Global Company Formation UK Ltd: June 2014

Friday 27 June 2014

Why to Incorporate in Gibraltar

Together with the highly reputable British Isles of Jersey, Guernsey and the Isle of Man, the crown colony of Gibraltar belongs to High Disclosure Offshore Centers which provide for greater legal certainty. It is the only British offshore centre that is part of the European Union. It is the only British offshore centre that can and will increasingly be able to provide financial institutions with pass porting rights and access to the single European market for financial services.

Gibraltar has repositioned itself, within the financial services sector, from an offshore tax haven to an onshore European finance district. It has been accepted as a jurisdiction proven to comply with all EU and international directives and treaties on responsible behaviour. Gibraltar maintains European and international standards of regulation, has an attractive tax system and it has an impeccable reputation which is very attractive to corporate entities.

Gibraltar has a launched a new favorable fiscal regime which has welcomed global businesses looking to relocate or establish a new subsidiary. Whilst for UK companies looking to establish a physical presence, Gibraltar offers a English language, sterling pounds and a legal system modeled on the familiar UK one. It also offers a stable economic, business and political climate.

Key Features and Benefits Include:

1. Zero Tax: Gibraltar companies are not liable to pay tax in Gibraltar on what they earn outside of Gibraltar and there is no Capital Gains Tax, Inheritance Tax, Wealth Tax, Capital Transfer Tax, VAT or Tax on savings and investment income in Gibraltar

2. EU Friendly: Gibraltar is a member of the European Union, hence, for persons/companies looking to do business in Europe, this makes it an ideal place to incorporate

3. Nominees Permissible: Although the names of Shareholders and Directors appear on the public record Nominee Directors and Nominee Directors are permissible in Gibraltar

4. Legal certainty: Gibraltar, a former English colony, boats a common law legal system (based on British common law)

5. Corporate Officers permissible: A company can be engaged to act as Director or Shareholder of a Gibraltar company and there is no requirement for the Director/s or Shareholder/s to be Gibraltar resident

6. Politically stable: Gibraltar is a British dependent Territory and boasts a British style constitution and system of Parliament

7. Easy to establish: Only one Director and one Shareholder is required and there is no minimum capital requirement. The Director and Shareholder can be of any nationality

8. Low maintenance: Small Companies are exempt from having to file accounts and exempt from having to get accounts audited. A Gibraltar company is not required to keep records locally – if the company chooses to keep records they can be kept anywhere in the world.

Gibraltar is a member of the European Union that has developed as an international offshore centre within Europe. Gibraltar is developing the financial sector of economy, taking full advantage of the EU directives, including Banking Ordinance, Insurance Companies Ordinance and a Financial Services Ordinance.

The UK enhances the reputation of Gibraltar as an offshore centre, by supervising the Gibraltar Financial Services Commissioner and the membership of that commission. Gibraltar legislation continues providing favorable tax conditions for offshore operations, and during the last years the jurisdiction has reached even more popularity

Global Company Formation UK Ltd

Suit 6-Westward House

Glebeland Road Camberley

Surrey, GU15 3DB

Tel: 02079935929

E :info@globalcompanyformation.co.uk

W :www.globalcompanyformation.co.uk

Welcome to Global Company Formation

We offer formation advice to start up business globally. We advise you of the mode of start up like limited company, partnership, sole trader, trust and which is more suitable to your business. Our professional team consists of Lawyers, Chartered Accountants & Business Consultants in all major jurisdictions across the globe. We guide you to the country of formation on the basis your domicile status, double taxation agreement, international plan and repatriation rule of the each country. Now you can form your business anywhere in the world with us and we care your business.

Mathew Stephen FCA, AAIA, CeFA

Mathew Stephen is the founder Director of Global Accountancy Services. He is a qualified accountant from the Association of International Accountants in the UK and the Institute of Chartered Accountants of India. He is also one of the partners of international Chartered Accountants firm P. Parikh & Associates. He has 20 years’ experience in accounts, business consultancy, taxation & statutory audit. He is also a UK Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of Finance.

He has won the Online Technology Award in two consecutive years, 2011 and 2012, from the Tenet Network. He specialises in Global Company Formation, International Taxation and also as Corporate Protection Advisor to the directors of Limited Companies.

