Offshore company for stock trading with Interactive Brokers

[balub]

Hi,

I'm new to the world of offshore companies. I've been thinking about setting up an offshore IBC to trade stocks with Interactive Brokers while being resident in Europe. I understand tax residence rules would still apply, but my country of residence has a much lower corporate tax rate than income tax rate and if I wanted to move in the future, I wouldn't need to set up another company. In addition, maintenance costs would be lower, as those tax haven countries often don't require audits etc. Would this make sense? I've read here IB recently terminated somebody's Seychellois account on the grounds of it being a "high risk country". Would Anguilla be a better choice? And would it be possible to skip opening a bank account in the offshore country and just use my personal bank account to receive wages or dividends while keeping most of the money in the IB account? I'd appreciate any help.

 

[cyprusbanker]

To be on the safe side I would setup a Cyprus non-dom company which does not pay tax, accounting and filing of a tax report per year is max 4000 euro - so you have a clean and trusted company which is resident within the EU.

 

[fshore]

To be on the safe side I would setup a Cyprus non-dom company which does not pay tax, accounting and filing of a tax report per year is max 4000 euro - so you have a clean and trusted company which is resident within the EU.

Do you mean a Cyprus non resident company, or is there such a thing a Cyprus non domicile company?
And why do you say that the company would be resident within the EU, if it's not Cyprus resident?

 

[balub]

Thanks for the replies, guys. I just thought it would be cool to use a company that didn't need to be audited and was located in an interesting place such as the Caribbean. But I guess I'd need to contact IB about it. Could anyone answer the question though, whether it's possible to use a personal bank account in my country of residence to receive dividends and skip opening a bank account for the company altogether. Since all the company would do would be trading stocks, so the majority of the money could be kept with Interactive Brokers.

 

[algotrader]

I have a somewhat similar problem. I recently formed a company in Cyprus but cannot open a bank account with it. I ordered a Limited company with myself as director and beneficial owner but the service provider set up a trust structure with a 3rd party company registered as director, secretary and beneficial owner and a trust deed contract without advising or asking me beforehand. They told me that it was necessary to have such a structure in place as my residence is not yet in Cyprus but I now that in other EU countries it is definively not necessary (sometimes you need an additional nominee director but you will remain director and beneficial owner yourself with your residential address being in another EU country).

Now, I'm unable to open bank accounts on behalf of that structure. (Transfer)Wise immediately rejected my application for a business account and revolut asked for the director to be invited and apply himself. If I cannot open bank and brokerage accounts myself, this company is completely useless. I was thinking about registering with Mexem (since they are a interactive brokers reseller, do offer accounts for trusts and have their banking license in Cyprus) but I guess they would reject my application rightaway as I'm not the director of that trust. I was provided only with a written power of attorney to open bank accounts on behalf of that company).

Does anyone know which banks and brokers in Europe would open an account for such trust structures?

 

[CyprusLaw]

I have a somewhat similar problem. I recently formed a company in Cyprus but cannot open a bank account with it. I ordered a Limited company with myself as director and beneficial owner but the service provider set up a trust structure with a 3rd party company registered as director, secretary and beneficial owner and a trust deed contract without advising or asking me beforehand. They told me that it was necessary to have such a structure in place as my residence is not yet in Cyprus but I now that in other EU countries it is definively not necessary (sometimes you need an additional nominee director but you will remain director and beneficial owner yourself with your residential address being in another EU country).

Now, I'm unable to open bank accounts on behalf of that structure. (Transfer)Wise immediately rejected my application for a business account and revolut asked for the director to be invited and apply himself. If I cannot open bank and brokerage accounts myself, this company is completely useless. I was thinking about registering with Mexem (since they are a interactive brokers reseller, do offer accounts for trusts and have their banking license in Cyprus) but I guess they would reject my application rightaway as I'm not the director of that trust. I was provided only with a written power of attorney to open bank accounts on behalf of that company).

Does anyone know which banks and brokers in Europe would open an account for such trust structures?

Just to clarify, I assume it is a nominee structure (not a trust structure) you are referring to, they are a bit different.

Just to correct you on the above - in order to benefit from the Cyprus corporate tax then your company must be able to show substance and control in Cyprus, otherwise it would be challenged by the tax authorities. The main way to show substance in control in Cyprus is by having the majority of the board of directors being Cyprus residents. So you could for example be a director yourself but then it would be best to have another two nominees directors (i.e. 3 in total including yourself) to show control in Cyprus. Also, registered address must be in Cyprus.

