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  • New Regulations for Offshore Companies in Detail

    Not completely new but definitely relevant - operational expenses incurred by a company are generally not recognised by the respective finance authority, should there by any suspicion of the applicant being a foreign company with no substance. In this context the business is often referred to as a ‘shell company’ and the approval of operating expenses refused.

    This is also one of the reasons why, even in the past, offshore companies were already suitable (and will probably still be in the future) for securing assets, whereas invoicing a company abroad proved to be rather difficult.


    Offshore companies are legal and will remain so in the future, although they will need to adapt to new conditions and change their structure accordingly.

    In short, non-resident companies without substance will now become ‘legitimate’ entities that meet international requirements but still offer the same advantages reminiscent of the ‘good old offshore times’.

    However, naturally there is no rule without exceptions – because the new regulations vary drastically from country to country and moreover there are countries with more flexible and business-friendly national laws within Non-European locations as well as within the European Union.

    You can find more information on these ‘Exception-States’ in our offer on this page.


    The aim of the CFC-Rules is, simply put, to prevent the shifting and parking of profits in ‘tax havens’ by directly attributing certain types of profits and/or the profits of certain forms of companies to the shareholders of a company. Recorded profits of a foreign company should in this way be treated as if they were transferred directly to the shareholder(s) and therefore taxed in the domicile location of the shareholder(s).

    A company with its seat in the Netherlands is a shareholder of an offshore company in a so-called tax haven. In this case the CFC-Rules should ensure that the profits of the offshore company associated with the Netherlands company will be taxed in the Netherlands.


    To ensure this aim is achieved, the OECD released some recommendations. However, because these are not legally binding, countries decide on a national level on the implementation of these recommendations. This is why countries such as EU-member Cyprus or Panama, as well as many other states, have evidently more liberal and business-friendly laws.

    Simply put, the recommendations are a basic introduction of concrete guidelines for ‘substance requirements’, targeted at specific companies. In simple terms, for companies based in low-tax countries and tax havens this means in future:

    • Employment of a local director (local management & control),
    • Maintaining local permanent premises,
    • The company must be available through telephone and internet,
    • Payment of corporation tax (if applicable),
    • Comprehensive bookkeeping and accounting obligation.

    Incidentally, a country can impose substance requirements on locally based companies as well as foreign companies that have a significant stake in domestic companies. However, every country regulates the implementation of the OECD recommendations into national law independently, which has already resulted in enormously varied interpretations of these.


    To be able to navigate international business without hindrances, offshore jurisdictions will in future also impose general requirements on the substance of companies, whereby the taxation of profits earned abroad or from foreign companies will remain unaffected (Keyword: territorial taxation).

    Particular current examples include Panama, the Seychelles, and the emirate Ras Al Khaimah in the United Arab Emirates.

    In future, it will be relatively easy for foreign companies to either prove the required existing substance or create it in a very short time – Keyword: Management-Package.

    If this step is made and the substance requirements are fulfilled in this way, the resulting CFC-Rules actually only present advantages:

    • Recognition of the company abroad;
    • Clear, even cross-border, tax regulations;
    • Clearly distinguishable features when choosing a location;
    • New opportunities in the context of relocation;
    • Legally secure regulations in regard to ‘local director’ or ‘Nominee-Director’;
    • More transparency also means less input during account opening.

    The recommendation for a foreign company to employ a local director at the company’s country of domicile, already makes logical sense from a tax perspective – because the old rule still applies: the location of the decision-making power of the company, also called management and control, ultimately determines tax residency.

    Conclusion: There are a multitude of good reasons to operate in business-friendly locations with liberal regulations in the future. Particularly when combined with a residential relocation, the chances and opportunities are unlimited!

    Legal Notices

    Privacy Management GroupFZ-LLC regularly checks and updates the information on its websites. Despite all due diligence, it is possible that some facts have changed in the meantime. It is therefore not possible to assume liability or provide any guarantee as to the relevance, completeness or correctness of the information provided. The same applies for all other websites that are accessed through the hyperlinks provided. Privacy Management GroupFZ-LLC is not responsible for the content of websites that are accessed through these links. Furthermore, Privacy Management GroupFZ-LLC reserves the right to make changes or additions to the content provided. In addition to the content and structural copyright protection rights of Privacy Management GroupFZ-LLC websites, the reproduction of information or files, in particular the use of texts, extracts or images, is prohibited without the prior written consent of Privacy Management GroupFZ-LLC.