Incorporating Across the World: Why to Incorporate in Delaware

Incorporating Across the World: Why to Incorporate in Delaware: Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. This geographical position repr...

Why to Incorporate in Delaware

Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. This geographical position represents a real advantage in terms of export markets due to its close location to the sea and main highways. More than half a million business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500. Businesses choose Delaware because it provides a complete package of incorporation services including modern and flexible corporate laws, its highly-respected Court of Chancery, a business-friendly State Government, and the customer service oriented Staff of the Delaware Division of Corporations.

The General Corporation Law of Delaware has built a good reputation for this jurisdiction and has helped Delaware in becoming a famous place for company incorporation.

Features of a Delaware offshore company

A Delaware LLC may be formed by one or more organizer or member. For tax purposes, non-resident legal entities (such as companies or Corporations) who are members of the LLC may cause the IRS to classify the LLC as a branch of a foreign company in the US, and the LLC will be taxed on its worldwide income. It is therefore recommended that the non-resident members of Delaware offshore companies be physical persons.
An LLC does not issue shares and therefore does not have shareholders. The owners of an LLC are referred to as members.
A Delaware LLC is a legal entity, registered with the state, and is treated separate from its members.
The Delaware LLC is recognized anywhere in the world as a legally registered US company.
Because of the Limited Liability status, the law protects the members (owners) from the debts and other obligations of the LLC.
After Delaware offshore incorporation, the risk to an owner of a Delaware offshore LLC is to the extent of his investment in the LLC, and all his personal assets are protected.
A Delaware Limited Liability Company may be fully owned by non-resident aliens.
An LLC may also be owned by Corporations (companies limited by shares), Partnerships, Trusts, Charitable Organizations and Pension Plans.
After Delaware company formation, the Limited Liability Company must have these words after the company name or the abbreviation thereof i.e. "Limited Liability Company", "L.L.C.", or "LLC".
The IRS tax treatment of a Delaware LLC is on the flow-through tax basis. That is the LLC is not taxed on its profits. The income of the LLC is distributed to its members who are taxed on a personal income basis.
Non-resident aliens are not taxable by the US on income derived out of the US. If an LLC derives its income outside of the US, the non-resident aliens do not file tax returns.
There is no limit on the number of members allowed in a Delaware LLC.
The Management of an LLC is usually undertaken by its members. If it is found necessary, an outside manager may be employed and would report directly to the members.
The structure of the LLC does not provide for a Board of Directors. The flexibility in the law allows the members by agreement, written or oral, to decide on the most appropriate management system and on the distribution of profits.
The voting authority usually is in direct proportion to member's interest in profits.
The manager of a Delaware LLC may be a member.
There are no statutory requirements concerning meetings of members or record keeping. It is recommended that with two or more members, Members' Agreement be entered into.
If meetings are held by members, this may be done anywhere in the world and in any way convenient to the members.
An Annual Report is required, which sets out the distribution of profits to US residents.
A Delaware Limited Liability Company (LLC) is a good vehicle for non-resident aliens to earn tax free income (not derived in the USA), utilizing a US business entity.
Members of a Delaware LLC are not liable for tax to the United States providing that:
The members are non-resident aliens.
The LLC does not employ US residents as permanent staff, or rely on a dedicated place of business within the United States.
The LLC does not undertake any business activity that is effectively connected with business or trade within the United States.
The Delaware LLC has a perpetual life and membership is easily transferable. It is advisable to enter into a Members' Agreement if alternative conditions are required.

Benefits of incorporating in Delaware

Low formation/incorporation and annual franchise/renewal fees.
No Delaware corporation income tax for Delaware corporations not operating in Delaware.
Delaware has no sales or personal property tax
Business Licence is not required if Corporation is not doing business in Delaware
Directors and members need not be U.S. citizens.
No name or address disclosure requirement for the initial board of directors.
One person may act as the only officer, director and shareholder of a corporation.
The corporation must have a registered agent in Delaware, but not a business office.
Where no business is conducted in the U.S. and the members/shareholders, director and officers are not US Citizens, a Delaware Company has the same characteristics as a normal "Offshore" Company
There is no Delaware income tax for Delaware corporations or limited liability companies that do not do business in Delaware.

