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.

Asset Protection and Asset planning structure

CASE STUDY:

Mr. Gillian Luciano owns two companies in UK, which is also his country of residency. He also owns two real estate properties which consist of a Real Estate property in UK, worth £2.5 Million and a property in Italy, worth £ 2.0 Million.

A few years ago, Mr. Luciano had taken several personal loans. Lately, due to economic crisis and market upheavals, the operational results of the two business entities were worse than expected and for this reason he has not been able to meet his loan repayment obligations and is currently at risk of defaulting. Also, due to the property market downturn, selling one of the properties is not a conducive solution.

Mr. Luciano, owing to these loan defaults and business losses, is currently at risk of facing enforcement proceedings. Consequently it is likely that he would have to forgo all his property; which may have an effect on the activities of his other businesses also.

THE PROBLEM:

Mr. Luciano needs to protect his assets and his businesses from enforcement procedures. When the property market revives he should be able to sell one of the properties at the correct market price and thus cover all his financing obligations.

THE SOLUTION:

In this situation, the structure illustrated below could be recommended to Mr. Luciano as an efficient offshore structure (with minimum risk and costs) to protect his wealth against litigation and claims.

Gillian Luciano

Under this structure the properties currently owned in the name of Mr. Luciano are transferred to individual offshore companies.  An offshore company will be set up for the two local companies, in order to reduce or eliminate the tax and protect it from any possible litigation. An individual offshore company for each of his properties will be set up in order to protect assets and to optimize tax.

On top of these offshore companies, this structure will also have an Offshore Foundation. Offshore Foundations are key tax exempt asset protection structures. Foundation can be used as offshore companies to maximize privacy, business confidentiality and to protect assets, accumulate and manage wealth.

When the real estate market recovers Mr. Luciano could sell one of the properties at a corrected market price. Under this proposed structure, he will be selling one of the offshore companies owning the property, thus optimizing all transaction tax costs and cover all his debt.

Also having a Foundation as the owner of an Offshore Company enables the profits of the Company to be regularly transferred to the Foundation; however should a bankruptcy of the corporation occur, it would not affect the Foundation at all.

This structure will provide Mr. Luciano the following benefits:

This structure will not give Mr. Luciano direct ownership of the offshore companies; thus it provides him with an extra layer of protection and make him less vulnerable to liabilities.

Mr. Luciano will be the Protector of the Foundation. The Foundation constitutes a separate legal estate from that of the Founder and its assets are protected from future claims against him.

Also Mr. Luciano will be the sole beneficial owner of the Foundation and thus can legally transfer all assets to his family or another third party, appointing them as secondary beneficiaries.

ASIA Equities Fund

ASIA Equities Fund

Background

Mr. Suchin King is well experienced Thailand-based fund manager, an investment advisor and a successful investor in listed securities. He wanted to establish a fund to invest in  listed and un-listed securities in the fast growing GMS (Thailand, Cambodia, Laos, Myanmar, Vietnam)and Yunnan province in China for a limited number of private investors and to act as the advisor to the fund.

Mr. King raised an initial amount of USD 100 million with a substantial investment contribution being made personally by his close connections.

Fund Structure

The new fund was established as a Seychelles International Business Company (IBC).. The Fund is licensed under the Seychelles Mutual Fund Law as a Seychelles private fund.

Please see below the structure of the fund.

Benefits of the structure

Asiafund

Efficient application and approval process

  • Tax Neutrality – fully exempt from business tax on the income of a fund as well as from withholding tax (dividends, interest, royalties, capital gains) and stamp duty
  • Auditing of accounts of Seychelles funds and fund administrators may be audited by approved overseas auditors including those qualified and belonging to recognised bodies in Australia, Canada, Hong Kong, Singapore, South Africa, UK, USA etc. (Full list of approved foreign auditor jurisdictions is mentioned below)
  • Overseas Fund administrators can be appointed
  • Value for money as Seychelles mutual funds can be established and administered for less than most competing jurisdictions
  • Dividends can be easily repatriated

 

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.

List of approved foreign auditor jurisdictions

Austria, France, Malaysia, Australia, Germany, Mauritius, Belgium, Gibraltar, New Zealand, Bahamas, Guernsey, Singapore, Bahrain, Holland, USA, South Africa, Bermuda, Hong Kong, Switzerland, British Virgin Islands, Isle of Man, United Arab Emirates, Canada Ireland, UK, Cayman Islands, Japan, Cyprus, Jersey, Denmark