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Jordans: a new and worldwide company formation offering in 2017

It is with a great sense of excitement that Jordans begins 2017 as part of Vistra. That excitement stems from the much wider range of company formation and trust services that we can now provide our clients. This will not only extend our offering to you, but also enhance our core services of managing and administering UK and offshore companies. As 2017 begins, we set out some of our observations on aspects of international business that we are now able to serve so comprehensively as part of Vistra.

UK corporate services

Despite the continuing uncertainties of BREXIT, we remain confident that UK companies will continue to serve the needs of international business. There are a number of reasons to support this view, including:

  • The cut in the rate of UK corporation tax to 19% on April 1 2017, and the prospect of further cuts if negotiations with the EU over Brexit become acrimonious
  • Prospective broadening of the scope of the UK corporation tax exemption from capital gains relating to substantial shareholdings
  • The foreign dividend exemption and absence of UK withholding taxation on outward bound UK dividends
  • The existence of over 100 UK double tax treaties

UK companies will therefore in our view continue to be used by international business:

  • for trading in the UK
  • for international trading
  • for international holding company activity and other special purposes

Jordans are market leaders in servicing this business with a wide range of company formation, company secretarial, director, accounting, tax and legal services.

Overseas company formation services

As part of a large international corporate and trust services group that employs more than 2,600 professionals in over 40 different countries, Jordans can now offer a global range of corporate services to entrepreneurs and business groups. Some examples of this are considered below.

Benelux countries

For some international corporate groups, their circumstances and fact patterns may make the use of Belgium, Dutch or Luxembourg holding companies preferable to the UK holding company. This may be the case, for example, where an international holding company is being considered to acquire a company or group of companies in Russia, or countries that were formerly part of the Union of Soviet Socialist Republics. On the whole, the tax treaties of the Benelux countries with Russia and the other former Soviet Republics are more favourable than the UK's tax treaties with these countries. Brexit may also cause some advisers to recommend Benelux holding companies for corporate groupings within the EU where before Brexit the UK may have been considered. Jordans can now organise company formation and management services in Belgium, The Netherlands and Luxembourg, where Vistra has offices, and we can offer impartial general guidance on the different holding company regimes.

Hungary

Hungary provided international headlines in the closing days of 2016 by introducing, with effect from 1 January 2017, a 9% uniform or flat corporate tax rate. Vistra has an office in Hungary, dedicated to the incorporation and management of Hungarian companies.

Hungary has been an international holding company and royalty centre for corporates for some years, but the new 9% corporate tax rate is likely to encourage international businesses to locate to Hungary to benefit from this attractively low tax rate. European law is quite clear that provided there is a business establishment in Hungary which conducts genuine economic activity with proportionate facilities in terms of office accommodation, equipment and personnel, the establishment or relocation of a business and its assets to Hungary to take advantage of Hungary's low tax rates is entirely lawful and proper. Hungary will also be an attractive base for international trade and investment, and this issue of Focus provides more information on Hungary as a corporate domicile.

"Onshoring" – an example from Bulgaria

Onshoring refers to a trend to look for tax economies via corporate structures that are not situated in traditional offshore financial centres. Most countries have now introduced legislation to negate the tax advantages of their residents using offshore companies to shelter income and gains. Furthermore, use of offshore companies can introduce the possibility of heavy tax penalties, even for honest tax payers who may have been wrongly advised.

Recently, a UK resident client enquired about setting up an offshore company to conduct a business venture in Bulgaria. Such a client – particularly if an EU citizen – is almost always best advised to engage the freedom of establishment principle enshrined in the EU Treaty by participating personally and directly in a Bulgarian company where the business is being conducted, or investing in a Bulgarian company via a UK company. Either case is an example of onshoring. The corporate profits are taxed in Bulgaria at the flat rate of 10%, and dividends paid from Bulgaria to UK shareholders will normally be taxed at the UK dividend rates (e.g. at lower rates than the upper and higher rates of UK personal income tax). Alternatively, if the Bulgarian dividends are paid to a UK company, the dividends should be exempt from UK corporation tax. Whereas, if an offshore company had been used to receive trading or any other kind of income from Bulgarian sources, the income of the offshore company would be likely to be treated as the income of the UK resident beneficial owner of the offshore company, and taxed at his UK marginal rate of income tax on an arising basis. This recent example illustrates that we are now in a position to offer UK and Bulgarian company formation and administration services for the case in point.

Because of their low corporate tax rates, and EU membership, we envisage professional advisors may well consider Bulgarian and Hungarian companies as international business vehicles for their clients in appropriate cases, and both countries are likely to benefit from the trend towards "onshoring". Companies in Hungary and Bulgaria pay low levels of taxation on net profits, and give added protection from anti-avoidance penalties for EU citizens.

Jordans international company formation services

Jordans clients will know that aside from the UK, we have also always provided company formation and administration services in the BVI, Cyprus, Hong Kong and Seychelles. However, as a result of becoming part of Vistra, our corporate service offering has now been significantly expanded:

A wider choice of offshore jurisdictions for Jordans clients

Now that we are part of Vistra, Jordans can offer a much wider range of offshore corporate services, enabling us to provide more choice to our clients. Offshore companies will always have a role to play in international commerce, firstly because they offer tax neutrality. This is not a euphemism: tax must be paid at source, and possibly on distribution, but will not typically be paid on receipt as post – tax profit by an offshore company. The second important role of the offshore jurisdiction is the provision of a respectable legal forum, with an independent judiciary. These are both essential for multinational business, and we see the BVI and Jersey as being amongst several leading offshore jurisdictions of the future that will be successful in providing these facilities.

New international trust opportunities

Jordans clients will benefit from a broader choice of offshore jurisdictions since our acquisition by Vistra. We believe offshore trusts will be a growth area in 2017 and beyond for international families seeking a secure, confidential and regulated environment for their family wealth. Our ability to provide international trust services is now greatly enhanced, and we envisage demand for high quality trust services in the BVI, Jersey and Hong Kong in particular. In this issue of the Focus, we also examine the BVI VISTA trust (Virgin Islands Special Trusts Act).

Banking services

It is well known that obtaining bank accounts for new company formations – in particular, where offshore companies are involved – is not straightforward. One solution to this problem is to refer the management and administration of company bank accounts to professional corporate service providers. Jordans are now well-placed to offer a broader choice of international banking services, benefiting from the wider access to international banks that Vistra is able to obtain.

Conclusion

Given the new and wide range of corporate and trust services Jordans can now provide and organise as part of Vistra, we are confident that we will be able to be of service to you in 2017. We invite you to contact us for any UK or international corporate or trust enquiry, as our 40+ international offices make it more than likely that we can assist you. .

For more information about Jordans and Vistra, please visit our respective websites:

www.jordanstrustcompany.com

www.vistra.com

 

 Martin Palmer


Martin Palmer

Director and Principal
T: +44 (0)117 918 1321
E:  mpalmer@jordanstrustcompany.com


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