Offshore Solutions

Sovereign was established in Gibraltar in 1987 and now the company has offices in all the major international finance centers. It has a total of 27 offices till date with offices in Bahrain, Dubai, Gibraltar, Isle of Man, Cayman Islands, British Virgin Islands, etc. Sovereign currently manages over 7,000 structures for a wide variety of clients worldwide. The majority of the clients are individuals, expatriates, entrepreneurs, freelance consultants, private investors, or wealthy persons and their families. Sovereign have developed a wide range of supporting services embracing asset management, corporate finance and fund raising, specialist tax advice, ship and yacht registration, insurance broking, credit cards, as well as trademark and intellectual property registration and protection. Offshore Companies are often demonized in the media, which paints a picture of investors illegally stashing their money away in banks located on an obscure Caribbean island where the tax rate is next to nothing. While it’s true that there will always be instances of shady offshore deals, the vast majority of offshore investing is perfectly legal. In fact, depending on your situation, offshore Companies may offer you many advantages. Such as:

Minimizing Taxation: Offshore companies established in low or zero tax jurisdictions may reduce, delay or even completely eliminate the tax burden on the company.

Holding Company: The offshore company can easily hold shares in Bahraini Companies (As WLL or SPC), and in other companies outside Bahrain at the same time. So it can act as A Holding Company for an individual`s shares in different entities. The following diagram illustrates the example.
Asset Protection: Placing your personal assets into a separate legal entity is generally a good idea whether you place them in a traditional company within your home country or you place them in an offshore company. Offshore centers are popular locations for restructuring ownership of assets. Through trusts, foundations or through an existing corporation individual wealth ownership can be transferred from people to other legal entities.

Simplicity: One often overlooked aspect of offshore company incorporation is the relative simplicity of the process. Offshore company formation in many jurisdictions is a quick and seamless process and Sovereign aims to make your offshore incorporation as simple as possible. Additionally, ongoing requirements for offshore companies are often more relaxed than for “onshore” companies.
Confidentiality: Many offshore jurisdictions offer the complimentary benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality. If this confidentiality is breached, there are serious consequences for the offending party. An example of a breach of banking confidentiality is divulging customer identities; disclosing shareholders is a breach of corporate confidentiality in some jurisdictions
 
Which are the most popular offshore jurisdictions? British Virgin Islands (BVI), Ras Al Khaima (UAE), Hong Kong, Seychelles, and Cayman Islands. What makes the British Virgin Islands such prime location for offshore banking? British Virgin Islands (BVI) are a British dependency located in the Eastern Caribbean; the government is stable and promises to remain that way. There is a good commercial and professional infrastructure and the government is actively encouraging the development of the offshore finance business. BVI became the clear market leader for corporate services in the Caribbean after the introduction of the International Business Companies Act in 1984 which created the International Business Company (IBC). This IBC became the industry preferred offshore company.

BVI Company Characteristics - Shareholder: A minimum of one shareholder is required, any nationality.
- Directors: A minimum of one director is required, can be the shareholder.
- No Taxation
- No cash capital required
- No Physical Office required
- Incorporation time 48 hours
- Business activity can be one or more at the same time.
- Very useful tool to hold shares, open a bank account, set-up a representative office in Bahrain, own assists, property, yacht, piece of art etc.
- Total incorporation fees including first year government fees in around: BD700 with no hidden costs

Are you aware of the role of offshore companies in property investment?

Introduction:

Dubai Land Department have recently announced, (as of January 1st, 2011) that it is has banned the registration of Dubai property in the name of virtually all "offshore companies" or companies not registered onshore in Dubai. The one exception to this "offshore company ban" is the Jebel Ali Offshore Company. This new rule does not affect individuals, only foreign or "offshore" companies looking to purchase property.

The following Q&A is to inform non GCC purchasers and investors, of the implications of the Land Department’s new rules, and how the recent changes will affect foreign companies purchasing and registering property in Dubai:

Why would one use a company to purchase a property in Dubai:

There are a number of good reasons why the use of Offshore Companies has become so popular when buying local Dubai property. The most obvious reason would be the avoidance of complicated inheritance procedures. A company does not die. If your property is held in a low cost offshore company, you (and your partner or partners) can own the shares of the company as you see fit. So rather than have your individual names on the title of the property, you have a company name. This is a very easy method for joint investment, for confidentiality, and for organising ones assets under a manageable structure (and in many cases, in a Common Law structure).

So the only "Offshore Company" that I can currently use to buy property in Dubai, is the Jebel Ali Offshore Company?

Correct. This applies only in Dubai. For example, you can still buy property in Abu Dhabi through a BVI company.

The Dubai Lands Department decision of Jan 1st 2011, has confirmed that it will NOT register property title to any foreign company, unless that company is registered offshore with the Jebel Ali Freezone.

But can a foreign company own the Jebel Ali Offshore Company?

Yes. You can for example, use a BVI company, or a common law Trust, to hold the shares of your Jebel Ali Offshore Company. You will still need to clearly show the Lands Dept evidence of the ultimate individual owner(s), with attested share certificates and passport copies.