    None of the content on any of the Privacy Management GroupFZ-LLC web pages represents an individual recommendation nor is it to be understood as an invitation to trade, default or purchase. Privacy Management GroupFZ-LLC also explicitly points out that you should seek advice from experienced tax consultants and/or lawyers, in particular for any cross-border activities. In principle, any income generated domestically or internationally is subject to taxation. It is solely your responsibility to fulfil your domestic and/or international tax obligations appropriately. Privacy Management GroupFZ-LLC does not accept liability under any circumstance. Additionally, our General Terms & Conditions as well as our Data Protection Provisions and Legal Details apply.

    Asset Protection

    CFC-Management-Services

    The taxation of companies on an international level generally follows the principle of decision-making power. A company is thus taxable in the country where ‘Management & Control’ is exercised. In general, international authorities assume that ‘Management & Control’ of a company is exercised in the same country where the general manager/director resides.

    Therefore, if you live outside of Panama, it makes sense to have at least local managing directors/directors in Panama. The level of authority of these Nominee-Directors can be determined individually according to personal needs and legal requirements.

    In addition, in most cases at least one foreign business address or even a foreign business premise is required. For this, we offer appropriate packages, with which this can be verified.

    Note: It is of course also possible to hire local managing directors instead of using nominee directors, should you prefer to do so. We are happy to advise you on the one-off and running costs upon request!

    Annual fees are only due after the first 12 months

    The annual fees are not due for payment until 12 months after the formation of your company in Panama. In the following years the settlement of the annual fees follows a 12-month cycle.

    For example: You establish a company in Panama on 14.07.2019. The start-up fees already include all the costs for the first year, with the exception of costs for optional services. After 12 months, at the latest on 14.07.2020, the annual fees for your company in Panama are due for payment (plus any optional services). Subsequently, the payment date recurs every year on 14th July at the latest.

    Renewal of the management fee annually USD 740.00
    Registered agent annually USD 245.00
    Registered office annually USD 245.00
    Corporate franchise fees annually USD 300.00
    annually

    Annual fees are only due after the first 12 months

    The annual fees are not due for payment until 12 months after the formation of your company in the Seychelles. In the following years the settlement of the annual fees follows a 12-month cycle.

    For example: You establish a company in the Seychelles on 14.07.2019. The start-up fees already include all the costs for the first year, with the exception of costs for optional services. After 12 months, at the latest on 14.07.2020, the annual fees for your company in the Seychelles are due for payment (plus any optional services). Subsequently, the payment date recurs every year on 14th July at the latest.

    Renewal of the management fee annually USD 190.00
    Registered agent annually USD 210.00
    Registered office annually USD 210.00
    Corporate franchise fees annually USD 190.00
    annually

    CFC-Management-Services

    The taxation of companies on an international level generally follows the principle of decision-making power. A company is thus taxable in the country where ‘Management & Control’ is exercised. In general, international authorities assume that ‘Management & Control’ of a company is exercised in the same country where the general manager/director resides.

    Therefore, if you live outside of the Seychelles, it makes sense to have at least local managing directors/directors in the Seychelles. The level of authority of these Nominee-Directors can be determined individually according to personal needs and legal requirements.

    In addition, in most cases at least one foreign business address or even a foreign business premise is required. For this, we offer appropriate packages, with which this can be verified.

    Note: It is of course also possible to hire local managing directors instead of using nominee directors, should you prefer to do so. We are happy to advise you on the one-off and running costs upon request!

    CFC-Management-Services

    The taxation of companies on an international level generally follows the principle of ‘location of decision-making power’. A company is thus taxable in the country where ‘Management & Control’ is exercised. In general, international authorities assume that ‘Management & Control’ of a company is exercised in the same country where the general manager/director resides. .

    Should you intend not to take on the position of local manager/director, despite having an investor visa, we can provide you with the appropriate trustee-service that will manage this position for you – a nominee is a natural person residing in the UAE. Similarly, should you not wish to officially appear as a shareholder of your Freezone-company in RAK, even in this case we can satisfy your requirements through the use of an appropriate Nominee-company. Let’s talk about it, we are at your disposal!

    CFC-Management Packages

    The international CFC-Rules are of particular importance when a Panama company wants to, for example, send invoices to companies based abroad.

    Each country implements CFC-Rules on a national and individual basis and thus makes different demands on the substance and structure of a foreign company. For the benefit of your customers, business partners and contractors and with the aim of not losing them, for example through ‘denied business expenses’ in your country of residence, you should adapt your company to international standards. In regards to this we can support you with one of our management packages.

    CFC Management Packages

    The international CFC-Rules are of particular importance when a Seychelles company wants to, for example, send invoices to companies based abroad.

    Each country has implemented the CFC-Rules on a national and individual basis and thus makes different demands on the substance and structure of a foreign company. For the benefit of your customers, business partners and contractors and with the aim of not losing them, for example through "denied business expenses" in your country of residence, you should adapt your company to international standards. In regards to this we can support you with one of our management packages.