International business company
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An international business company or international business corporation (IBC) is an offshore company formed under the laws of some jurisdictions as untaxed company which is not permitted to engage in business within the jurisdiction in which it is incorporated.
Characteristics of an IBC vary by jurisdiction, but will usually include:
- exemption from local corporate taxation and stamp duty, provided that the company engages in no local business (annual agent's fees and company registration taxes are still payable, which are normally a few hundred U.S. dollars per year)
- preservation of confidentiality of the beneficial owner of the company
- wide corporate powers to engage in different businesses and activities
- abrogation or restriction of the requirement to demonstrate corporate benefit
- the ability to issue shares in either registered or bearer form
- an abrogation of any requirements to appoint local directors or officers
- provision for a local registered agent
However, under pressure from the Organisation for Economic Co-operation and Development (OECD) and the Financial Action Task Force on Money Laundering (FATF), most offshore jurisdictions have removed or are removing the "ring fencing" of IBCs from local taxation. In most of the jurisdictions, this has been accompanied by reductions of levels of corporate tax to zero to avoid damaging the offshore finance industry.
In contrast, Seychelles residents are legally able to own and operate a Seychelles IBC as long as the IBC is not conducting business within Seychelles. Seychelles also has a "territorial" tax system meaning that Seychelles residents are only taxed on their locally sourced income. Therefore, there is no advantage to non-residents over residents and claims of "ring fencing" have no merit on the Seychelles IBC. This has been, and continues to be, used successfully by Seychelles in defense of the Seychelles IBC vs. international bodies such as the OECD and FATF. Boosting the defense even more is the fact that there are no restrictions on a Seychelles IBC owning shares of a Seychelles domestic company.
Further, most jurisdictions (Seychelles being the key exceptions) have either eliminated or highly restricted the issuing of bearer shares by IBCs due to international pressures.
The IBC legal entity
An IBC is a legal entity incorporated in a tax haven which is free from all local taxes (except small fixed annual fees). Typically the IBC cannot conduct business in the country of incorporation. Anguilla, Bahamas, Belize, Dominica, Nevis, St Vincent and Seychelles have special IBC legislation in place, which is similar to the legislation for Panama Corporation and Gibraltar Non-resident Company. The British Virgin Islands and Gibraltar formerly had popular IBC regimes, but in each case the relevant legislation has been repealed.
IBCs are offshore companies that are most commonly used for offshore banking to conduct international trade, investment activities, by professionals and for asset protection. Offshore companies can be involved in buying and selling goods and services, hold bank accounts and operate businesses. IBCs are also commonly used for the ownership of real property and land; for ownership of intellectual property, licensing and franchising; personal service by individuals working overseas and offshore e-business among other things.
An IBC can hold assets in a safe, secure financial center. At the same time, an IBC also allows the owner to retain 100% control of assets. An IBC's assets are extremely private. In the offshore jurisdictions, there is no ITIN required in order to open an IBC bank account. In certain offshore jurisdictions it is a crime for a banker to reveal your association with a bank account to an individual outside of the bank. IBC ownership records are not typically available in any public record.
There are countries with IBC laws that take privacy very seriously. The asset protection provisions in some countries are extremely strong. Many of these countries are island nations that have become financially strong by offering a safe-haven in which to store one’s money. One of the strongest IBC asset protection laws found is on the Island of Nevis (Nee’ Vuhs). Nevis is located in the Caribbean Sea and is about a one-hour flight East of Puerto Rico.
The term Offshore company seems more commonly used than International Business Company (IBC). Although all IBCs are necessarily offshore companies, not all offshore companies are IBCs. Both terms refer broadly to a similar type of corporate structure. The term 'offshore' is used to refer to a company, or bank account, set up outside the jurisdiction of residence or place of doing business. Jurisdictions such as Singapore, Ireland, Dubai & Hong Kong are popular places for setting up IBCs (offshore companies) as they have well developed infrastructure, are global business hubs and relatively low corporate tax systems.
- For BVI, see BVI Business Companies Act