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SETTING UP AND MANAGING A COMPANY OVERSEAS

If you are planning to set up a limited liability company (in particular an Offshore Company), have a quick run through our checklist to ensure you have got everything covered.

Invoicing
If you provide a specialist service, using a company rather than acting as a sole trader could have tax advantages
 
Property Holdings
Using a company to hold property such as buildings, boats and even classic cars can be cheaper and provide savings on tax and property transfer costs. It can also be helpful with probate and executor administration.
 
Investment Holdings
The many beneficial investments available for expats can be held in the name of a company. Having investments in one place at the one address is especially useful if you move frequently with your work.
 
Trading
Even with small scale trading, having a company may be necessary or desirable for entering into contracts.
 
A company could be used for any combination of the above or for all of the above and more - the more you use it the more cost effective it becomes. However, check with your advisor to ensure that any activity you plan to undertake does not jeopardise the tax situation of the company.
 
Next you need to consider the location or jurisdiction of the company.
 
Your circumstances - it generally costs more for you to use an 'Offshore Company' so make sure you stand to benefit from such a set up. If not, consider a local company instead.
 
Political Stability
Riots, wars, coups etc are always possible but very unlikely. Look out for jurisdictions that are being pressurised to 'change their ways'. This applies in particular to British Crown Dependencies and jurisdictions within or bordering on the European Union.
 
Economic Stability
This is connected with political stability. Is the jurisdiction susceptible to economic pressure to change its ways (meaning it should stop offering what might be seen as unfair tax advantages)?
 
Company Law
Ensure that your company is subject to reputable company law. As a rule of thumb and depending on your chosen geographical area, look for English or US law models.
 
Investor Protection
If buying through a financial intermediary you need to check that both the intermediary and the investment you are buying are regulated. Many modern offshore centres have excellent protection schemes in place.
 
Good Banking
Ensure that the jurisdiction has reputable banking. Banks with a world-wide reputation and infrastructure can generally be taken as an endorsement of the jurisdiction.
 
Professional Services
If the jurisdiction has well-known accountancy firms, legal practitioners, insurance companies and fund managers who employ professionally qualified people, then its likely you are dealing with a reputable jurisdiction.
 
Good Communications
If you are in one part of the world and your company and its assets are in another, you need to be able to keep in touch easily. Therefore, ensure that phone, fax and email facilities are well developed.
 
Language
It is advantageous if your native tongue and the language of the jurisdiction are the same.
 
Tax
Consider all tax registration and requirements.
 
Once you have decided you need a company and chosen the jurisdiction, you need to consider the cost (cost is very often a factor in choosing a jurisdiction).
 
Professional fees - get several quotations from different Service Providers (SP's). Ask for brochures, check websites and find out if taxes such as Sales Tax or VAT will be added to the fees.
 
Local Government Fees
Local fees paid to the jurisdiction government which include Capital Duty, filing fees, residency fees, fees in lieu of taxes etc. When comparing incorporation and other fees from SP's, check to see if government fees are included as otherwise they can come as a costly surprise.
 
Domiciliary Fees
Fees will be payable for having the company located in the jurisdiction (usually for the provision of a registered address). There may also be fees for resident directors, a company secretary and local agents etc.
 
Management Fees
May cover some of the above but are more likely to include filing annual returns, holding company and board meetings/producing minutes and any other statutory duties required of your company. Other costs to be aware of include accounting, auditing, VAT returns and bank charges. (Are management services required for the type of company you are setting up? Can they be avoided using a different set-up i.e. using a tax-exempt or non-resident company?).
 
Penalty Fees
Some local government fees can result in Penalty fees if not paid on time be aware of the penalty conditions.
 
Hidden Costs
If you decide to move the company to another SP you may have to pay a fee for the hand over.
 
Do It Yourself (DIY)
You may be able to save money by doing some things yourself. For example, keeping the account records, holding board meetings, etc
 
Client Agreement / Terms of Business
Once agreed, ensure you get confirmation of the fees/quote in writing and ask for it to be incorporated into any Client Agreement or Terms of Business. Doing this will ensure that disputes over costs are likely to be kept to a minimum.
 
Whilst there appears to be a lot to think about, some of the points on the checklist may not necessarily apply to your circumstances. However, referring to it may help you to ask the right questions which, if nothing else, will save you time, effort and hopefully some money!