Now with respect to the UBO, indeed this does not matter in showing substance and control and, unless you had a reason to not appear as the UBO, there is nothing precluding you and therefore no need for a nominee shareholder (in any event now that the UBO register has been implemented your information as UBO will still have to be declared).

Going back to the original issue, if you ad a POA from the company then there shouldn't have been much of a trouble unless this was not done properly. Has the service provider tried to open a Cyprus bank account?

 

[algotrader]

Just to clarify, I assume it is a nominee structure (not a trust structure) you are referring to, they are a bit different.

Thanks for your reply.

I don't think it is a simple Nominee structure as the company has been registered under the name of a different company serving as director, secretary and unique shareholder. My ownership is only confirmed via a "trust deed" contract between myself and the nominee company and they have given me power of attorney rights to open accounts. But by name doesn't appear in the commercial register and I'm not listed as UBO. For many banks this seems to smell like money laundering and they refuse any commercial relationship.

My intention was to move to Cyprus once the Covid crisis is over and to have the company being operational by then, so I didn't care much about CFC rules. I told this to the provider, had my intention to be 100% UBO and director written in the instruction form and I have never asked for any kind of anonymity. Also, I have been told by a consultant of this company that CFC rules would not apply for trading activities as this is not a client related commercial activity. I guess, they did a mistake but they are insisting that such a structure is necessary in Cyprus if you have no residential address there.

Going back to the original issue, if you ad a POA from the company then there shouldn't have been much of a trouble unless this was not done properly. Has the service provider tried to open a Cyprus bank account?

Yes, they offered my to open an expensive bank account in Cyprus. But such an account would be useless for me if I cannot open a brokerage account later and they don't offer any assistance with that. My plan for now is to continue trading via my private account, to wait until I have my residence in Cyprus and then to change the ownership structure so that I can open accounts.

But traders should be aware of this problem if they intend to register a company in Cyprus.

 

[CyprusLaw]

Thanks for your reply.

I don't think it is a simple Nominee structure as the company has been registered under the name of a different company serving as director, secretary and unique shareholder. My ownership is only confirmed via a "trust deed" contract between myself and the nominee company and they have given me power of attorney rights to open accounts. But by name doesn't appear in the commercial register and I'm not listed as UBO. For many banks this seems to smell like money laundering and they refuse any commercial relationship.

My intention was to move to Cyprus once the Covid crisis is over and to have the company being operational by then, so I didn't care much about CFC rules. I told this to the provider, had my intention to be 100% UBO and director written in the instruction form and I have never asked for any kind of anonymity. Also, I have been told by a consultant of this company that CFC rules would not apply for trading activities as this is not a client related commercial activity. I guess, they did a mistake but they are insisting that such a structure is necessary in Cyprus if you have no residential address there.


Yes, they offered my to open an expensive bank account in Cyprus. But such an account would be useless for me if I cannot open a brokerage account later and they don't offer any assistance with that. My plan for now is to continue trading via my private account, to wait until I have my residence in Cyprus and then to change the ownership structure so that I can open accounts.

But traders should be aware of this problem if they intend to register a company in Cyprus.

To begin with it should be a nominee structure, not a trust, as the two differ, so I guess the service provider made a mistake there. As I noted the nominee director is a must (of course if you were planning to relocate to Cyprus within the next few months arguably you could show substance and control in the end so you could avoid it for the first few months). The nominee shareholder has no point if you had not asked for it, the only reason it could be used is for convenience in terms of signatures for setting up the company in the beginning but it should have been transferred to you as soon as it was registered.

What do you mean by an expensive account in Cyprus as this seems quite strange to me. I would suggest considering consulting another provider, preferably a lawyer.

 

[msantoso]

Thanks for the replies, guys. I just thought it would be cool to use a company that didn't need to be audited and was located in an interesting place such as the Caribbean. But I guess I'd need to contact IB about it. Could anyone answer the question though, whether it's possible to use a personal bank account in my country of residence to receive dividends and skip opening a bank account for the company altogether. Since all the company would do would be trading stocks, so the majority of the money could be kept with Interactive Brokers.

