Is a "2 companies/2 jurisdictions" structure necessary if I use nominee shareholders?

[electric]

Hello,


I am trying to understand how this all works.


Ultimately, my goal is to create an offshore structure so that my ecommerce web hosting business is able to keep all revenue offshore with zero or low tax, and where there is no direct (or easy to find) link to me. (I live in the EU, and I understand I must pay personal income tax on all money that arrives in my personal onshore bank account.)


After reading a lot of posts in these forums, it was recommended that I should create an offshore scheme like this:


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1. Create a Seychelles "holding" company that owns a Hong Kong company, which has a Hong Kong bank account.


2. Use the Hong Kong company and Hong Kong bank account to get a merchant account, which will collect revenue from customers. I would work for the Hong Kong company as an "operations manager".


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The idea is that having the Hong Kong company owned by the Seychelles company would create an additional layer of privacy. However, I don't really understand why this is necessary. If I use nominee shareholders and directors for the Hong Kong company, isn't that sufficient privacy? After all, the whole point of using nominees is to hide the true beneficial owner info from the public records, right?


When the Hong Kong company is created, I am required to provide my personal information (passport, utility bill, etc), even though the Hong Kong company is owned by the Seychelles company. There is no way to get around this, as far as I can see. So what is the point of having the Seychelles company if my personal info is being recorded and held somewhere for the Hong Kong company?


Wouldn't it be easier (and less costly) to just use only nominee shareholders and nominee directors for the Hong Kong company?


Thanks!

 

[Zqq]

(I live in the EU, and I understand I must pay personal income tax on all money that arrives in my personal onshore bank account.)

Any assets you hold, even if they are offshore, may be taxable in some jurisdictions. Make sure you have checked this with a qualified professional, instead of assuming.

After reading a lot of posts in these forums, it was recommended that I should create an offshore scheme like this:
--------------


1. Create a Seychelles "holding" company that owns a Hong Kong company, which has a Hong Kong bank account.


2. Use the Hong Kong company and Hong Kong bank account to get a merchant account, which will collect revenue from customers. I would work for the Hong Kong company as an "operations manager".


--------------


The idea is that having the Hong Kong company owned by the Seychelles company would create an additional layer of privacy. However, I don't really understand why this is necessary. If I use nominee shareholders and directors for the Hong Kong company, isn't that sufficient privacy? After all, the whole point of using nominees is to hide the true beneficial owner info from the public records, right?

It depends on the nominees and in what jurisdictions they are. Nominees may be compelled to disclose the UBO. It can be far more difficult to extract the UBO of an offshore entity.


There are other advantages to not using nominees. By not having nominees, you are not at someone else's mercy when it comes to opening bank accounts or even opening accounts with PayPal, 2CheckOut, and so on.

When the Hong Kong company is created, I am required to provide my personal information (passport, utility bill, etc), even though the Hong Kong company is owned by the Seychelles company. There is no way to get around this, as far as I can see. So what is the point of having the Seychelles company if my personal info is being recorded and held somewhere for the Hong Kong company?

For your own privacy. Hong Kong puts the name of directors on public records, easily available for a low fee from the ICRIS website.

By using an offshore company as director and shareholder, your name will not appear on the Hong Kong public records.

 

[electric]

Thanks Zqq. Your comments have helped to clarify how this works. I hope you can help me with two more questions?

By using an offshore company as director and shareholder, your name will not appear on the Hong Kong public records.

1. Should I use a nominee shareholder and director for the Seychelles "holding" company? So when someone looks up the director or shareholder of the Hong Kong company, they will see the Seychelles company... and when they look up the director/shareholder of the Seychelles company, it will list a nominee instead of my own info. Do I understand that correctly? Is this needed? Or would it be better to have the Hong Kong company owned by a Panama Foundation and skip the Seychelles company? (Since Panama Foundation does not require public disclosure of protector or beneficiary.) What do you recommend? Ultimately, I want to have an offshore structure that does not directly (publicly) link me to the Hong Kong company or Hong Kong bank account as beneficial owner...


2. I am obligated to provide my personal (passport, utility bill, etc) to the Hong Kong bank in order to open an account, even though the account will be owned by the Hong Kong company (which is owned by the Seychelles "holding" company or Panama Foundation). However, since my personal information will be known by the Hong Kong bank... isn't it a major risk that they will provide my information to someone who asks for it? (For example, if my government contacts HSBC bank in Hong Kong and asks them if I am a beneficial owner or signatory of any accounts in their system...) Is there any way to mitigate this risk?


Thanks again!

 

[Zqq]

1. Should I use a nominee shareholder and director for the Seychelles "holding" company? So when someone looks up the director or shareholder of the Hong Kong company, they will see the Seychelles company... and when they look up the director/shareholder of the Seychelles company, it will list a nominee instead of my own info. Do I understand that correctly? Is this needed? Or would it be better to have the Hong Kong company owned by a Panama Foundation and skip the Seychelles company? (Since Panama Foundation does not require public disclosure of protector or beneficiary.) What do you recommend? Ultimately, I want to have an offshore structure that does not directly (publicly) link me to the Hong Kong company or Hong Kong bank account as beneficial owner...

The Seychelles does not require disclosure of UBO either. There is no such thing as easily looking up a company in the Seychelles, unless there is a TIEA that overrides local law. There are no public registries of details of IBCs in the Seychelles.

2. I am obligated to provide my personal (passport, utility bill, etc) to the Hong Kong bank in order to open an account, even though the account will be owned by the Hong Kong company (which is owned by the Seychelles "holding" company or Panama Foundation). However, since my personal information will be known by the Hong Kong bank... isn't it a major risk that they will provide my information to someone who asks for it? (For example, if my government contacts HSBC bank in Hong Kong and asks them if I am a beneficial owner or signatory of any accounts in their system...) Is there any way to mitigate this risk?

Not without using nominee bank account signatories.

 

[electric]

OK, thanks again. So if I am understanding all this correctly... the only real reason I would really need a Hong Kong company (which would be owned by the Seychelles holding company) is to make it easier to get a merchant account (or paypal, 2checkout, etc..).


Is that correct?

 

[Zqq]

There may be tax advantages, depending on agreements between your jurisdiction of tax residence and Hong Kong. It is also much easier to recruit people with a Hong Kong company than Seychelles IBCs. However, the main advantage of a Seychelles-Hong Kong structure is that you get the excellent international reputation of Hong Kong with the privacy of the Seychelles. This reputation helps not only when entering into agreements with financial institutions, but also when finding business partners, representing your company at fairs and conventions, and so on.

 

[electric]

Thanks again.


The most important aspect for me (besides privacy) is that I need to have a good merchant account. If I can't charge my customers, then there is little point to be in business.


With that in mind, do you still recommend Hong Kong as the best place to operate? ie: Is it relatively easy to get a good merchant account? (Where "good" means very reliable and decently priced.)


(I have over 12 years of onshore merchant account history, and current chargeback ratio is .05%. My business is very low-risk.)