What about if my property is not yet delivered? I have signed the purchase agreement before January 2011 in my personal name, can I now switch to a company name?

The Dubai Lands Department have an interim property register, and main property register. Until your property is listed on the actual main property register (which happens after handover), then

it is possible to change the title from an individual name to a Jebel Ali Offshore Company, providing you can show that there is no change in the beneficial ownership (i.e. the same individual on the initial agreement, is the same owner behind the company).

But will there be an additional transfer fee, if the sale and purchase agreement is not currently in the name of a Jebel Ali Offshore company?

In order for the registration of title to take place, the developer of the property must issue a No Objection Certificate consenting to the registration in the name of the Jebel Ali Offshore Company. As mentioned above, normally the developer will want to see clear evidence that the person named on the sale and purchase agreement, is the same person as the beneficial owner behind the new Jebel Ali Offshore company. The developer normally charges an administration fee, which should not be more than Dh3-5,000, to issue the No Objection Certificate.

If the developer and Jafza both issue NoCs to the Land Department authorising the registration in the name of the Jafza offshore company, it is normal that the registration can be completed without charging an additional transfer fee, again provided that the ultimate beneficial owners of the new Jafza offshore company are the same as those mentioned in the original sale agreement.

What if my BVI company already holds the title deeds to my property in Dubai?

The recent changes to the policy only apply to registrations of titles taking place from January 1, 2011, and do not affect any that took place prior to that date.

Does Jafza allow offshore companies to own property anywhere in Dubai?

From the 2006 Circular that Jafza issued, it stated that Jebel Ali offshore entities could own property in any project in Dubai that were owned by Dubai World, Dubai Holdings and Emaar Properties.

Whilst we understand that there is no restriction on any freehold property, Jafza offshore companies must still obtain a "No Objection Certificate" from Jafza, in order to register title at the Land Department.

To date, we have not ever had a refusal for an "NOC", when clients are looking to own property outside the projects listed on the 2006 circular.

How is the Jebel Al Offshore Company set up, how much will it cost me?

Set up is fairly straightforward, with the normal due-diligence required on all proposed Directors and Shareholders. It will take about 4-5 days in incorporate, and requires the shareholders of the company to visit the freezone and sign (or provide a Power of Attorney to someone to act on their behalf).

The cost at set up is USD$4,950, and annually there is a registered agent fee of $1950. Sovereign Dubai is one of the oldest registered agents with Jafza, and we have a dedicated corporate services department of 25 people who are there to assist with all company formation enquiries.

What if I want to sell my property, and it is owned by the company, how do I do it?

You have two choices here, you can either sell the property OUT of the company, by simply signing the sale documents as a Director of the company, or you can sell the shares of company, (assuming the company only holds one asset, which is the house). The Lands Dept WILL need to be notified of the change in beneficial ownership of the company, with certified documents to be provided from Jebel Ali Freezone (all of which we can assist with).

HSBC under threat of US tax fraud investigation

Officials said, on 26 January 2011, that the US Federal authorities were considering whether to serve a broad legal summons on HSBC to ascertain whether it sold tax evasion services to scores of wealthy American clients.

The legal action was being considered after a federal indictment in US District Court in Newark of Vaibhav Dahake, an affluent client of an unidentified international bank on charges of conspiracy to defraud the US by keeping hidden bank accounts in India and the British Virgin Islands from about 2001.

Dahake was born in India and became a naturalised US citizen in 2006. He is a principal of an information technology business in New Jersey. The indictment said the unnamed bank had identified wealthy Indian-Americans as clients for undeclared offshore banking through NRI Services, a US division of the bank. The New York Times said officials who had been briefed on the matter said that the international bank was UK-based HSBC, which has private banking operations around the world.

According to court documents, Dahake received “an unsolicited letter advertising bank accounts in India that paid high interest rates” from the international bank in 2001. The indictment cited five unidentified bankers – three Americans and two Indiana – as unindicted co-conspirators.

One of these advised Dahake to transfer money between his accounts in smaller amounts “to stay below the radar” of rules requiring banks to report to US customs officials transfers of $10,000 or more, while others advised him not to file required forms to the Internal Revenue Service (IRS) declaring the money, telling him that money transferred between the BVI account and the India account would not be processed through the US banking system, further evading scrutiny.

One of the bankers further told Dahake that he did not have to worry about bringing his money from the India account back to the US because, according to court papers, the IRS “would be looking for undeclared accounts maintained in the Caribbean rather than in the Far East,” and his ownership of and the structure of the BVI account would be unknown to authorities. The international bank, the papers said, also advised Dahake about holding money in Singapore and Hong Kong.

The New York Times said it was not clear how many client names would be covered under a summons, which would have to be issued by the IRS and enforced by the US Justice Department. Last August, authorities dropped a similar summons against Swiss bank UBS that had sought to require the bank to disclose the names of as many as 52,000 wealthy American clients.

On 24 January, the IRS said that it would soon announce a new amnesty programme aimed at encouraging wealthy Americans with hidden offshore bank accounts to come forward, declare their money and pay taxes owed in exchange for reduced fines and penalties.