22.24 HUNGARY

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22.25 IRELAND

The mild south is especially attractive as a retirement haven and for a select group like writers and painters, it is a zero tax haven. If you lack artistic talent, there are other ways to qualify and receive your income, profits, pension or social security check at a zero tax rate.

An Irish company which is beneficially owned by non residents of Ireland, does not do business in Ireland and which is managed and controlled from outside Ireland i.e. has non resident directors, will not be taxable in Ireland. As Ireland is not an obvious tax haven, an Irish non resident company provides an excellent low profile tax avoidance vehicle. For a time during the early 1980s this was also possible in the U.K. The EU objected to a developed country permitting such tax avoidance and so the legislation was changed. In time, the situation will also change for Ireland as it is now approaching the EU economic norm in many areas. Currently, Irish non resident companies enjoy huge popularity.

Legislation introduced in 1995 now requires the disclosure to the tax authorities of: the address of the company's principal place of business which by definition must be outside Ireland; the name and address of any individuals who have "control" of the company. These requirements have tax implications for both the beneficial owners of the company and the company.

Ireland has an extensive network of tax treaties and many of these provide for the exchange of information. Details of the directors and of the registered shareholders already appeared at the Companies Registry but now also are registered with the Tax Department. This increases the likelihood of those details being passed to your home tax authorities. Even if no tax treaty is in place the Irish authorities tend to be compliant in meeting requests for information from overseas tax authorities. Most onshore countries have provisions within their tax legislation whereby any company, no matter where it is incorporated, which is managed or controlled from within their jurisdiction can be considered tax resident and taxable on worldwide income at local rates. Thus, for example, any offshore company whick had U.K. based directors would be deemed by the U.K. Inland Revenue as being tax resident in the U.K. and subject to U.K. tax on its worldwide income. Most other onshore countries have similar provisions within their tax legislation. Therefore, to guarantee that confidentiality can be retained and in order to help rebut any suggestion that the company may be tax resident in the home country of the promoters or any other onshore jurisdiction, the management of an Irish company should be based somewhere fiscally neutral. This will normally necessitate employing the services of professional third party directors.

Most countries have Controlled Foreign Corporation legislation and other anti-avoidance provisions which may allow them to tax the profits of the company as though those profits had been distributed to the shareholders whether they had been so distributed or not. For example, if it is revealed that the Irish company has U.K. resident shareholders then the U.K. Revenue may seek to tax the shareholders as though they had actually received the profits of the company even if this was not the case.
The use of nominee shareholders would not remove the obligation to reveal the beneficial ownership as the nominee agreements make it clear that the real control of the shares rests with the beneficial owner and not with the registered nominee shareholder. The shares may, however be held by a discretionary trust so that the details required to be revealed to the Irish Revenue authorities is the name and address of the trustee rather than the client's own details. Many client are not prepared to use a discretionary trust for security and cost reasons and so Ireland has become less popular with clients seeking a low cost and private company registration solution.

For the reasons stated above it has become increasingly popular to arrange for the shares in an Irish non resident company to be owned by a suitably drafted discretionary trust. Many clients find this objectionable and so do not use Ireland.

The principal advantage of the Irish Republic, for individuals, is that there is a clear distinction between a person's domicile and physical residency for tax purposes. In effect, a "foreign" person resident in Ireland need only be taxed on remitted income back to Ireland. If a suitable distinction is made between capital and subsequent income from capital (i.e. interest) before taking up permanent residence it may even be possible to live in Ireland almostly completely tax free. Another benefit of Ireland over most other potential tax havens is that all permanent residents will be able to benefit from Ireland's sophisticated and extensive double taxation treaty network. Third party investigating tax authorities will be bound by the terms and conditions of the applicable tax treaty and clients will be protected against the almost ubiquitous reverse burden of proof employed by other developed nations. These basic advantages combined with other domestic tax breaks have resulted in Ireland having a significant and wealthy expatriate community. Entry clearance criteria are very similar to those of the United Kingdom with the possibility of Irish passports for those willing to invest IR� 1,000,000.

Whilst the distinctions drawn between domicile and residence in Ireland for tax purposes are well known, i.e. that non-Irish nationals resident in the Republic are only taxed on external passive income when directly remitted to the country, what is not as well known is the fact that it is also an ideal base for working "international" consultants. Under the Finance Act of 1994, inducements were introduced not to tax Irish based, i.e. resident, executives working on behalf of their employer outside of the Republic on such foreign generated income even if remitted. The rules are complex but very real advantages are available.
(Courtesy of the Baltic Banking Group).

