Monday, July 22, 2019

Where else can you hide a business. How does the map of offshore zones change?

For Russians owning offshore companies, there is one less safe place in the world. The British Virgin Islands began to cooperate with the Federal Tax Service of the Russian Federation. However, 120 more quiet harbors remain on the globe.

The Russian Federal Tax Service has excluded the British Virgin Islands from the blacklist of offshore companies. The authorities of the territory obeyed the requirements of the tax authorities from around the world and will reveal who owns the firms registered with them. “DP” figured out how the trends in “tax optimization” have changed, and show where else you can open a safe offshore for a small amount.

Lost fighter

In June 2017, the most popular offshore in the world fell – the British Virgin Islands (BVI), a UK dependency in the Caribbean. The decree of the government of the islands on the creation of a unified register of offshore residents came into force: the list includes passport data of the final beneficiaries of companies registered on the islands. As part of an exchange of tax information, the authorities of the islands will send this data upon request from the UK. Also, access to information will be available and tax from other countries. Since October, BVI began cooperation with the Federal Tax Service of Russia. In response, the Russian tax authorities have excluded BVI from the list of black offshore territories.

The blacklist of the Federal Tax Service includes offshore territories and states that do not share information about beneficiaries with Russian tax authorities. Under Russian law, a beneficiary is a person who owns or controls more than 25% of the company’s capital. Now in the list of the Federal Tax Service of 108 states and 18 territories. A year ago, South Korea and the BVI were on the lists. New countries were not included in the list. The FTS also considers Cyprus, the Netherlands and Luxembourg offshore companies to be transparent.

It is believed that the consent of the BVI to the disclosure of information is not significant. It is unlikely that innovations will lead to a significant outflow of customers since going to another jurisdiction can only save for a couple of years from the exchange. The beneficiaries of the companies are set by banks, and companies registered in offshore companies do not open accounts in banks of the same territories, but in Switzerland or other jurisdictions with a reliable banking system.


After the Panamanian scandal in 2016, politicians, tax authorities and activists demand to disclose the beneficiaries of not only offshore, but also ordinary companies around the world: even off-shore of Nevada and Delaware in the United States are at risk of de-offshore. The ban on the registration of anonymous trusts entered into force in New Zealand. A similar measure since June is valid in the EU.

In addition, under the Fourth EU Directive against Money Laundering, which was approved in 2015, a single register of legal entities is being formed in Europe. The database is expected to display information about the real owner of the company, even if he controls it through a chain of offshore companies.

The UK went into the matter of combating tax evasion and money laundering somewhat further. On January 1, 2018, the Law on Criminal Finances will enter into force, allowing courts to demand from foreign owners an explanation of how they bought an asset in the country.

OECD member countries have created a plan to counter the withdrawal of profits from taxation (BEPS). As a result, OECD countries plan to bind themselves with a network of automatic exchange of tax information. Russia joined the BEPS at the beginning of June. In the context of the global trend towards tax transparency, the decision of the BVI authorities seems inevitable.

How not to sell cheap

But moving from offshore to offshore in the long term loses its meaning: sooner or later, offshore companies will exhaust themselves as a way of reducing tax costs, experts are sure. Now more demanded among law firms with tax and international practice, an integrated approach in the handling of assets. It can include various strategies: from using trust management (trusts) to conceal the beneficiary to full transparency in relations with the state.

However, this is a long-term perspective. While standard offshore companies are still in great demand, the benefit of opening a company in a zone of special taxation can be relatively inexpensive.

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