Q:- OK. I have set up my offshore structure,
and I have tax-free money accumulated in my offshore bank account.
How can I spend, repatriate, these funds?
The way to repatriate small increments
of funds is through a corporate Debit Card. The customer can use the
card to withdraw cash from any ATM or for any purchases, like any other debit
card. The advantage to this offshore corporate Debit Card is that it does not
require a large security deposit as for a credit card, and the transactions at
ATM's, banks, or merchants are not traceable to the client, as the only
information revealed through the transaction is the corporations information.
Obvious, a corporate credit card is available.
Amounts, by a "Back
to Back" Loan.
A situation where an investment organisation, such as an investment trust,
deposits sterling with a UK bank which subsequently arranges with a foreign
associate bank to lend the equivalent amount of foreign currency to the
investment organisation. The purpose of this transaction is to hedge against
currency fluctuations affecting the portfolio.
to Back’ loan is very
simple and relies on the client depositing a sum of money in the
participating bank, then borrowing back that same amount of money
(less any fees). The deposited funds are invested by the bank
themselves either in a ‘straight’ deposit account accessible only to
the bank themselves or possibly by the purchase of an interest
bearing CD (certificate of deposit) in another bank. An equal sum is
then made out to the client, either directly or via an intermediary
company, as a flexible loan for him to do what he chooses with. The
participating bank will earn its fees on the difference between the
interest rate paid on deposit and the interest charged on the loan,
often called the ‘spread’.
After we'll incorporate your company and open an
offshore bank account, you will have to contact your banker.
Why a ‘Back to Back’ Loan?
Why would anyone
want to borrow against money they already have though? There are
several reasons but we’ll just outline two of them.
already have offshore funds that have accumulated through a
number of corporate activities using offshore companies.
Your ‘home’ Government, particularly its Tax Authorities,
are of course completely unaware of these funds, but you’d
like to be able to bring it back into the country without
causing too much attention. How? A ‘back to back’
loan of course. Your own funds are deposited with the
participating bank and the resulting loan is made payable to
you or your ‘onshore’ company – the net result is that the
funds flow back onshore in a perfectly legal manner. OK,
there’s more to it than just that – little things like the
actual terms of a loan agreement, repayment periods, what
happens to the actual funds you ‘repay’ etc, which your
lawyer will need to discuss with your banker, but in
essence it enables legal onshore access to offshore funds.
Alternatively somewhat the reverse may be the case. You
already have ‘onshore’ funds but want it to seem that your
new ‘onshore’ project is actually financed and run by an
offshore company with no connection to yourself. How? Again
a ‘back to back’
loan. This time slightly more complex since you must firstly
and quite openly place your onshore funds into an offshore
investment – all quite legal if properly declared. Once
these funds are offshore, they then form the deposit for the
‘back to back’ loan
payable to the offshore company who are financing ‘your’
onshore project. Again there’s much more to it than just
Loan Periods & Terms.
Because you will be
responsible for setting up your own loan terms, either directly
or via an intermediary offshore company, you can pretty well
make your own arrangements for repayment.
The bank will not be
overly concerned – after all, they’re 100% covered by the
deposited funds – so any ‘default’ as such is a simple
termination of the arrangement. Interest (the spread) will be
usually be paid annually in advance and they will be profiting
for as long as the arrangement is in force.
Since in 99% of
cases the ultimate loan agreement is between an intermediary
loan company established just for this purpose and yourself, the
loan can be 1 year, 5 years, 10 years …… even 50 years if you
The rate of interest
fixed between yourself and the offshore company can be 7%, 8%,
10%, even 15% if you choose. There can be monthly, quarterly,
annual interest payments, in advance or in arrears. The capital
can be repaid evenly throughout the term, with a ‘holiday’ in
the early years, even postponed until the end of the loan
Just use your
imagination and you’ll see how valuable and flexible such a ‘back
to back’ loan can be, we’re sure we don’t need to spell out
all the details, just read between the lines.
Any Other Benefits?
‘Back to Back’
loans can have a number of additional benefits, but in some
areas we’re entering that legal ‘grey’ area that hovers between
money laundering and tax evasion. What you do and how you do it
is between you, your conscience and your taxman – we will gladly
put the possible scenarios together, but we cannot openly advise
that you break any laws, nor openly condone your doing so.
Let’s just say that
in many countries, the USA including, interest payments on loans
for property purchase, even from offshore, are fully allowable
against income tax, sometimes at your highest marginal rate. If
your ‘onshore’ loan agreement states that you’re paying 8%, you
will be getting tax credits on that and could well come out with
a profit on the deal courtesy of your taxman!
Another benefit is
since any property you ‘purchase’ with the loan will, under the
terms of the agreement with the loan company, be acting as
security for the loan, it cannot be seized or repossessed by
anyone else, especially if the loan is always ‘kept topped up’
Just use your
imagination and you’ll soon see the benefits.
What Are The Requirements?
Really just the
one – that you have a sufficiently
large sum of money, which must obviously be unencumbered by any
attachments or liens, to start with to make the exercise worth
while for the participating bank. What are we talking about?
Well, certainly not less than US$200,000 and preferably
in excess of US$500,000. Remember though, whatever
structure we arrange, your security deposit will always be
direct to the participating bank, NOT to us!
FIND/BUY RELATED BOOKS!
Whilst every effort has been made to ensure that the details contained
herein are correct and up-to-date, it does not constitute legal or other
professional advice. We do not accept any responsibility, legal or otherwise,
for any errors or omissions.
Please go to our
Uses of offshore Companies Page where you
will find interesting information on the benefits of using offshore companies
and trusts for business and personal use, links to information on other
locations and details of our products and services.