Request a callback
Tax Engineering

Offshore foundation

What is an offshore foundation? What are its origins? Why would I need a foundation? Is it legal to form a foundation? Is it private? How can I protect my assets?

The origin of offshore foundations arises in the Principality of Liechtenstein in 1926, in order to safeguard the interests of a group of people. An offshore foundation can be defined as an entity between a Trust and a company registered outside the residence country of the founder(s) and whose main purpose is to benefit and protect a group of individuals in financial sense.

In offshore foundations, the founders, administrators or beneficiaries are completely separated. They do not have owners, shareholders, participants or partners; they cannot carry out any type of commercial activity on a continuous basis since the statutes of the foundation indicate the purpose for which it was founded. However, they can own shares of other companies, receive dividends and participate as shareholders in any company or foundation.

An offshore foundation operates in a following way: the founder forms a foundation, for example in Panama, and transfers the assets or rights to its foundation that in its turn creates an international business company (IBC). The company (IBC) buys bearer shares in an investment fund that will pay the dividends annually to the IBC company whose owner is a foundation. In this way, the foundation will not have beneficiaries until the founder is absent. An offshore foundation is not required to have a physical office in the country where it is incorporated but the information about the board of directors, the promoter and the first shareholder does appear in the commercial register. As a general rule, the foundation agent appointed by the founders will appear in the registry. The Panamanian laws do not require any information related to final beneficiary to be included in the articles of incorporation of the foundation and, as a result, it is difficult to know his identity.

The founder, who is the maximum authority, has the following rights: to concede, to sell, to transfer or donate the goods, but not to create debts. The founder can maintain total anonymity of the beneficiaries, be the only beneficiary and avoid paying taxes to the founders or beneficiaries of the entity.

The latest events related to the Panamanian papers, have shown the usage that has been given to the Panamanian foundations by certain individuals through negligence. Forming an offshore foundation is legal and its purpose is not to pay taxes but, on the contrary, to protect the assets of one or more people. Nevertheless, the future of offshore foundations is bright. According to the latest regulations on automatic information exchange, the benefits generated by these foundations can be repatriated to the country through double taxation treaties where the founder is obliged to pay the income tax, but the protection of heritage is still strong and cannot be broken.

How can I use Offshore foundation?

The uses that can be given to an offshore foundation are the following:

  • Put a domain or server in the name of foundation to avoid relieving who is the last beneficiary.
  • Assign a patent in the name of foundation.
  • Transfer title of a property in the name of a foundation.
  • Put copyright rights: books, videos, photographs, digital books, music, translations, clothing designs, and software on behalf of the foundation.
  • Create a non-profit non-governmental organization.
  • Put contracts and sales of other companies in the name of the foundation.
  • Tax planning for heritage.
  • Offer non-profit consultancies on behalf of the foundation.
  • Be the owner of several offshore companies or foundations.


In reference to the latest international regulations for the prevention of tax fraud and automatic information exchange treaties, banks will have a right to report information as long as these four conditions are met:

  • The bank account in the name of the foundation has a balance greater than $ 250,000 as of December 31. If on 31st of December the foundation has a balance of 249,999 $, the financial institution will not make any report.
  • The beneficiary of the offshore foundation is a tax resident of one of the countries who signed the agreement. That is, if the beneficiary of the foundation is a citizen of Peru and has his or her tax residence in Peru or in another non-signatory country, than the bank where the account is held will not report any kind of information, since Peru has not signed said treaty.
  • If an offshore foundation does not own a bank account in any country in the world, no bank will be able to report any information.
  • If the foundation has an account in non-signatory countries such as: United States, Peru, Ecuador, Bolivia, etc. than the balances of the foundation's accounts will not be reported.

Recent posts

What is Beckham law and how to take advantage of it?

Special purpose entity to reduce tax liability

You also can open a bank account in Andorra

Why and how to invest in gold?

What are the most famous tax havens?

How to transfer money to offshore?

Transfer prices: What are they? How do they work?

What are Holding Companies?

FINANCIAL SERVICES

Offshore Company

Bank accounts

Prepaid cards

E-commerce package

Payment gateway

Online gambling license

Private foundations