Tax and privacy
Offshore entities in tax havens
Donations with the possibility of tax deductions both in private and through your company and protecting your privacy do not go together. If your privacy is dear to you, there are better solutions. In addition, it can provide a high tax bill for the beneficiary if it is not a charitable organization but a natural legal person and especially if it is a family member. If you intend to make a regular donation or a large sum, the possible tax advantage in your own country probably does not outweigh the many advantages that an offshore foundation and bank account offer, which not only allows you to legally avoid taxes, but also much more financial privacy. and can significantly reduce the tax burden for the beneficiary (s) of your donations. Forget tax deduction on anonymous donations; it will not go along with hiding your identity. Going offshore and certainly with a IBC makes it unnecessary as well. Paying almost no tax at all is better than paying a lot of tax and getting a bonus for donating to charity in return.
Tax avoidance and private wealth management
Taxpayers can not be required to avoid the legal ways to save tax. Everywhere in the world this is also endorsed by jurisprudence. As a taxpayer you are free to choose the most advantageous way for you. It is therefore permissible to establish companies in tax havens. You can avoid legal taxation through such a construction. Large companies have already taken that route for a long time. Smaller entrepreneurs often do not and they fail themselves in that way. Many entrepreneurs pay too much tax and many bankruptcies and problems with legacies could have been prevented in this way.
The IBC in general
Do you not yet have a legal form in which your business activities or assets are placed in an offshore jurisdiction, then it is certainly worth considering.
Our personal favourite entity in a tax haven; the IBC or International Business Company. Quite new actually, but very interesting nevertheless. This extraordinaire effective offshore entity is based and founded on Anglo-Saxon legislation.
The IBC is much more flexible and offers more privacy than a personal Trust and is useful for tax avoidance in business operations, asset management and donations. Regardless of the nature of donated assets such as money, crypto currencies, shares, movable and immovable property, art, gold, diamonds or a yacht. In addition to large savings, it can also prevent a lot of misery in business succession, bankruptcy and inheritance.
Versatile and flexible also apply to the S.P.F. or “Stichting Partikulier Fonds”. The S.P.F. is based and founded on Dutch legislation and more precise the Antillen and Curacao in particular. Where the IBC is a bit more focused on business, the S.P.F. is more focused on asset management. Both have a lot in common and most of the advantages mentioned for the IBC also apply to the S.P.F. Because the S.P.F. is a typical Dutch entity we will focus on the IBC here.
The International Business Company (IBC)
We think the IBC is the most flexible and versatile corporate form that includes assets, activities and property rights. A foundation owns the shares of the holding and can be used for almost anything you can think of. Because life in unpredictable this flexibility makes it interesting and suitable for anonymous donations but also for many non charitable purposes. Even more so if your business has a international character. It is a versatile entity which can be used for among other things:
- Act as a holding company or parent company.
- As an international investment company.
- Register yachts or recreational craft.
- To accommodate foreign interests.
- Guarantee privacy and confidentiality.
- The exploitation of licenses, trademark rights and patents.
- Recruit employees and representatives in an international business setting.
- To avoid taxes on company take-over.
- No publication obligation.
- The Foundation is not obliged to publish its financial status.
- No tax with an inheritance.
- Protection of (family) assets against economic risks such as creditors in case of bankruptcy and theft.
- No dividend tax.
- No withholding tax.
- No tax on income from intellectual property such as licenses, copyright and trademark rights and patents.
- You will end up paying so little tax that caring about tax deduction on your donations is meaningless, because there is almost nothing left to deduct!
The private foundation
Can only be used as a charity vehicle. Mend to generate own income by investing the funds they manage. Many of them depending on the jurisdiction of the owner have to pay taxes on the revenues of that investments. There flexibility compared with a IBC is limited by legislation as well.
Private foundations must distribute income annually for charitable purposes. There are also limits on the private business holdings of such foundations. The investments made by private foundations must also not put at risk the execution of the organization’s exempt purpose. The expenses and assets spent by a private foundation must be towards those purposes.
Use an advisor as intermediary
Although advisors can’t guarantee anonymity, they can help protect clients’ identities. With this strategy you channel the funds through the advisor—such as a law firm, bank, or trusted adviser It might work but we have the same problem here; you cannot only rely on the integrity of staff members to keep your identity protected!
That is the main reason we do not rely on the trustworthiness of our employees alone and secured and organized the workflow and communication in a way that now one knows the name of the donor or UBO and can connect him/ her to the beneficiary.
A Grantor trust is a irrevocable trust, and the ultimate irony is that one of the key advantages can easily become a strong disadvantage if careful planning and consideration is not employed. We speak of the permanency of the arrangement and you will have no control at all nor possibilities to change or revoke the made arrangements.
Because life is unpredictable that might not be a good idea.
Our solution : If you have donated to us, you receive a donation code. If you want to revoke your gift or change the intended beneficiary or the height of the donation , just fill in your own bank account number or the bank account number of a new beneficiary of your choice and/ or change the amount you want to give. Simple as that!
limited liability company or LLC
Seems to be the right answer in the US. We can add to that; in many countries it will not. It works in the US because “the tax liability flows through to the members” but in some jurisdiction the organisation papers and sometime also the name of the manager are public records and could reveal your identity if this a family member.
So you need a trustee for that as well. Again trust is involved in people’s good behaviour.
Although LLC ‘s have some attractive features, they also have several disadvantages, especially in relation to the structure of a corporation. An LLC has to be dissolved upon the death or bankruptcy of a member, unlike a corporation, which can exist in perpetuity.
Our solution; the donation code stays valid forever and the funds are well protected with two Dutch based foundations, one of which is operating independently and manages all the assets in a third party bank account and protects your funds in case of a bankruptcy of the other foundation or the hired companies who assist and support the donation process.
A donor-advised fund
“This is a public charity through which individuals and groups can make grants to not-for-profits.” It can help you to stay anonymous, but again it depends on the people who manage it.
The most important downside is that you have no absolute control over the donations”. Not our cup of tea and again al lot of trust involved here in people and parties involved. A typical U.S. entity.
The above information is only intended to help you on your way if you want to transfer your activities and assets in another jurisdiction and avoid tax. We just express our opinion in this matter and we are not a trust office and do not provide financial or tax advice or mediate against payment. We also receive no commission from such institutions or companies. For setting up all the mentioned matters and possibilities that offshore tax havens offer you, we refer you to trust offices with a very good reputation. They can help you organize your asset management, donations, and organizing your business so that you can take full advantage of the benefits that such jurisdictions offer. Don’t forget to mention us!