Global Company Formation UK Ltd

Suit 6-Westward House

Glebeland Road Camberley

Surrey, GU15 3DB

Tel: 02079935929

E :info@globalcompanyformation.co.uk

W :www.globalcompanyformation.co.uk

Welcome to Global Company Formation

Mathew Stephen FCA, AAIA, CeFA

Mathew Stephen is the founder Director of Global Accountancy Services. He isa qualified accountant from the Association of International Accountants in the UK and the Institute of Chartered Accountants of India. He is also one of the partners of international Chartered Accountants firm P. Parikh & Associates. He has 20 years’ experience in accounts, business consultancy, taxation & statutory audit. He is also a UK Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of Finance.

Thursday 26 June 2014

How to Effectively Implement Anti-Money Laundering Techniques to Better National Security – An Indian Context

Money laundering is the process whereby the proceeds of crime are transformed into ostensibly legitimate money or other assets. However in a number of legal and regulatory system the term money laundering has become conflated with other forms of financial crime, and sometimes used more generally to include misuse of the financial system, including terrorism financing, tax evasion and evading of international sanctions.

Anti-money laundering (AML) is a term popularly used in the global financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent, detect, and report money laundering activities. Anti-money laundering guidelines came into prominence globally as a result of the formation of the Financial Action Task Force (FATF) and the promulgation of an international framework of anti-money laundering standards.

Even though India is a signatory to various United Nations Conventions on anti money laundering and procures its own central legislation, that is, the Prevention of Money Laundering Act, 2002, it is so far successful neither in implementing the law nor in preventing money laundering.

Now it is high time for our country to bring about a drastic change in the existing system and to introduce the concept of ‘corresponding law’ to link the provisions of Indian law with the laws of foreign countries in such a way that it adds the concept of ‘reporting entity’ which would require financial institutions and other intermediaries like, Chartered Accountants, Lawyers etc. to identify their clients, establish risk-based controls, keep records, and report suspicious activities to the Financial Intelligence Unit.

Banks and other financial institutions can play a very crucial role in reporting money laundering whereby they must verify a customer's identity and, if necessary, monitor transactions for suspicious activity. This is often termed as "know your customer". This means knowing the identity of the customer and understanding the kinds of transactions in which the customer is likely to engage. Such anomalies include any sudden and substantial increase in funds, a large withdrawal, or moving money to a bank secrecy jurisdiction. By knowing one's customers, financial institutions can often identify unusual or suspicious behavior, termed anomalies, which may be an indication of money laundering.

As a part of reporting, bank employees, must be trained in anti-money laundering and instructed to report activities that they deem suspicious. Additionally, anti-money laundering software can be adopted to filter customer data, classify it according to level of suspicion, and inspect it for anomalies. The software can be explored to flag names on government "blacklists" and transactions that involve countries hostile to the host nation. Once the software has mined data and flagged suspect transactions, it alerts bank management, who must then determine whether to file a report with the government.

OUR IDEAS TO REFORM

Today, chartered accountants, auditors, tax practitioners, company secretaries and lawyers being the professionals whose service is inevitable in financial sector and comes in direct contact with monetary transactions of clients, there should be clear cut guidance for these professionals to identify and report transactions of a suspicious nature to the Financial Intelligence Unit.

Like in foreign countries, Client Due Diligence or CDD should be the key operational responsibility of practicing accountants under the Indian law as well. The overriding purpose of these requirements is to ensure that accountants are able to comply with the dictum ‘Know your Client’. They should not only know who their clients are but should also understand the motives of the client and the nature his business. Only if the accountant understands what is normal and usual in client’s business, will he be in a position, later on, to recognize things which are abnormal or unusual and hence potentially suspicious. Accordingly this CDD are essentially intended to ensure that accountants are able to remain in control of the engagement and that their offices are not used for criminal purposes. An indirect aim of the rules on client due diligence should be to make those who may be trying to launder money aware that, should they approach an accountant for help, the accountant will be obliged by law to take steps which may lead to the detection of their criminal activities.

