IBCs (INTERNATIONAL BUSINESS COMPANIES)
An IBC (abbreviation for International Business Company) is a company that is registered and based in an “offshore jurisdiction”. The term “International Business Company” is used to describe it because it is formed in a jurisdiction that is outside one of the major industrialized countries. It usually carries certain benefits, including income tax, privacy, and financial as well as security benefits.
When you form an IBC, you are generally in complete control of the assets of the IBC, in control of its bank accounts and of all transactions done by the company. The income to the IBC is sometimes taxable in the country where the beneficial owner lives, immediately it is earned. This differs from income that you earn through shares purchased in a company in your homeland. The general rule for such shares is that you have a taxable event only when you receive distributions in the form of dividends.
In the case of the IBC, you may be taxable in some countries of domicile, even if you have not repatriated (i.e. brought home) any of the income. In others you may not be. Although the provision of Bearer Shares could enable the owner of an IBC to conceal earnings through the IBC, it is evasion of taxes to fail to report and pay taxes in one’s homeland and could carry serious penalties.
In some countries, you are not required to prepare audited financial statements and there is no minimum share capital required. No local income tax is required in the situs of the IBC, but in some jurisdictions residents of Caricom countries may elect to pay taxes at 1% to the local jurisdiction and become exempt from local taxes in his/her country of residence. Some jurisdictions offer a company limited by guarantee, sometimes called a “hybrid” company. Such a company has characteristics both of an IBC and a Trust, which can be very useful to residents of countries like the US which tax their citizens and residents on worldwide income or France which does not recognize Trusts. In countries like Canada, the intent behind the formation of the structure is scrutinized.
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Advantages of an IBC
- Incorporation (within 48 hours, often 24 hours)
- Requires only one incorporator in many jurisdictions (often no secretary required)
- Shareholders and directors may reside in any country and meetings may be held anywhere
- Greater Flexibility
- Greater Asset Protection
- Greater accessibility to companies that prefer to deal with offshore entities
- Properly structured, an IBC can provide tax-free compounding
- May engage in any activity that is not illegal in the offshore jurisdiction
- Shares may be issued as registered shares or bearer shares, may be par value or no par value, voting or non-voting
- Share capital may be expressed in any currency
- An IBC may be administered from any place in the world and its books, records and seal may be kept outside the country of incorporation
- Only one Director required in some jurisdictions
- The names of directors, officers and shareholders are not disclosed on any public register
- IBC’s are exempt from tax and stamp duties for as many as twenty five years from incorporation in some jurisdictions
- No foreign exchange controls are imposed upon IBC’s
- Limited Liability of shareholders
- No restrictions on percentage or ownership of shares
- No investment restrictions may apply except that an IBC may not be able to purchase real property in the country of domicile
- No restrictions on borrowing or distribution of dividends except those provided in the Articles of Incorporation or Memorandum and Articles of Association