what is an ibc?
the international business company
The IBC or
International Business Company is a type of
offshore corporation
existing generally in
tax havens, regulated by specific and especially favorable legislation. Its main benefits include tax exemptions, dispensation from having to file annual returns
or accounts and the simplicity of its creation and administration.
It is possible to form an IBC with a purely nominal capital, i.e. without any physical expenditure of money. It is also protected by strict privacy rules. The names of the owners or shareholders do not appear in the public records or in the main documents of incorporation, such as the certificate of incorporation and the memorandum and articles of association.
The International Business Company is a type of corporation targeted to non-residents and is therefore prohibited from engaging in economic activities within the own territory of the tax haven in which it is registered. This means it cannot carry on business with local companies or citizens nor buy real estate in the country. The possibilities of investing in the jurisdiction of incorporation are also restricted.
However, there are exceptions to this rule. For example, an International Business Company is allowed to open and maintain bank accounts or hire certain services necessary for its administration locally, such as legal assistance, virtual offices, consulting or accounting services. Needless to say, the IBC can do all the above activities without any restriction in the rest of the world.
corporate structure of an IBC
In this regard, International Business Companies are no different from any other type of foreign or domestic companies. They are mostly formed as limited companies as they cannot offer its shares to the public. Nevertheless, the use of suffixes like ‘Corporation’, ‘Inc.’ or S.A. is permitted.
As with a conventional limited company, the capital is divided into parts, which are called shares. They represent the capital contributed by each shareholder and as well the limit of his liability in case of failure. This means the shareholder is not personally liable for any debt of the company beyond the value of his investment. The IBC may issue registered shares (bearing the name of the shareholder), or in some jurisdictions, bearer shares, i.e. freely transferable securities, are also allowed.
The shareholders elect the Board of Directors, which in turn appoints the Executive Director, Managing Director or President, who will be responsible for the daily operations of the company.
Main benefits of an International Business Company
As its name suggests, one of the traditional applications of the IBC is its use in international trading activities or import-export businesses. Using an IBC as an intermediary, substantial tax savings can be obtained.
However, many people who incorporate an offshore company have no intention to engage in any trading whatsoever; rather, they use it as a holding company. That is, to manage assets and properties of all kinds. Through the IBC, they manage to avoid paying certain taxes, such as the property transfer tax, stamp duty or inheritance tax, when transferring, selling or bequeathing property. Procedures, registration and transfer costs are usually also much simpler and affordable in a tax haven than in a traditional jurisdiction. And the privacy level is pretty higher, of course.
The most important non trading activities for which International Business Companies are used are the following:
- Shipping register. This includes everything from large commercial vessels by means of the so-called flags of convenience, to smaller boats and yachts for recreational activities.
- Registration of motor vehicles, especially luxury cars or collectibles.
- Real estate managing.
- Managing of intellectual property rights.
- Asset protection and estate planning.
- Holding companies holding shares of other corporations.
- Investment companies, such as mutual funds, hedge funds or venture capital companies.
- Captive reinsurance companies or protected cell companies.
The International Business Company is present in almost all offshore jurisdictions. Although in some countries it is known under other names (Non Resident Company, Global Business Company, International Company, etc.), their features are similar.
It is noteworthy that in most tax havens already established IBC’s can be acquired. These are the so-called shelf companies, because, like products in a store, they are "on the shelf”, ready to be sold. The intention is to offer customers who are in urgent need of a corporation a faster service.
The cost is generally not higher than for a normal IBC, except for a “vintage company.” This is a shelf company created and aged for some time to be sold to people who, for some reason, need a company that already has a certain age.