Once any such suspicion is traced, the accountant being a public friend, should be made duty bound to report to and disclose the same to the Financial Intelligence Unit with immediate effect, without leaving any loop hole of doubt for the client and in this way not just financial aid to terrorism is demotivated and national security is added; but also a large quantity of black money is turned into white and confiscated to the public exchequer through deterring tax evasion and thereby ultimately adding to the national wealth. The same way the government should undertake the responsibility of ensuring and extending protection to the so called public friends, in return for serving the country by risking their profession.

Global Company Formation UK Ltd

Suit 6-Westward House

Glebeland Road Camberley

Surrey, GU15 3DB

Tel: 02079935929

E :info@globalcompanyformation.co.uk

W :www.globalcompanyformation.co.uk

Welcome to Global Company Formation UK

We offer formation advice to start up business globally. We advise you of the mode of start up like limited company, partnership, sole trader, trust and which is more suitable to your business. Our professional team consists of Lawyers, Chartered Accountants & Business Consultants in all major jurisdictions across the globe. We guide you to the country of formation on the basis of your domicile status, double taxation agreement, international plan and repatriation rule of each country. Now you can form your business anywhere in the world with us and we care your business.

Mathew Stephen FCA, AAIA, CeFA

Mathew Stephen is the founder Director of Global Accountancy Services. He isa qualified accountant from the Association of International Accountants in the UK and the Institute of Chartered Accountants of India. He is also one of the partners of international Chartered Accountants firm P. Parikh & Associates. He has 20 years’ experience in accounts, business consultancy, taxation & statutory audit. He is also a UK Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of Finance.

Tuesday 24 June 2014

Inherited properties in India is taxable in the UK

The reason for this article is that I believe this is an important area of interest to all Indians living in the UK and holding some kind of assets in India. There are a lot of enquires, and people get confused and they panic about the subject. So I thought it is good idea to clarify the points of this matter.

Many Indians live in the UK and still believe they should not pay any tax on the income or assets held in India. They think they have paid tax on their UK income and it has nothing to do with their Indian assets or income. This is wrong, because they are avoiding UK tax and that leads to penalties and later a big tax bill.

As for the tax laws of UK concerned, world wide income is taxable for the UKtax resident.

Tax residency should not be confused with your residential or passport status.Even if you are Indian passport holder and/or a student in the UK, you are still a tax resident in the UK.

While you are filing a tax return or declaring income in the UK, it is your responsibility as a UK tax payer to disclose your world wide income. If you are domiciled in UK, you have to pay tax on your worldwide income, whether or not it has been remitted or not. But if you are a non-domiciled in the UK, you can opt for a remittance basis. In that case, you need to pay a fixed tax payment on the basis of the number of years of residency in the UK.

I believe this tax rules will affect all Indians living in the UK, who have some kind of assets or income in India. It will affect even property inherited from parents or a share of family property.

Considering the laws in two countries, it is very complex subject unless you planned in right way.

If you buy a house, property or land in India and subsequently you sell it, you need to pay tax in India as well as tax in the UK. Even though this property is inherited from your parents, you still need to pay tax in India as well as in the UK.However you could claim ‘foreign tax credit relief’ whilst computing their UK tax liability.

Many residents in UK still think they are not required to pay tax in either place and are being wrongly advised, and finally end up with more tax liability.

This article is specially targeted at Indians who have settled in the UK, US or other countries and having assets in India.The assets may be owned out of the investment from overseas income or inherited from their parents. We will analyse below these two in a separate way.

1. NRI’s acquired assets out of NRI saving and living in the UK

Tax payable in India

They are liable to income tax or short-term or long-term capital gains tax subject to the nature of business

The land they bought as agricultural land will be exempt from capital gains tax and income tax in India. However, in the case of house properties and other assets, they are subject to income tax and short- or long-term capital gains tax.

The buyer needs to deduct the withholding tax, and he can transfer up to £ 1 million US dollars to the UK. For any amount more than that, he is required to obtain prior RBI permission. Otherwise, he needs to open an NRO account and repatriate only the cost of investment and the remaining amount can be repatriated after paying the appropriate tax in India. Any transaction over 3 million Indian Rupees needs to be informed by the registrar to the local income authority, and subsequently they can be investigated.