Same problem here. Not yet found an answer whether the IB accepts the Seychelles IBC as a client. I believe you have to open a bank account in the name of your offshore company to get in touch with an IB account under the same name. From the offshore bank account, you can transfer it to your personal account. I don't think you can withdraw money from your IB and transfer it to different name.

 

[Pembroke]

What do you mean by an expensive account in Cyprus as this seems quite strange to me. I would suggest considering consulting another provider, preferably a lawyer.

I checked Bank of Cypus fee schedule and there seems to be a 50 eur/month fixed fee, a 20 eur/month fee if you do <4 transactions, a 25 Eur fee for each 1-5K outgoing SEPA payment to other legal entities, plus fees on inward transfers. And that is if in Euro; otherwise it's a lot more. Combined it seems you have at least 100 Eur in fees per month or 1200 eur per year with only a handful of transactions per month. I would call that expensive as well.

 

[CyprusLaw]

There are a number of other credible banks you could check., for example Hellenic Bank, I think the maintenance fee is 100 EURO quarterly (compared to 50 euro monthly of Bank of Cyprus). I note however that compared to other jurisdictions the fees in Cyprus banks are considerably low.

 

[glengoolie]

a ton of banks in europe have free accounts for individuals and companies. so even 100€ per quarter is waaaay too much.

 

[Corno]

a ton of banks in europe have free accounts for individuals and companies. so even 100€ per quarter is waaaay too much.

For individuals yes, for businesses not so many, and especially not many good ones imo. Whether 100 € per quarter is a lot or not depends on the other fees they charge and the services that are included.

 

[john254]

Thanks for the replies, guys. I just thought it would be cool to use a company that didn't need to be audited and was located in an interesting place such as the Caribbean. But I guess I'd need to contact IB about it. Could anyone answer the question though, whether it's possible to use a personal bank account in my country of residence to receive dividends and skip opening a bank account for the company altogether. Since all the company would do would be trading stocks, so the majority of the money could be kept with Interactive Brokers.

Interactive Brokers will not let you transfer any founds to any account, owned by other than the company. Currently they are not accepting BVI companies, I had to close my BVI company account with them. They refused to move positions to my personal account, even being the sole director and only beneficiary.

 

[JohnLocke]

Going back to the original issue, if you ad a POA from the company then there shouldn't have been much of a trouble unless this was not done properly. Has the service provider tried to open a Cyprus bank account?

don't it require substance in Cyprus as in most (if not all other) European countries?

 

[CyprusLaw]

don't it require substance in Cyprus as in most (if not all other) European countries?

Yes I have mentioned this above. The company must show substance and control in Cyprus, the main part of the test for this is the majority of the board being Cyprus residents, hence, the CSP is acting as nominee for the director and secretary position, however, there was no need for the CSP to act as a nominee shareholder (as this is not part of the test) if this was not requested by the UBO.

 

[clemens]

there was no need for the CSP to act as a nominee shareholder (as this is not part of the test) if this was not requested by the UBO.

how do I have to understand it, you mean I can setup a Cyprus company, but don't need to have office, staff but only nominees?

 

[CyprusLaw]

how do I have to understand it, you mean I can setup a Cyprus company, but don't need to have office, staff but only nominees?

The CSP will provide nominee directors and secretary and a registered address for a set annual fee. This will strengthen your company's position in showing substance and control in Cyprus and therefore be deemed a Cyprus tax resident.

I note that of course relocating to Cyprus and have offices does strengthen this even more, however, we are not aware of any cases where authorities in Cyprus have challenged a nominee structure.

 

[clemens]

I note that of course relocating to Cyprus and have offices does strengthen this even more, however, we are not aware of any cases where authorities in Cyprus have challenged a nominee structure.

that's good to know. Back 5 years it was impossible to open an account with Bank of Cyprus and Piraeus bank as it was used before that time again. I thought Cyprus has closed for all remote account opening with our without nominee service.

 

[Fred]

We make regularly Dubai Company Formations to achieve a 0% tax setup that works with Interactive Brokers.

The compliance is pretty streamlined for Dubai Companies on the Interactive Brokers - the only requirement they have is to have a real physical bank account for the company within the UA.

To keep the setup working you use the Residence Visa the Dubai Company Formation grants you anyway to open the local UAE Business Bank Accounts. Onyl requirement is to be every 6 months at least 1 day in the UAE to keep the Residence Visa active.