| 22 March 2009
Time moves on, manners turn, so business customs should do the same. However,
even in full swing of the global financial crisis, when tax authorities are
aggressive towards probable tax evaders as never before, and super-confidential
tax havens are quick to backwater, there are always smart providers advocating
bullet proof asset protection schemes based on bearer shares and complete anonymity.
It's not always that good as it is positioned.
First of all, what is it that the anonymity of an offshore structure is based
on? Bearer shares and/or formal non-existence of the owner. Any of these concepts
is doing great for the purposes of mere confidentiality, when you quietly do
your business and don't upset anybody's interests, including those of the state
and its tax department. As soon as you cross the line, all these high secrecy
tricks might not be working. Behind the sophisticated paperwork, there always
exists the real owner which is you. And it's getting more and more difficult
for modern tax havens to hide you. If something goes wrong, in particular inferring
a criminal tax investigation, and your home country inquires your tax haven,
chances are your identity and true membership will be disclosed.
There are still a number of indeed un-cooperative countries, which will be
protecting your privacy rights to the last breath, and the information about
the real owner of the assets in question will never be divulged. Does it mean
you and your assets are really safe? Below are a couple of situations for your
consideration.
Situation one: identifying the owner. There exist judicial
precedents of so-called «presumption of owner». If your offshore
company happened to be a party to legal proceedings, and the court cannot identify
the owner, the judge tends to presume that the defendant is the owner of the
company. Now it becomes your burden to find the owner and/or prove that you
are not the one.
Another example is even worse and easier, with no involvement of the judge-made
law. When under certain circumstances the country's authorities cannot identify
the owner of some property, this property may be recognized abandoned and subject
to forfeiture to the state budget. Now you can go to law to prove that seizure
was illegal because you are the owner, if you ever planned to do this.
As a matter of practical comment, apparently, it's safer to have someone identifiable
as the holder of your shares, than just nobody. Even a mere nominee person would
serve better than bearer shares.
Situation two: bearer shares and taxation. In many countries
transfer of bearer shares falls into the gift category and is subject to the
according tax. It means, you can accept and transfer bearer shares as many times
as you want, but as soon as you are «caught» and all transfers have
been proved retrospectively, all involved persons are in trouble for tax evasion.
Add here non-reporting of foreign transactions, where applicable.
Actually, because of the known wide uses of bearer shares for money laundering
and tax evasion, many jurisdictions have abolished bearer shares or restricted
their free circulation. Nominee shareholding still plays nearly same role, and
brings same challenges, if you mean to use it only to preserve anonymity. Nominee
person is a nominee person, which can hardly appear before the court and claim
to be the real owner of the assets in question.
Notwithstanding the aforesaid, we do not campaign against anonymous offshore
structures. It is a tool that can serve its purposes. You are welcome to utilize
it, but compare its net out to discern for yourself if that one is for you in
advance. If you go for it, bear in mind the downside.
You have been reading an entry on the following blog:
Offshore Advisor
Mary is a consultant and blogger at Offshore Advisor - free online consultancy on offshore services covering asset protection, offshore banking, second citizenship and more. Contact Mary via mary@isla-offshore.com.
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