Loan Agreement Offshore to EU. Best way to do this?

[no1d]

Hi everyone,

My local accountant informed me that one of his clients is selling 60% of his company (A) that owns a large plot priced at around 800k.
We agreed to buy it, he has a small part of this amount and I should invest the rest.

The accountant suggested to setup 4 local companies (RO) with me and him as shareholders.
Through a loan agreement the local companies will take a loan of 150k each from my UAE or SEY company in order to acquire 60% of company A.

He's saying that its safer splitting the amounts than one go and that won't draw the attention of tax authorities, amounts being too small.

My concern is that I will have to sign the agreements on the name of offshore company and since I'm the director it might ring some bells to tax authorities, and who knows what CRS data they might bring up.

Basically we need a low risk structure funded from my UAE or SEY companies to acquire the 60%.

What would be the best way to do this safely?

I thought forming a company in Cyprus with nominee that will take a loan of 800k from my other companies, but how fast I can get a bank account ready?

I read in another post that I could sell the stocks of the SEY company to another company that I own in my home country.
All the assets will be legally transferred to the parent company in my home country. After that I will even liquidate the SEY company.

Looking forward for your your comments/suggestions/proposals. Thanks!

 

[newNomad]

Well described and clear
Unfortunatelly a bit complex, I don't particularily like opening other 4 offshore companies, in the same jurisdiction, on the same date, for the same purpose
If they were already ready or off the shelf ok...but. Or maybe me being paranoic

 

[no1d]

Unfortunatelly a bit complex, I don't particularily like opening other 4 offshore companies, in the same jurisdiction, on the same date, for the same purpose

Hi @newNomad, the plan is to buy the shares of the local company through 4 local companies (RO Ltd's), not offshore companies.
My accountant already has two ready and we need another two which are new.

I will be shareholder in all four, I will sign each loan agreement for 200k from my SEY or UAE companies. Don't know which one is better to use. I want SEY because is under process of liquidation. Maybe I should get a nominee direct asap?

I think this setup is too transparent, somehow that will make me come clean with my tax agency who might open up a tax investigation.

But its a good deal since the plot will be worth 2-3x more in two years

 

[avalanche]

Hi everyone,

My local accountant informed me that one of his clients is selling 60% of his company (A) that owns a large plot priced at around 800k.
We agreed to buy it, he has a small part of this amount and I should invest the rest.

The accountant suggested to setup 4 local companies (RO) with me and him as shareholders.
Through a loan agreement the local companies will take a loan of 150k each from my UAE or SEY company in order to acquire 60% of company A.

He's saying that its safer splitting the amounts than one go and that won't draw the attention of tax authorities, amounts being too small.

My concern is that I will have to sign the agreements on the name of offshore company and since I'm the director it might ring some bells to tax authorities, and who knows what CRS data they might bring up.

Basically we need a low risk structure funded from my UAE or SEY companies to acquire the 60%.

What would be the best way to do this safely?

I thought forming a company in Cyprus with nominee that will take a loan of 800k from my other companies, but how fast I can get a bank account ready?

I read in another post that I could sell the stocks of the SEY company to another company that I own in my home country.
All the assets will be legally transferred to the parent company in my home country. After that I will even liquidate the SEY company.

Looking forward for your your comments/suggestions/proposals. Thanks!

This plan sounds very complicated and tbh looks like impeding disaster.

Maybe I'm wrong but 800k purchase is not worth tax planning like you are running Apple Inc.

 

[no1d]

@avalanche, my accountant's plan its pretty simple, four loan agreements and four bank transfers, after that he will merge all four into one company and voila.

Acquisition through a Cyprus company with nominee director I think is much better.

My question is how fast I can have the bank account ready to receive 800k? Maybe someone that does Cyprus companies can chime in.

 

[spacenomad]

Why don't you have a nominee director or shareholder for SEY company to sign the agreement?

 

[no1d]

The bank account of SEY company is in EU and because of CRS the nominee seemed a bit useless.
In case the deal goes as planned should be better to get one.

 

[spacenomad]

The bank account of SEY company is in EU and because of CRS the nominee seemed a bit useless.
In case the deal goes as planned should be better to get one.

Which bank you have the account with?

 

[no1d]

MKB, until end of August, after that I need to liquidated it.

 

[BigUnicorn]

I thought forming a company in Cyprus with nominee that will take a loan of 800k from my other companies, but how fast I can get a bank account ready?

Wouldn't the seller's bank ask for UBO details of the acquirer anyway?

 

[no1d]

Don't think so, we're not that in line with all regulations here in eastern europe.

 

[newNomad]

By the way, in full transparency, is getting a loan from a company where you are the UBO (regardless if there is a nominee or not) and then perhaps not servicing that loan a violation of any Laws?
I remember some sole entrepreneurs use agressively the scheme of borrowing their personal savings money to their company in the initial stages, perhaps even with some interest, and then later drawing back that money from the company + interest to reduce taxation and it seems to be fully legit, many accountants suggest it.
So not sure if there is a risk of being outlawed in any of these scenarios, maybe someone can contribute?

 

[JustAnotherNomad]

By the way, in full transparency, is getting a loan from a company where you are the UBO (regardless if there is a nominee or not) and then perhaps not servicing that loan a violation of any Laws?

It would probably be deemed a hidden profit distribution and subject to tax. Might even be tax fraud.

I remember some sole entrepreneurs use agressively the scheme of borrowing their personal savings money to their company in the initial stages, perhaps even with some interest, and then later drawing back that money from the company + interest to reduce taxation and it seems to be fully legit, many accountants suggest it.
So not sure if there is a risk of being outlawed in any of these scenarios, maybe someone can contribute?

Yes, it's the purpose of thin capitalization rules to stop this. They limit how much debt a company can have to its owners.

 

[newNomad]

Good to know, never heared about that "thin capitalisation" rule before