Offshore Foundation for Asset Protection, Tax Avoidance and Wealth Management
Summary
Offshore Foundations are legal vehicles that provide a high level of privacy, tax savings, asset protection, wealth management, and more.
​
Offshore Foundations are often referred to as a hybrid between a company and a trust, which allows and provides legal solutions that a company or trust cannot provide.
​
A foundation is similar to a corporation but without shareholders, as the Foundation is owned by itself and is managed by a council. It offers a level of confidently and asset protection comparable to a trust but differs in that it does not require beneficiaries (unlike a trust which requires the appointment of a beneficiary to be valid) and can be structured for specific purposes, including asset protection, estate planning, and charitable activities.
Tax Benefits of Offshore Foundations
Offshore Foundations are not subject to taxes in the jurisdiction of formation, but that is not the main tax benefit.
The main tax benefit is that it allows tax deferral on undistributed income, unlike an Offshore Corporation where depending on the jurisdiction of the owner it might be subject to tax payment on undistributed income in the jurisdiction where the shareholder is a tax resident in pursuant to the Controlled Foreign Corporation rules.
​
Each jurisdiction has its own tax treatment of foreign foundations. For example, some jurisdictions will classify a Foundation as a “Corporation” or a Trust for tax purposes and tax it accordingly, while other jurisdictions do not tax the offshore Foundation Income until it is distributed to the Beneficiary.
Purpose
A Foundation can be used for Wealth Management purposes, meaning a Foundation does not need to be Charitable.
Documents of a Foundation
Charter
The Charter of a Foundation is the initial and main document of the trust as it sets out how the Foundation will be governed in general.
​
Each offshore jurisdiction has its own rules in regards to what the initial Charter has to include.
One thing to take into consideration before picking your jurisdiction of Foundation formation is what information has to be set out in the Charter. For example, one jurisdiction might require to disclose who is the Founder and not who the Councillors are, while other jurisdiction require the initial Council members to be disclosed but not the Founder
In general for privacy purposes, the formatted the Charter does not include certain information as this Charter might have to be reported to the Registrar. As a solution, the information and rules on the Foundation Management, etc is not reported in the Charter, but it is submitted on the Charter’s Regulations or By-Laws.
Regulations or by-laws
Depending on the Offshore Jurisdiction, the document that complements the Foundation’s Charter rules and procedure for its internal governance.
These Regulations or By-laws are supplementary to the Charter, and in case there is a contradiction between them, the provisions of the Charter will prevail.
Parties of an Offshore Foundation
Offshore foundations are generally integrated by
-
Founder,
-
Councillors (Members of the Council),
-
Protector
-
Beneficiary
Founder
-
Founder - this person is the creator of a Foundation
-
One benefit of a Foundation is that from a tax perspective, someone who makes a contribution to a Foundation will not be considered a Founder.
Councillor
-
Councillors are members of the Foundation Council, which is the Foundation management board.
-
Councillors in general do not need to reside in the jurisdiction of Foundation formation, and do not need to be licensed.
-
Geneally, the Founder can be a Councillor as well but no the only Councillor
Beneficiary
-
The beneficiary can be an individual or company.
-
A Foundation is not required to appoint or name Beneficiaries in order for it to be valid.
-
The Founder can be a Beneficiary but not the sole beneficiary.
Protector
A Protector is a company or individual who has the power to approve or disapprove the actions and decisions of the Council, all pursuant to the powers granted to the Protector in the Foundation Charter and Regulations.
Protectors sign what is called a Private Protectorate Agreement.
Management of a Foundation
A Foundation is Managed by a Council that direct and manage the Foundation affairs and assets according to the Charter and Regulation provisions.
Cost effective
A Foundation is sometimes a more cost effective solution as it will not need a licensed Councillor to operate, making it a more attractive solution.
​
Generally, offshore trusts require a Licensed Trustee to manage the Trust or the establishment of a Private Trustee Company to act as the Trustee. In case a licensed trustee is appointed, their fee is usually charged based on the amount of assets under Management.
​
Foundations on the other hand, can be managed by any individual or company without residency restrictions and licensing Requirements.
[Reserved]
[Reserved]
Counseling Service
If you need counseling in regards to the content on this page, and also about Offshore Companies Formation, International Tax Counseling, Offshore Bank Accounts, Asset Protection, and much more, you can hire our Counseling Services.
Our counseling rate goes from US$200 to US$300 per hour.
Founder & CEO