The principal reasons for establishing a business structure in Anguilla, Barbados, Ireland or some similar suitable jurisdiction are:
- as trade barriers and communication costs fall and facilities (e.g. the Internet, Web, Cloud computing) become pervasive, it becomes more and more important for businesses to exercise their geographic freedom. Corporate situs has become a significant competitive factor;
- pursuit of international markets necessitates the choice of a strategic corporate residence within which to own assets, whether of the more traditional variety or intangible assets like data, Intellectual Property, knowledge & social networks. The Canadian/Anguilla treaty (TIEA) provides an exemption from Canadian tax and is an excellent example of government initiatives to encourage businesses to seek and expand foreign markets;
- an overall desire for more privacy in decision making and investments than is currently possible with the reporting and disclosure requirements of many nations. Anguilla has reasonable controls on secrecy and no financial reporting requirement for non public companies;
- increasing concern in several nations that governments may arbitrarily impose exchange controls, new or higher taxes, or similar commercial restrictions. Changes of these types in Anguilla are unlikely;
- a desire for a location which allows tax effective business decisions. Anguilla has no tax on income, assets, gifts, capital gains, estates, nor inheritances and thus is an ideal location. One effective business example is interest withholding exempt loans into other jurisdictions like the USA and Canada. Similarly, Barbados, Ireland, and Holland have unique treaty relationships and favorable tax treatment for international business.
EXAMPLES OF INTERNATIONAL BUSINESS AND TAX STRUCTURES
Moving an existing company to a more favorable jurisdiction.
Where a company domiciled in a tax jurisdiction wishes to move its corporate residence to a more favourable tax jurisdiction like Anguilla, the respective Companies Acts allow for such a transfer. The exiting company should have losses or be of low value to avoid tax on the deemed disposition of its assets on departure. We have effected such transfers for companies such as A&B Geoscience (Arawak Energy), Hansa.net Global Commerce and Bingo.com, while preserving their trading status as public companies on international Stock Exchanges. Future profits of such companies will not be taxed in Anguilla and their higher resulting value should be reflected on the public exchange.
Acquisition of foreign intellectual property:
It is desirable to have the ownership of assets in a tax free location such that any exploitation by way of royalties, fees, franchises, etc. attracts low or no tax. This is particularly appropriate for intellectual property such as software or pharmaceutical and other technology patents. Examples now domiciled in Anguilla companies include many such types of intellectual property. In most of these examples, sales into other markets can be structured without tax in the buying jurisdiction and, of course, with no tax in Anguilla.
Software financing in Canada (Class 12 Assets):
Where products have been developed or enhanced in Anguilla, and their appraised value determined, investors from Canada can buy these assets and receive a 100% Canadian tax write-off subject to the two year rule. We have concluded numerous such transactions such as TradeRef, Movease, Viewpoint. These financings provided an investment for Canadians as well as an advantageous method of financing software. One of our ventures is featured in a chapter of 'The Last Best Hope' (McClelland & Stewart) a 1995 book by Rod McQueen.
Financing foreign subsidiaries from Canada (treaty relationship, formerly "listed country"):
Murex was a Canadian company which, acquired a major diagnostic division of Wellcome, a major UK pharmaceutical firm. This gave Murex over 600 new products and distribution in over 80 locations throughout the world. To do this acquisition directly from Canada would have meant fully taxed earnings in either the UK or Canada. By establishing Anguilla as an active subsidiary, the Canadian parent enjoyed virtually tax free dividends from its worldwide operations. This structure would have provided the advantage of a permanent deferral of tax for parent companies in most jurisdictions around the world but for the Canadian parent, it resulted in the complete exemption of tax. Murex was sold in 1998 to Abbott Laboratories for ten times the value of the 1992 Wellcome purchase in part because of its efficient international structure.
Financing foreign subsidiaries from the USA:
As above, the establishment of an active business in Anguilla will result in deferral of US parent company or US investor tax on foreign source income. Taxes must be paid when the US shareholder receives a dividend but not until then. Provided the shareholding is less than 50%, use of the Anguilla profits can even be made by the American through properly structured loans.
We have developed a global marketing network for various products. This is enhanced dramatically by the introduction of the Internet and Web based services. Sales are structured such that virtually any product can now be sold with no tax being paid in the buying jurisdiction. It is essential that the "invitation to treat", "offer", "acceptance", and the "title transfer" for the goods or services all take place outside the buyer's location. This is achieved by locating the Internet server in a jurisdiction like Anguilla. Contractors for advertising, fulfillment or telemarketing in the target countries may still be used.
Lending from Anguilla into other jurisdictions:
In many examples such as TradeRef Software Corp, Suzu Fudosan Capital, Physis SA and many others, Hansa Company Limited or one of our financing companies, makes loans such that the interest payments back to Anguilla are not subject to withholding tax in the borrowing country. For the investor who might otherwise use equity as a method of financing, this can also provide a stronger asset protection plan should the venture fail or become subject to lawsuits.
Personal holding company for foreign earnings:
Some countries such as the UK allow their citizens and residents to enjoy foreign source income without paying tax on those incomes. The income can be left outside the country and is only taxed if it is repatriated to the UK. The Span-Hansa Group is able to assist clients in establishing UK or other residences and to manage their structures and funds abroad.
A large part of the Group's business involves investing for domestic companies. This includes stock market trades which (in at least the case of capital gains) attract no domestic tax in most world stock exchange countries. For example, a recent seed capital investment at $.15 was sold at $1.70 with no tax in the jurisdiction where the company traded and operated nor any tax in Anguilla.
Domestic active Anguillian business:
More and more businesses are choosing to operate directly from locations such as Anguilla. We have numerous data haven examples using the Internet. In addition, hotels, restaurants, consulting, software development, property development and other businesses can easily be located in tax free countries to conduct local business.
Since our inception in 1981 in Anguilla and other jurisdictions, we have developed and refined legal precedents and structures for the examples above and many others. The Span-Hansa Team would be pleased to discuss these in more detail.
Please note that all company references above are made with permission.