A Tale of Two Countries and Wealth Management

Rick Mayer is a South African national planning to retire from a Fortune 500 firm and move to Thailand. Mayer was looking for an asset protection solution designed to be tax efficient in accordance to Thai Laws yet flexible to change if a more efficient structure can be formed latter. His main concern was to ensure bifurcation of the wealth he accumulated in South Africa (SA) and received from his father Sheldon Mayer from his future potential earnings in Thailand.

We understood his real requirement; which was to ensure that his SA wealth was protected and was there to take care of his family even if the Thai venture did not work out.

We set up a Seychelles Trust as per his requirements while being compliant.

The Structure has his father Sheldon Mayer as the Settlor, Rick as the Protector and their decedents (as per the Trust deed) the beneficiaries.

Entities of Mayer Discretionary Trust

Post settling in Thailand, Rick plans to start a goods trading business from South Africa to Thailand. We created a Tax efficient structure by leveraging the Seychelles  DTA agreement it has with South Africa and Thailand. A Seychelles Special Licence Company (CSL) was set up to import goods from South Africa and sell in Thailand. The Mayer Discretionary Trust was a shareholder and the dividends went into the Trust .

The Mayer Discretionary

Seychelles as a Jurisdiction

Seychelles as a Jurisdiction

Seychelles is a country that has grown from being a traditional fishing and tourism economy to being a contributor to the growth of world economy and in enabling international flow of capital, wealth, and investment.

Seychelles has adapted a sustainable growth model by re-positioning itself to tap into human capital and provide Financial Services as a jurisdiction. The political stability, good communication infrastructure, a sound legal system, and high standards of professionalism have been the important factors of the growth of this sector. The official languages are English, French and Creole. Though Creole is spoken widely, English is the main language of business. Today, Seychelles is among the fastest growing jurisdictions in the world.

The Seychelles Financial Services Authority is the regulator for non-bank financial services in the Seychelles. Established under the Financial Services Authority Act, 2013, the Authority is responsible for the licensing, supervision and development of the non-bank financial services industry of the Seychelles. The Authority is also responsible for the registration of International Business Companies, Foundation.

The double taxation treaties with countries such as China, Indonesia, Belgium, Cyprus, South Africa, and UAE among over 10 other countries make Seychelles a perfect business destination for international traders. Seychelles provides a wide array of products such as International Business Company (IBC), Special License Company (CSL), Protected Cell Company (PCC), Domestic Company, Trusts, Mutual Funds, Offshore Bank Accounts, Foundations, and services such as Legal, Accounting & Auditing that are ideal for offshore businesses.

Since the introduction of the Seychelles International Business Companies Act in 1994, over 100,000 Seychelles IBC’s have been registered, with more than 600 new offshore companies being registered every month. Seychelles has one of the fastest Registries of International Business Companies in the world. New IBC’s are usually incorporated within 24 hours.

Summary of Advantages:

Fast Registrations
Competitive Cost
Political Independence and Stability
Convenient Time Zone
Nominees Permissible
Minimal Paperwork
Multiple Banking choices
Migratable /Re Domicile permitted

With absolute compliance to the International AML regulations and the confidentiality that the local regulations provide, the industry and the jurisdiction of Seychelles is poised to grow further. Unparalleled advantages such as relatively inexpensive set up costs, unlimited authorized capital, and faster speed of establishing offshore companies are only strengthening this destination.

 

Why Take a Licence for your Securities Trading Business?

Why Take a Licence for your Securities Trading Business?

A Securities Dealer Licence is a licence that allows a person to trade in securities either as a Principal (on its own account) or as an agent (on behalf of its clients). This licence is beneficial for you if you trade in securities on behalf of your clients and you wish to attract more clients. The licence will give your firm more credibility in the eyes of your wholesale broker and your clients and offer tax benefits.

A lot of trading stock / securities is performed by unregistered company or freelancers. As an individual or sole proprietor, un-licenced or individual traders cannot take advantage of the tax advantages and asset protection strategies which are otherwise available to licenced companies.

Since income from trading is considered as passive income, the tax charged is same as any normal tax paying individual. All business expenses like education, a trading platform, software, internet access, computers etc., are excluded from deductions.

