Situated just two hours from Paris and a part of the European region, the United Kingdom is not actually an offshore location. However, in the context of offshore outsourcing, this destination can offer similar types of benefits, and can offer substantial offshore / onshore services. We must bear in mind that the United Kingdom is unequivocally the most efficient tax haven, despite any negative comments which you may have heard.
The Private Limited Company (Ltd.) is an ideal gateway to offshore trading.
If your English limited company is 100% owned by an offshore company, then you are entitled, and fully permitted by the English tax authorities, to outsource up to 95% (around 80% in practice) of pre-tax profits to your offshore company. This arrangement has been introduced by the “Agency Law” which regulates contracts for agency representation of overseas companies. The chart can be seen below:
How do you use an English company for optimising taxes, and what actually is the “Agency Agreement”?
The “Agency Agreement” is a commercial agency agreement which has been established between the two companies, parent and sister.
In England, a company which is 100% owned by an offshore company governed by British Law (Such as in Gibraltar) may draw up and qualify for an agency agreement which will allow it to outsource up to 90% of its profits.
This arrangement is used primarily in connection with the use of an English company to help avoid local taxes of up to 20%, which is outsourced, and then reduced to 2%.
Also, any commercial activity which relates to trading by the English company may outsource 90% of its profits to its parent company in Gibraltar (tax-free), and is only required to pay tax on the remaining 10%.
Simplified accounting procedure for non-residents.
Another advantage, and not the least for of establishing a limited company, is that it is able to present a positive image to your customers. The United Kingdom allows the formation of a Ltd. company owned by an offshore company to be used for various types of activity. London is quite removed from the stigma of a tax haven, and generates an image of prestige and real professionalism. This destination will often meet the commercial imperatives for a European business for invoicing services, or within the framework of import/export operations conducted outside of the EU.
Important information:
You are not required to either have, nor justify any share capital. Thanks to legal offshore agreements, tax on companies can be reduced to 4%. The UK allows the use of a nominated director, who does not appear in the public registry (at Companies House). Just like any non-resident company, you will bill your clients a total net of taxes, and you as a business will not be subject to VAT.
The cost:
- Incorporation: €2,400.00
- Annual costs for maintenance and domiciliation: €1,700.00
- Accounting and tax statement: €1,800.00