Post #174

How Do Offshore Companies work? (not the way you think) [ #SetTheRecordStraight ] The British Virgin Islands citizens are very, very talented and enterprising. The Islands host about 360,000+ active companies while the islands have around 39,000 people. That is 9-10 companies per capita. ⏩ Many people think mining companies register offshore to avoid paying local taxes. Sadly, many are wrong. 🔸 For long time in most countries in Africa and beyond, foreign firms have been prohibited from holding mining rights directly. The law asks them to create a local subsidiary for the license and the day-to-day work. 🔸 As a result one cannot just register an offshore entity and forget about taxes, which are in any case charged on the local subsidiary. 🔸Yet companies continue to create intermediaries between the local subsidiary and the real owner, registered 5–7 thousand kilometres away from the pit. ⏩ So, why add an offshore layer? 🔸First, access to international capital. Big investors prefer to buy a slice of a neutral holding that can list in London or New York and follow familiar company law. 🔸The second thing is confidentiality. Offshore centres like Barbados or British Virgin Islands often do not disclose ownership structures to general public. Whether you are a geopolitics lover or a simple corruption enjoyer - hop on. 🔸 Finally, access to arbitration. It's convenient to have contracts governed by a system that courts and arbitrators know well. Mauritius is one such hub. It supports modern arbitration and even allows appeals to the UK Privy Council in some cases. ⏩ But can you still cut taxes?Of course, in some ways you can. 🔸 In many places, if you sell a mining company, you must pay tax on the sale. If there is a holding in the middle, the seller can trade that company instead of the local operator - thus, no exit tax. 🔸 Plus you can route part of your group’s work through the offshore holding. For example, accounting - then the local taxable profit goes down and more cash remains within the holding. As simple as that. However, in general offshore companies have lost a lot of their old shine. They no longer let poor multinational giants skip national budgets at will. Today they are mainly used for raising money, sharing risk, keeping paperwork clean. Devils Below