Tax payable in the UK

The person needs to pay tax, either income tax or capital gain tax, depending on the cases. But they are eligible to apply for double taxation exemption and claim back that tax credit.

But in the case of a non-domiciled UK resident, they can opt for the remittance basis. Many Indians can claim for non-domiciled status .But if they are domiciled in the UK, even though they are in Indian, they need to pay tax on world wide income, whether it is income tax or capital gains tax.. They are not able to pay tax on a remittance basis, but they need to pay tax on an accrual basis of income.

2. NRI’s acquired assets by inheritance from parents in India or their family share of property and assets in India

This is a very typical situation of Indians living in the UK with their parents living in India who are tax resident in India.

While parents have passed on their assets to their children, but if they are UK resident, they are taxable for the capital gains tax, while they are selling this property in India. We can analysis the tax treatment of both the countries, as follows:

Tax payable in India

The assets, land, property or any other assets in India are subject to profit or capital gains tax. This will happen at the time of selling the inherited property in India.

If the property is agricultural land it is exempt from capital gains tax and income tax.

But if the property is situated in a municipal area, it is not exempt from income tax or capital gain tax.

There are two ways the Indian tax can be paid:

In the first method, Indian tax can be withheld by the buyer and the balance amount remitted to the UK up to an annual limit of one million US dollars. For any amount higher than that, prior RBI permission is required. The buyer withholds the tax, and pays the tax authority, and NRI will get tax clearance certificate prior to remitting the amount to the UK.

The second method is that NRI need to open a NRO account and transfer all the sale proceeds to that account. They need to pay the tax from that account. After paying the local tax the clearance certificate is required to remit up to one million US dollars, and they can even pay more with the prior permission of RBI.

If they want to invest in similar properties in India out of the sale proceeds they will be exempt from Indian tax, but they still need to pay UK tax

Tax payable in the UK

The tax payer in the UK needs to pay income tax or capital gains tax depending on the nature of the Indian income. But they can claim double taxation relief on tax they have already paid for the same income in India. But in the case of non-domicled residents, they can opt for a remittance basis, but they need to pay fixed fees up to £50,000, depending on the individual case.

But in the case of a domiciled person in the UK, they need to pay tax on an accrual basis of income. This means they need to pay tax, whether remitted to the UK or not remitted to the UK

By applying non-domicile status, they need to state separately in their tax return that their status is non-domiciled.

Other Business Income or profit in India

Tax payable in India

The same principle is applied to other business and income and it depends on the domiciled status. There is a way to postpone Indian income tax by reinvesting the sales proceeds.

Tax payable in the UK

They need to pay tax in the UK and they can claim double taxation tax relief

Parents cash gift from India

Tax payable in India

Any gift more than RS.50, 000 is taxable in the hand of the person receiving the gift, even if this is to a person non resident in India, they are taxable, even if the property is given as a gift to children, the same principle is applied. Sales at lower price than market value will be treated as a gift.

Tax payable in the UK

Cash gifts from non-resident parents are not taxable and this exempt from tax.

Who needs to file tax return in the UK?

If you are self-employed
Company directors,
Ministers of religion
£10,000 or more income from saving and investments
£2500 or more untaxed saving and investments
£10,000 or more income from property before deducting allowable expenses
£2500 or more income from property after deducting allowable expenses
If your annual income is more than £ 100,000
If you are employed and want claim for expenses or professional subscriptions of £ 2500 or more
You have capital gain tax to pay
You are living or working abroad or not domiciled in the UK
If you are trustee

Global Company Formation UK Ltd

Suit 6-Westward House

Glebeland Road Camberley

Surrey, GU15 3DB

Tel: 02079935929

E :info@globalcompanyformation.co.uk

W :www.globalcompanyformation.co.uk

Welcome to Pearl Business Start up

Mathew Stephen FCA, AAIA, CeFA

Mathew Stephen is the founder Director of Global Accountancy Services. He isa qualified accountant from the Association of International Accountants in the UK and the Institute of Chartered Accountants of India. He is also one of the partners of international Chartered Accountants firm P. Parikh & Associates. He has 20 years’ experience in accounts, business consultancy, taxation & statutory audit. He is also a UK Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of Finance.