receipt of taxes and, accordingly, under-formation of the budget.

Many experts are inclined to argue that the global economic crisis arose precisely because of the expansion of the activities of offshore companies. Approximately 90% of Russian large businesses are transferred to free economic zones.

With increasing financial instability in the United States and the national budget deficit, the government took anti-crisis measures that led to higher taxes. Large companies, responding to these measures, transferred their business to offshore zones, mainly to the British Virgin Islands, where more than 800 thousand enterprises are registered.

Legality of work in the offshore

From the point of view of the company’s activities within the offshore zone, the legitimacy of its economic and financial operations can be said. But from the point of view of the state from which the business left, the exact opposite is observed.

As described above, the state loses huge amounts of unpaid taxes, in addition, there is a significant outflow of capital and real investment in other countries, which does not support and does not develop the national economy.

Many offshore companies conduct illegal activities to finance terrorism, due to the fact that in free jurisdictions there is no financial control of transactions and there is no mechanism for open contractual relations, all activities are in complete secrecy.

From this point of view, offshore companies pose a great threat to the whole society, therefore, special organizations have been created that are developing measures to prevent the development of such a business:

One such global organization is Fat. Her recommendations on preventing the financing of terrorism and money laundering have been adopted by the governments of most countries.
OECD - The Organization for Economic Development and Cooperation - also maintains lists of countries and territories with a simplified tax system and opaque financial and economic laws.

The states that support the recommendations of these organizations more closely monitor firms that cooperate with companies from universally recognized offshore zones in their economic and economic activities, limit the amount of their transactions, carry out full identification of enterprises and their owners, monitor product pricing to avoid unreasonable understatement prices.

The plot on how to choose an offshore

On video - the process of choosing an economic zone for doing business:

The next official found a company through which large cash flows pass, while it is registered in the offshore zone. The ship goes to sea under the Panama flag, but most of the sailors come from Russia, and the ship itself was launched from the shipyard of the Soviet Union. These are the current market realities when most of the money goes through offshore companies. This article will cover a typical offshore business scheme.

The best options for taxation, opening companies and accounts in offshore zones, assistance in choosing ready-made offshore companies.

Legal activities of offshore companies

If you pay attention to the largest investors in the Russian economy, you will not see the USA or China there. The largest investments were made in Russia from small states, such as Cyprus, the Netherlands, and Luxembourg. This can be explained by low taxes in these countries. Many Russian companies prefer to work through offshore companies, as It is more convenient for foreign partners. And the main advantage of offshore companies is the absence of income tax for Russian companies. And so, withdrawing funds abroad to facilitate business, companies return money to Russia in the form of direct investments or loans from foreign companies that belong to the same people. This scheme refers to legal activity, but a large proportion of the money that went overseas does not simply return to the country. In order not to arouse suspicion of supervisory authorities, various schemes are used, which will be discussed later.

Payment for services

Using this scheme, many entrepreneurs kill two birds with one stone: they reduce the tax burden and save profits on offshore accounts. Of course, it applies only if the company has a substantial profit for the year, with which it must pay a tax of 20%. And if directors have an offshore company whose activities involve consulting services, you can make a profit through it. For example, she could conduct an audit or provide legal services. Then you can attribute most of the net profit to the payment of this service to an offshore company. As a result, there will be a much smaller amount in the profit line of the accounting report, and accordingly the tax. But all real profits will be saved in an offshore account. If the documents on the services provided are in order, the tax inspectors should not have any questions.

Offshore fleet

The largest merchant fleet for securities does not belong to the United States and China, but to small Panama. In Panama and similar offshore zones, you can inexpensively register your vessel, there are no taxes for any activity, and there are also no numerous checks. Such a policy attracts many entrepreneurs, because it allows you to get huge profits with minimal taxation.

international trade

If the company is engaged in international trade and procurement (buys goods in one country, and sells in another), due to the registration of the company in the offshore zone, it can save on taxes. So the profit will settle in one place - a tax-free zone.

