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Some Usefulness and Cases in Using IBC/BC/NRDC Corporation

 

How a International Business Company ("IBC") / Business Company ("BC") / Non-Resident Domestic Corporation ("NRDC") can add value to your business?

An importing or exporting company

Asia International Trading Company

Intellectual Property

Independent Consultants and Contractors

Investment Portfolios

Property Owning Companies

Holding Companies

Shipping Companies


Following cases are for information purposes only, please read our disclaimer carefully, especially on the information as listed below. Please also note that scenerios & laws may change as time goes, client is advised to consult his/her professional advisers and accountants before taking any decisions.


An importing or exporting company

An importing or exporting company might establish a/an IBC/BC/NRDC (i.e. offshore) company. The IBC/BC/NRDC would take orders directly from the customer, but have the goods delivered directly to that customer from the manufacturer or place of purchase.

The profits arising out of the difference between purchase price and sales price would then be accumulated in either a tax free or low tax jurisdiction. With such trading companies, it is important to choose an offshore area, or at least an operational base, which has good communications as shipping and other documentation may be critical to the scheme.

Asia International Trading Company

A/An IBC/BC/NRDC is an excellent vehicle through which international trading can be conducted while accumulating tax free profits. A properly structured IBC/BC/NRDC can legally receive profits without being subject to corporation tax, even if the corporate bank account is in Hong Kong.

This type of trading structure is most beneficial to those who trade goods and provide consulting services in different Asian countries and it can be shown that the profits from the sales arose outside of the home jurisdiction of the business.


Intellectual Property

Intellectual property, including patents, certificates for computer software, trademarks and copyrights can be owned by or assigned to a/an IBC/BC/NRDC. Upon acquisition of the rights, the IBC/BC/NRDC can enter into license or franchise agreements with companies interested in using those rights.

Independent Consultants and Contractors

Many individuals working overseas, particularly in the professional services such as engineering, computers, construction, aviation, finance, film and entertainment, prefer to have their offshore company employ them. A/An IBC/BC/NRDC enters into the contractual arrangement with their overseas employer. The company ownership can be in bearer share form (subject to the bank account opening requirments) and the individual is provided with a full Power of Attorney to arrange such contracts.

A/An IBC/BC/NRDC invoices the overseas employer and the funds are deposited in a Hong Kong corporate bank account. The individual accesses the bank account via internet etc.. Funds can also be sent to local bank accounts.

This arrangement avoids any difficulties with local currencies, exchange controls or other local restrictions. Also, the fees earned can accumulate offshore, free from taxation.

Investment Portfolios

Both large companies and individuals regularly use a/an IBC/BC/NRDC as a mediator to hold investment portfolios, which may consist of stock, bonds, cash and a broad range of other investment products. Cash assets held by offshore companies earn deposit interest gross or can be placed in collective cash funds.

Funds accumulated through a/an IBC/BC/NRDC can be invested or deposited throughout the world and whilst generally returns or interest payable in respect of these funds will be subject to local taxation, there are a number of offshore areas in which funds may be placed either in tax free bonds or as bank deposits where interest is paid gross. Similarly, the Marshall Islands assess no capital gains taxes. Use of a NRDC allows the possibility of investing tax efficiently in a high tax country where there is a concessionary tax treaty in respect of investments made by companies incorporated in the offshore country.

Property Owning Companies

There are great advantages in using a/an IBC/BC/NRDC for the purpose of holding an overseas property. Advantages include minimizing inheritance tax and capital gains tax. In addition, ease of sale which is achieved by transferring the shares in the company rather than transferring the property owned by the company and reduction of property purchase costs to the onward purchasers, particularly relating to stamp duty.

Taking the example of investment in property in the United Kingdom by a/an IBC/BC/NRDC, use of an appropriate offshore vehicle can offer relief from income tax, capital gains tax and inheritance tax. It should be remembered, in particular, that when a non-resident company disposes of a property investment, no capital gains tax is charged and holding through an offshore company removes the application of inheritance tax which would apply if a non-domiciled investor held a UK property in his personal name.

Holding Companies

If the holding company is situated in an offshore area where there are no income or corporation taxes and no requirement that dividends must be paid, then the profits which are accumulated in the tax free climate can be used to fund the requirement of subsidiaries or reinvested as business convenience suggests.

Use may be made of a/an IBC/BC/NRDC to fund the operation of subsidiaries in various countries so that the subsidiaries obtain the benefit of tax deductions on interest paid. A/An IBC/BC/NRDC may hold investments in subsidiaries and/or associated companies, publicly quoted and private companies, as well as joint venture projects. Capital gains arising from the disposal of particular investments can be made without crystallizing taxation liabilities.

Shipping Companies

The use of offshore shipping companies can eliminate direct or indirect taxation on shipping. Shipping companies may own or charter ships, the profits from which activities can be accumulated tax free. Tax and legal requirements generally dictate that the offshore company owning a shipping vessel should be incorporated in the jurisdiction whose flag the ship flies.

The Marshall Islands is the world's premier ship registration jurisdiction, with low registration fees and exemption from tax on income derived from shipping and chartering activities. Furthermore, nearly all shipping companies that are traded publicly on the New York Stock Exchange or the Nasdaq are Marshall Islands companies.



Our aim is to provide a comprehensive service to our clients in Hong Kong and offshore operations. If you find above helpful, please free to contact us.

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