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22.26 ISLE OF MAN

Companies are formed under the U.K. common law: introduced locally as The Companies Act of 1932 to 1993. The Isle of Man enjoys a high degree of respectability in the world's financial circles. There are no political parties and the constitution dates back to 1205. It boasts one of the largest reinsurance and asset management markets in the world. The commercial law is constantly reviewed and updated.

An International Company may qualify for tax exemption in the Isle of Man and yet be registered for VAT for European trading purposes and get the benefit of certain tax treaties. This may be very useful for companies trading within the EU. Bearer shares are not permitted and beneficial owners must be disclosed. The minimum capital duty is 28 GBP 28 and the annual fees to the government are GBP 705 for non resident exempt and GBP 345 for non-resident companies. Registration can be accomplished within a week. Shelf companies are not easily available. The companies' name must end with the word "Limited". Certain words, e.g. "Insurance", "Assurance" etc. require further approval.

The Isle of Man is one of the few offshore areas which forms part of the European Union for customs and VAT matters. Although the Island itself is not an EU member, it is associated with the UK for VAT and customs purposes and a Isle of Man company can therefore be an ideal offshore vehicle for trading within the EU. The ability to register for VAT is essential, in various situations:
(a) Any company which is registered within the EU whose turnover exceeds the legal minimum must register for VAT in its home jurisdiction. Thereafter that company must charge VAT on any invoice to another EU company. If the recipient company is not registered for VAT then it will have to pay the VAT and this cannot be claimed back. If the recipient company is registered for VAT then the recipient company may claim back the VAT it has paid so if a company trades within the EU it is essential and advantageous to be registered for VAT.
(b) Where a group of consultants sets up an offshore company to bill for their services supplied within the EU they may find that their clients are unhappy paying them unless they are registered for VAT. This is because without the payee being VAT registered the paying company will not be able to zero rate the payment. Additionally if the payee is VAT registered the service company can claim VAT back on equipment purchased which is to be used for the business of the company and cannot if it is not registered.
A common practice to save tax is to re-invoice for goods extracting profit offshore. If goods are purchased from one EU company and sold to another then it is essential that the company in the middle is registered for VAT so that the seller can zero rate the goods. For exemple, if goods were being purchased in Germany and sold in France and the client wished to take the profit offshore to avoid tax then a non VAT registered offshore company would have to physically export the goods outside the EU and then re-import those goods to France. If the offshore company were VAT registered then the goods could move directly from Germany to France and all invoices raised could be zero rated thereby cutting down on administration and creating a cash flow advantage. The re-invoicing must have economic substance in order to withstand audit by tax authorities. This required good documentation and planning.
An Isle of Man VAT number is indistinguishable from a U.K. VAT number and can be applied for by a Isle of Man or foreign registered company which operates from the Isle of Man.

SHIP REGISTRATION

Ships which are majority owned by companies or individuals resident in the European Union and certain British dependent territories can apply for registration in the Isle of Man. The Isle of Man is not deemed to be a flag of convenience and has a quality register maintaining high standards based on U.K. legislation and offers a practical approach to Maritime rules and regulations. The Isle of Man register is part of the British register and the British Red Ensign is normally flown on Isle of Man yachts. Fees are competitive and are set only to recoup administrative costs. There are no annual tonnage taxes.

RESIDENT PROPERTY OWNING COMPANIES

Companies receiving income from trading or investment purposes would generally be structured as exempt or non-resident so as to pay a flat rate tax or duty instead of a percentage tax on profits. However, if a company is to be completely dormant only holding a property, it may be wise to structure it as a resident company. Resident companies pay 20% tax on profits but as the company would have no income, there would be no current tax liability and future potential tax liabilities could be handled by appropriate planning.
The entry clearance and general residency requirements of the Isle of Man are very similar to those of both the United Kingdom and the Republic of Ireland. Unlike Jersey there are no special residency permit or financial constraints placed upon prospective permanent residents. The tax rate for Isle of Man residents is 20% on their world-wide income. There may also be significant capital gains and inheritance tax savings, however British nationals may not be able to avail themselves of all the potential fiscal benefits as a result of the Island's lone Tax Treaty with the United Kingdom.
The Isle of Man can provide significant tax savings for organizations which trade within the EU and may do so on a disclosed basis. It is practicularly useful for publicly listed companies and investment funds. It is not recommended for persons needing complete privacy nor is it a low cost solution.
(Courtesy of the Baltic Banking Group).

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22.27 ISRAEL

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