Conducting transport activities

This scheme is used by companies specializing in international cargo transportation. First, a company is registered in a country with which Russia has an agreement on the avoidance of double taxation, for example, in Cyprus. This company will act as a carrier in Russia, while the income will not be taxed, because valid agreement. In turn, the money received on the account of a Cyprus company can be transferred to the account of a classic offshore company in the Caribbean, for example, according to the consulting services payment scheme. Thanks to this scheme, it is possible to legally avoid taxes when conducting activities in Russia

Open an account with a foreign bank

Using this scheme, you can transfer money from a Russian account to an account with any foreign bank with impunity. For this, the Russian organization opens an account with a foreign bank and transfers the necessary amount there. In the reporting documentation, this operation will be listed as a transfer between your accounts. Everything that happens with the money in the account is no longer displayed in the documentation. As a result, for tax inspectors, the money will still be in the account at a foreign bank, although, of course, they are no longer there. To determine whether the money is actually stored in the bank account, the tax service must apply to the tax service of the country where the bank is located. At the moment, such an operation is unlikely.

Accumulation of assets through offshore

To work on this scheme, two foreign companies are needed, similar to the scheme with transport activity. The first company is registered in the country with which there is an agreement on avoidance of double taxation, for example, with the same Cyprus, while the company will own at least 25% of the Russian organization. The second company, which owns a Cyprus company, opens in the Caribbean, for example, in Belize. Under this scheme, dividends from the profits of a Russian organization are paid to the accounts of a Cypriot company, with only 5% tax being paid, and not 9%, as for Russian residents. Dividends received are immediately transferred to accounts in Belize. As a result, considerable funds are accumulated, while this scheme is completely legal.

Risks when transferring money to offshore under false pretenses

All the schemes discussed above can be classified as illegal, because they mean only the withdrawal of funds from the country, while avoiding taxation. Outwardly, the schemes look legitimate, but upon careful examination, it may be obvious that these operations are a method of tax evasion. Therefore, there is a serious control of cash flows from Russia to countries with tax benefits from the tax authorities. And, if there are reasonable suspicions, the company may be fined, and executives may be held criminally liable.

One of the key issues that interest entrepreneurs who are considering opening an offshore company is the legality of using this scheme in our country. Will the incorporation of such a legal entity in the structure of the enterprise have legal consequences? Is registration of an enterprise in the tax haven harassed by law? We analyze the activities of offshore companies in terms of law and indicate which schemes are the most widely used and safe.

How legal is the opening of an offshore company?

We’ll immediately reassure: registration of an offshore, as well as its use in business processes, is not considered a crime and is not prosecuted by law. The only “but”: you can withdraw money outside the country only if it is justified by production or economic necessity, and not by the desire to hide tax revenues. The crime that law enforcement and tax authorities are fighting is precisely the suppression of the illegal withdrawal of funds. Accordingly, using an offshore company for legal purposes, an entrepreneur has nothing to fear.

Basic schemes for using companies from tax havens

Mostly offshore companies become a means of optimizing taxation or protecting property rights. In the first case, it is necessary to carefully consider the scheme for incorporating the company in the structure of the enterprise, since there is a risk of violating the laws of the country or attracting excessive attention to the company from the inspection bodies.

Transfer of funds under service agreements (for example, if an offshore company is developing software or consulting, you can withdraw funds “to tax havens”, paying for the services provided).
Transfer pricing (an offshore company buys goods at one price, and sells them at another, correspondingly higher, thereby reducing the taxable income of the parent company in our country). It is worth noting that this particular scheme today attracts the most attention from the oversight bodies.
Registration of long-term loan agreements (in most cases, agreements are used that provide for deferring the repayment of debt until the end of the agreement - that is, for almost any period of time, up to tens of years. Moreover, the company will not need to provide almost any documents, except for the loan percent lower than recommended by the Central Bank at the time of conclusion).
Transfer of ownership of a specific asset (this procedure is carried out outside the country, therefore, it is possible to solve two strategic tasks that are most important for any enterprise: firstly, to ensure the confidentiality of the transaction, and secondly, to avoid taxation of this operation).

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