The only advantage to being considered a passive trader is that the income derived from trading is not subject to additional self-employment taxes.  To be tax effective, active traders look to qualify for licences. The qualified trader is allowed to file for rebates and hence deduct business running costs as mentioned earlier.

A Legal Trading Business

Qualification processes may often be tedious and hence a trader can opt for incorporating a legal trading business and thus avail these tax benefits. The only way to receive the same tax treatment as a qualified trader is to create a separate corporate entity to trade through. By creating a limited liability company or a limited partnership, you can receive the similar tax treatment as a qualified trader.

For successful traders, most advisers would suggest business structures that have multiple entities to maximize the tax and protection benefits. Such planned structures can help save up to 30% of revenue; simple example would be to have a contracted management fee to take advantage of the multiple tax strategies available. This type of business structure also provides excellent asset protection because it separates the business from the individual.

An easy very cost effective way to obtain these licences and be tax optimal is to look at suitable jurisdictions like Seychelles, Dubai or Belize.

Why Seychelles?

  • Quick turnaround time to get licence
  • Modern and flexible securities law
  • Well regulated jurisdiction
  • Minimum capital requirement is USD 50,000
  • Reasonable licence fees
  • Low tax rate (business tax rate is 1.5%)

We at Abacus Seychelles can help you get the Seychelles Securities advisor licence. Our Service advantages include:

  • Formation of the entity for Securities Dealer
  • Assistance in completing all application documents and filing the application
  • Renewal of Securities Dealer and Securities Dealer Representative Licence
  • Provision of registered office
  • Assistance with opening bank account
  • Preparation of financial statements and facilitating annual audit of financial statements
  • Provision of compliance (including statutory filing with the regulator) and AML services to the licensee
  • Provision of virtual office services
  • Facilitation of holding of Board of Directors Meetings and general meeting
  • Maintenance of registers and other records of the licensee

Multiple Advantage of Multi-Jurisdiction Structure

When it comes to planning investments and wealth, there is no ‘one-size-fits-all’. There are as many as 80+ jurisdictions which offer offshore structuring and each one of them is unique in its own way. The number and the kind of treaties that each jurisdiction enjoys with partnering countries is never the same and neither is the client’s need.

It is at these times that one should consider making use of more than one jurisdiction as part of the structure.

Whether it is international trading, assets across borders or investments that one looks at, the very fact that it involves more than 2 or 3 countries leads to different requirements that need to be met. And depending on the source of the investment and the destination the usage of more than one jurisdiction would come into play.

Let us consider an example:
Mr. Zhang Wei a successful medical equipment supplier in Hunan province in China is exploring the possibility of trading his goods in say, Uganda. While he already has a Hong Kong company ‘Zhang Wei Medeq Pvt Ltd’, which has helped him creating a market in rest of Asia, he is unsure of Africa.

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This is all but a simplistic solution to look at a multi-jurisdiction structure which is absolutely compliant with international regulations.

 So what are the reasons to consider a multi-jurisdiction structure?

  • Books are maintained separately. One’s profit / loss doesn’t affect another leading to better valuation of each entity
  • Each entity has the potential of its own to create newer markets
  • Jurisdictional advantages like investment protection
  • Simplified accounting depending on the kind of entity created in each jurisdiction
  • Asset protection wherever applicable
  • A variety of products available to choose; from simple trading / holding companies to Trusts / Foundations or Funds based on the need.
  • Incidentally, these structures can also prove to be highly tax prudent

At Abacus Seychelles, we believe in working closely with our clients in creating structures which are compliant, simple and still provide you with the best solution for your given situation across multiple jurisdictions through our network of associates.

Apart from Seychelles, we can provide solutions in other renowned jurisdictions including Mauritius, Hong Kong, Cyprus, Dubai, Singapore and many more.

We would be happy to assist you in your multi-jurisdiction requirements. Please do connect with us with your requirements on enquiry@abacus-offshore.com and we would be happy to take a call with you.

Cyprus – Seychelles collaboration through the double taxation treaty – By Anuj Sharma

Cyprus – Seychelles collaboration through the double taxation treaty – By Anuj Sharma

The Cyprus-Seychelles Double Taxation Avoidance treaty came into force on November 2, 2006.

