Proform Offshore Limited - Seychelles Dual Structure IBC and Trust Packages

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Seychelles "Dual" Structure
(IBC and a Trust)

POPULAR "DUAL" STRUCTURE International Business Company (IBC) and Trust

A Trust may be used together with an offshore company. Often an IBC and Trust dual structure is used, where the IBC is the active entity and the Trust is passive in that its main role is to hold and own the shares in the IBC; with the IBC owning any property, funds or other external investments. Use of the dual structure is also one means of giving a settlor more “influence” than may be possible in relation to a sole Trust. This dual structure is commonly deployed in the offshore investment area, particularly because of strong tax planning, privacy and asset protection features.

Seychelles International Trusts

A UK non-resident property investor may also wish to consider using an IBC and Trust dual structure, where the IBC is the active entity and the Trust is passive in that its main role is to hold and own the shares in the IBC; with the IBC owning any property, funds or other assets and investments. This dual structure is commonly deployed in the offshore investment area, particularly because of strong tax planning, privacy and asset protection features.

With a mere IBC, the client remains (despite any nominee shareholder/director) the beneficial owner of the IBC and its assets; and this may be very relevant to the client's tax position in his or her country of residence. In contrast, a trust is a legal arrangement where the owner of property or other assets (known as the settlor) transfers ownership of those assets to a trustee to hold and administer under the terms of a Trust Deed for the benefit of other persons known as the beneficiaries (who will often be members of the settlor's family). As the assets of a valid Trust do not form part of the settlor's "personal" property, trusts are highly useful for tax and estate planning as well as for risk management purposes. Whereas a settlor can be a beneficiary under a Seychelles trust, he or she cannot be the sole beneficiary.

Apart from tax saving considerations, protection of assets from creditors of the settlor is another reason investors use offshore trusts. If ownership of property has been shifted from the settlor to third parties, then usually such assets cannot be executed against by any creditors of the settlor. The International Trusts Act 1994 (Seychelles) provides to the effect that notwithstanding any foreign law, a trust shall not be void by reason of the settlor's bankruptcy or liquidation of the settlor's property or in any legal action against the settlor by the settlor's creditors. The Act provides for a narrow exception for creditors of a settlor to attack trusts, namely, where the court finds "beyond reasonable doubt" that the trust was made with the intent to defraud creditors of the settlor or that the settlor was insolvent at the time when the property was vested in the trustee. The Act, however, makes in hard for "trustbusters" in that the onus of proof as to intent to defraud rests on the claimant creditor. Additionally, the Act provides that a legal claim by a creditor is not permitted against a trustee of a trust after 2 years from the date of transfer or disposal of assets into the trust.

There are clearly a variety of fiscal and other benefits to be derived from effective use of Seychelles-based offshore structures.

We do not provide legal advice and no reliance should be placed on this article. UK tax laws are subject to change. If you are considering acquiring UK property, we recommend that you take expert UK tax advice and tax advice in your country of residence and domicile.

Fee Schedule

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Total first year's costs (see note below) includes incorporation of Seychelles IBC and a standard International Trust, Trusteee, registered office and agent, and all government licence fees	UK£1995 US$3591
Annual costs (see note below) includes Trustee, registered office and agent, filing returns and all government fees	UK£1100 US$1980
Nominee Director (per year) We would appoint a nominee to act on your behalf as a director to ensure your complete anonymity. We appoint individuals not corporate nominees. This includes a non-apostilled Power of Attorney.	UK£295 US$531
Assistance with opening bank account Proform Offshore can assist with opening accounts with a bank in the Seychelles or Cyprus	UK£350 US$630 UK£250 US$450
Apostilled Documents Proform Offshore can arrange for a power of attorney and/or company documents to be issued, certified and apostilled - per document	UK£130 US$234
Mail Forwarding We will forward all mail as required (by courier or airmail) This fee includes a US$300 float against forwarding fees which will require topping up as necessary	UK£300 US$234
Courier Fees We forward company documentation by express airmail however if speed is paramount then a courier service is available	UK£50 US$90

Note: The first year's annual fees (registered office, registered agent, nominee services and Government Duty) become due on the anniversary of incorporation.

XE.com Personal Currency Assistant

SEYCHELLES IBCs AND TRUSTS:
VERSATILE SOLUTIONS FOR UK PROPERTY INVESTMENT BY UK NON-RESIDENTS

There are many reasons for UK non-residents wishing to invest in the UK commercial real estate market. An individual may have built up wealth through business interests in his or her own country, yet have concerns as to the level of volatility or economic uncertainty in their country of residence. One answer and hedge against such own-country risk, has been (and continues to be) investing in blue-chip foreign markets. The buoyant UK property market has attracted many foreign investors over the years, particularly in view of favourable tax treatment in respect of non-residents.

Real Estate Ownership Vehicle

A Seychelles international business company (IBC) is an excellent choice of vehicle for the acquisition of UK property (especially where the underlying client is a UK non-resident). The company will be the legal proprietor of the property and be registered as such at HM Land Registry.

Avoidance of Inheritance Tax

The use of a company as the purchasing entity lawfully avoids the imposition of UK inheritance tax. If owned directly by an individual, the full value of the property will be subject to UK inheritance tax on the individual owner's death (irrespective of whether they are resident and domiciled inside or outside of the UK at the time of death) - unless a spouse exemption is applicable.

Avoidance of Capital Gains Tax

Another major fiscal incentive for UK property investment by non-residents is the exemption from UK capital gains tax (CGT), provided that the owner company is not trading or managed and controlled in the UK. As such, a capital gain (no matter how large) arising on the disposal of a UK property purchased and held as an investment would be free of CGT, as the UK does not assess non-residents on such gains (Sec 2 TCGA 1992). UK income tax will however be payable on any rental income derived from the investment property. Although, in appropriate cases, tax efficient financing from outside the UK can alleviate the income tax burden. That is, relief (by way of deduction in computing profits or gains or deduction or set off against income or total profits) is available in respect loan interest payments, subject to the restrictions under Section 787 ICTA 1988.

Stamp Duty Considerations

Another consideration in such a transaction is UK stamp duty. UK stamp duty rates on property transfers range from 1 percent (where the sale consideration is from £125,001 to £250,000) to as high as 4 percent (where the sale consideration is £500,001 or over). In other words, this levy can be quite substantial in a big-figure transaction; and, although payable by the buyer, can be relevant to total price negotiations. A prudent investor thinks ahead. Using a Seychelles IBC can smooth the path in relation to this issue. The sale of the property as a separate asset to a buyer, will certainly attract UK stamp duty. On the other hand, where the property is legally owned by an offshore company and in the case of a sale to another UK non-resident, the imposition of stamp duty may be legally avoided by selling the entire issued share capital of the offshore company to the purchaser (instead of the land per se).

Using our above example, if the UK property had been owned by a Seychelles IBC, under favourable Seychelles laws there is no stamp duty or any other tax or levy on the relevant share transfer and privacy is assured in that there is no requirement to file any shareholders' or beneficial owners' details with the Seychelles Government. Additionally, where a Seychelles IBC is used to own a UK property, the IBC is completely exempt from tax in Seychelles on all income and profits derived from the UK property.

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