OFFSHORE. WHAT DOES IT MEAN? IS IT LEGAL? - Berger & Dozet
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OFFSHORE. WHAT DOES IT MEAN? IS IT LEGAL?

OFFSHORE. WHAT DOES IT MEAN? IS IT LEGAL?

bank-offshore There is a word that has been constantly repeated these days in all the newscasts. It is the word: OFFSHORE.

 In the following article we´ll try to clarify some doubts, lies and truths about them:

 “Offshore” means away from the coast, but in legal terms it refers to companies or societies incorporated outside of one’s national boundaries, in regions where tax is 0%.

 The term “offshore” in the financial language is used to describe any business activity or investment made outside of one’s national boundaries. It can deal with a wide variety of products: bank accounts, insurance policies, real estate investments, foreign companies, investment funds, etc. Many companies consider that the tax burden in their countries is much higher than in other countries and that is why choose the areas called “tax havens” for their investments.

The countries that are appropriate to provide “Offshore” services depend on their own structure, which highlights through the following features:

  • No legal tax – low taxes or no taxes for non-residents, both individuals and societies
  • Favourable Laws for Establishment of Societies – Laws of establishment of companies in the country, should enable them to maintain the “Bearer Shares”, to have directors from any country, without so many expenses, and to build up the Private Interest Foundations.
  • Stability of the local currency regulation without restrictions – There is no exchange control and there is great freedom in capital movement.
  • Strict Privacy Laws – there must be strict privacy laws that protect your banking information and information about corporate books of anyone, including foreign governments. In the majority of jurisdictions it is punishable by imprisonment or heavy penalties if there is any breakup of bank secrecy.
  • Stable government and economy of the country – The Government and its economy must be stable
  • Excellent Banking System – the country’s banking system must be advanced in both areas of banking infrastructure, in government auditing and in technology.
  • Excellent Communication System – the country´s communication System must be technologically advanced in comparison to the first world countries.
  • Language Support – the language of the country should be appropriate for understanding.
  • Compatibility of Time Zone and Close Location – the time zone of the country must allow you to contact your “Offshore” provider or financial institution during their domestic normal working hours, as well as to travel to the country quickly if you need to run a business.

Some examples of such countries are:

– Traditional banking centres: Switzerland, Luxembourg, Cayman Islands, Isle of Man, Channel Islands, Panama, and Hong Kong.

– Major banking secrecy: Austria, Luxembourg, Portugal, Switzerland, Hong Kong and St. Vincent. Less secure are Bahamas and Singapore.

– Deposit of fortune: Switzerland, Andorra, Monaco and the Channel Islands.

– Interposed societies: Channel Islands, Gibraltar, British Virgin Islands.

– Foundations: Panama, Austria and Luxembourg.

– Investment funds: Luxembourg and the Cayman Islands.

HOW IT IS CONSTITUED?

You can open an offshore bank account in two ways: to go through the whole process as an applicant or to hire a specialist.

Go through the process by yourself

Step 1. In-depth Investigation

Read articles and blog posts. Participate in forums. Find recommendations on appropriate offshore jurisdictions, as well as suitable offshore banks. Remember, not all offshore banks are the same: some are financially solid and others are not, regardless of jurisdictions.

Step 2. Contact the banks from your list (choose the best one)

Contact the banks and offshore jurisdictions that you consider to be ideal for protection of your assets and which you’ve compiled in a list of banks to contact to.

Step 3. Request the opening of an account

Some banks have online forms, others only have email addresses. Either way, you need to submit an application for opening an account.

Step 4. Provide the documents required

As for the documents required for a personal account, at least a certified copy of your passport is requested, as well as a document proving the place of residence of the account holder. Often it is enough to provide an extract from a credit card or from another bank, an electricity or water receipt, or something similar. Some banks also request a letter of reference from another bank or an authorization that allows them to consult with the entity on solvency and honesty of the customer.

Step 5. Obtain bank approval

The bank will review your application and once it is approved, you will have to send the funds corresponding to the minimum amount required for the opening.

Hire a specialist

 A better alternative as to do the whole process by yourself is to hire a specialist. The specialist will avoid losing the time and will advise you on the best bank solvency and on the documents required.

To ensure the opening of your bank account a free pre-approval process is to be done.

Once it is approved, you must submit the required documents and make a payment.

The waiting time varies from one professional to another, in general the whole process can take from two to fifteen days.

IS IT LEGAL?

 Yes, it is as long as everything is declared and if there is no commission of crimes, such as money laundering. The legality of offshore structures is based on the principle of “tax avoidance” using all legal remedies for not paying taxes. Do not confuse the definitions “tax avoidance” with “tax evasion”. The “tax evasion” is referred to the illegal actions of a natural or legal person undertaken to avoid paying taxes.

 Since 2013 the Spanish law considers essential to present the undeclared assets abroad, so that theirs value is to be taxed as capital gains that is not justified in the Income Tax. The Tax Agency may impose a fine of up to 150% of the amount of the defrauded quota, and if it exceeds 120,000 euros, it would become then an evidence of a tax offence.

 For more information, please contact our law office. Our specialists will be glad to advise you.

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