The two countries however, share a history which goes well before that.
There is a closeness that has always existed between Seychelles and Cyprus on the basis of Continue reading

Solution for trading in China through Hong Kong

ESTABLISHING A HONG KONG TRADING COMPANY AS A PLATFORM FOR BUYING IN CHINA

ABC Ltd from Europe is sourcing products from China and many other Asian countries and reselling to large retail chains in their home market and other third party destinations.
With the growth in business, ABC Company is looking for an effective way to manage this process while giving them an international presence, and enabling their larger customers to buy FOB from an Asian port, and expand their sales into new markets around the globe.

Accordingly, the ABC Ltd is required to:

  • Centralize their sourcing function in Asia
  • Have better control
  • Have better control over receipts and payments
  • Sell on FOB Asia terms

We recommend the following structure:
china

ABC Ltd now has an international business with a local presence in Hong Kong, they retain control of their expanding business and its costs, and the profits are retained in their Hong Kong Company – usually tax free under Hong Kong’s territorial tax system.

Benefits of the structure:

  • Potentially low or no taxes in Hong Kong
  • Increased flexibility to sell FOB
  • One more layer of protection on the interest of the parent holding company
  • Easier to change shareholding structure
  • More developed trading infrastructure
  • No foreign exchange control
  • Sell directly from HK to worldwide clients without involving the headquarters and without goods burdening the warehouse – Free up capital financing on inventories
  • Transferable Letter of Credit possible
  • Offshore RMB centre with cross-border trade settlement

Seychelles PCC fund

FIRST SEYCHELLES PCC Fund Limited

Background

A fund management company, based in the UK, wanted a structure an investment vehicle to invest the assets of a HNI clientele in a diversified range of assets through various different portfolios and strategies, such as: Listed securities, Real Estate and  Fixed income securities . They wanted to keep the costs to manageable level and still offering them enough flexibility. Also, this investment vehicle had to be set up at short notice.

Fund Structure

To accommodate the requirement of the Fund Manager, a Seychelles Protected Cell company (PCC) with three designated sub-funds – was selected as the investment vehicle and licensed as a Seychelles Professional Fund.

The principal rationale behind using an umbrella structure is to enable a variety of different products to be offered within one structure.

Under this structure each sub-fund is entirely and legally segregated from each other sub-fund, so as to avoid any cross-collateral risk. Thus, if one of the sub-funds should suffer losses in the market, which exceed the capital of the sub-fund, those losses will be ring-fenced within the individual sub-fund and will not be passed on to other sub-funds of the Fund.

This structure also permits the creation of additional cells to accommodate new investors without the need for a new fund to be established.

Further the flexibility of the umbrella structure permits the portfolio cell to independently deal with the portfolio manager, custodian bank and prime broker while the real estate cell can deal with real estate agents and valuers.

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Benefits of the structure

A single legal entity – The PCC as a whole is considered as a single legal entity and it follows that one set of accounts is prepared, audited and submitted to the authorities.

Each sub-fund will hold a separate pool of assets and they can be structured as protected cells, thereby segregating the liabilities of the sub-funds from each other.

  • It is possible to establish an unlimited number of sub-funds within an umbrella scheme for different strategies, starting at the outset with at least one sub-fund and then adding new sub-funds on an ongoing basis
  • Each sub-fund may also contain different classes of shares.
  • The umbrella fund structure enables investors to cherry pick between the portfolios in a tax-efficient manner.
  • Each portfolio could be managed by the same internal investment manager, or could appoint an external investment manager to one or more of the sub-funds.
  • The promoter also benefits from time and cost efficiencies by housing different portfolios within one legal structure, rather than establishing a separate legal structure for each product.

Abacus Seychelles Services:

  • Facilitate the set-up process, including meetings/liaising with regulatory authorities.
  • Prepare the fund licencing application pack including the, prospectus.
  • Lodge the fund license application with the Seychelles authorities.
  • Maintaining the register of shareholders and providing statement of holdings to the shareholders at regular intervals.
  • Company secretary services including due diligence/KYC process and board meetings.
  • Ensure management compliance with Seychelles regulations and licensing conditions.
  • Prepare annual audited accounts and Liaise with auditors in connection with annual audit.