At present, the climax of overseas investment by Chinese companies and domestic high-net-worth individuals is not diminished. Investors are not only fascinated by overseas markets and profits but also begin to pay more attention to preventing and avoiding risks. The latter has paid a heavy price to countless Chinese investors.
At present, the climax of overseas investment by Chinese companies and domestic high-net-worth individuals is not diminished. Investors are not only fascinated by overseas markets and profits but also begin to pay more attention to preventing and avoiding risks. The latter has paid a heavy price to countless Chinese investors. In the process of implementing overseas market and investment diversification development strategy, Chinese enterprises should effectively use the offshore structure, avoid and diversify investment risks as much as possible through systematic methods, and finally realize the diversified development strategy of enterprises. High-net-worth individuals in China also need to effectively use offshore structures to preserve and increase the value of their personal wealth and ensure the privacy and security of wealth.
The establishment of offshore companies and the establishment of offshore structures have become the most effective and mature model for multinational companies to invest overseas. They not only have great advantages in tax saving but also have the characteristics of investment information security and business risk dispersion. Building an offshore structure can not only avoid domestic monopoly or regulation on foreign exchange, industry, capital market operations, etc. but also effectively use the free and dynamic legal system of offshore to achieve a sound and efficient overseas investment structure and operation. Construction of the structure. As a result, offshore facilities bring more convenience and benefits to the enterprise than the company’s expected increased regulatory and compliance costs. In the foreseeable future, the offshore structure will remain the best choice for multinational companies to implement overseas investments.
The following is an analysis of the offshore investment offshore structure through three types of cases:
01 Concealing investor information and evading policy barriers
Two domestic companies A and B intend to invest in a certain country, but because their main business involves sensitive matters, the government has set strict review standards and suffered policy interference during the investment process. After that, A and B each established an offshore company C in the BVI Islands with a 50% joint venture, and financed Hong Kong with C as the investment entity, thus successfully entering the country’s market and investing successfully. The basic structure is as follows:
This architecture is the simplest offshore architecture. Its advantage is to be able to conceal investor information, effectively avoid various barriers, minimize risks and achieve investment objectives. Therefore, when conducting overseas investment, Chinese enterprises can take advantage of the unique characteristics of offshore company information confidentiality, structural security, and freedom of identity to rationally plan overseas investment and financing projects, avoid political barriers and policy barriers, and achieve investment objectives.
02 Business risk of diversification
Three domestic investors, A, B, and C, intend to jointly invest in setting up a Hong Kong company to invest in three overseas projects. If the three investors directly set up a Hong Kong company in accordance with normal investment steps and invest in the project, of course. However, this model of direct investment has many drawbacks: First, the information of investors A, B and C is completely unprotected. Secondly, Hong Kong companies have the characteristics of complete transparency of information, so that all of the subsequent investment process The investment structure of the project was exposed. Finally, the Hong Kong company held three overseas projects at the same time, which has great hidden dangers in preventing and diversifying risks.
If the overseas investment structures of Groups A, B and C are rationally optimized, different investment projects will be provided with offshore platforms through the offshore structure, thereby avoiding exposure to the investment structure throughout the investment process, while avoiding and diversifying the investment business. risk.
First of all, A, B, and C each set up a BVI company, namely A, B, and C, to ensure the opacity of investor information, and the information of the three people will be completely kept confidential, ensuring the security of the original investment information, and The co-investment behaviors originally belonging to Groups A, B and C are separated and hidden from the investor information, and the effect of non-associative investors is obtained. Secondly, the three BVI companies A, B and C jointly hold one BVI company D, D company invests in overseas projects one; A, B, C three BVI companies jointly hold one BVI company E, E company invests overseas project two; A, B, and C BVI companies jointly hold one BVI company F, and F company invests in overseas projects three. Since D, E, and F are all BVI companies, their opacity is still used to ensure the information security of investors. Finally, three BVI companies, D, E, and F, respectively held three overseas projects, achieving the goal of risk dispersion. The basic structure is as follows:
The architecture separates different investment projects with offshore platforms, thereby avoiding exposure to the investment structure throughout the investment process while circumventing and diversifying the business risks of the investment.
03 Avoiding tax law risks and saving tax costs
Chinese company A intends to invest in overseas country A with the aim of obtaining local cheap labor and using advanced technology to develop local raw materials. Since the target raw materials belong to the buyer’s market in country A, Chinese company A has sufficient strong pricing power. If the investment is directly invested, the structure is too simple, and there is no protection for the investor’s information, which greatly limits the right of Chinese enterprises A to fully exercise pricing and the arrangement of domestic and overseas profits, which reduces the flexibility of funds and profits and is China. The future investment of Enterprise-A in the country A has laid a heavy cross-border tax burden.
From the perspective of controlling and saving tax costs, Chinese enterprise A should fully consider the tax law risks of investment destination countries and investment home countries, combined with tax treaty preferences, transfer pricing arrangements, and intangible asset allocation. On the basis of the purpose and economic essence, an offshore structure in which economic interests and tax benefits are consistent is established, thereby avoiding tax law risks and saving cross-border tax costs.
First, Chinese company A set up an investment platform HK company in Hong Kong and injected funds into HK company. Secondly, HK Company established a BVI trust company in BVI and placed the funds in the trust plan of the BVI company. The trust beneficiary was set as HK company and the trustee was set as BVI company. Finally, BVI uses the funds in the trust plan to set up Company B in Country A to undertake the production function of the target raw materials. The basic structure is as follows:
This offshore architecture effectively combines the offshore platform with the trust plan. In addition to the commercial investment advantages of the offshore structure itself, it also has the following three characteristics:
1. Give full play to the pricing advantage of investment companies
Since the target raw materials belong to the buyer’s market in the country A, the HK company can freely and flexibly implement the pricing arrangement when purchasing the raw materials produced by the company B, and can separate the domestic enterprises from the procurement pricing of the HK company, avoiding the price and the domestic tax authorities. Tax supervision of income. Domestic companies can jointly implement raw material purchases with Company B, thereby enhancing the rationality of purchase prices.
2. Covert related investment and transaction information
By placing a two-tier offshore company and a shareholding trust plan between the domestic A company and the company A company, it is possible to effectively conceal the investment relationship between the domestic A company and the company B company. The transactions and arrangements are more free and flexible.
3. Reduce cross-border tax costs when investing exits
The placement of the equity holding trust plan in the offshore structure can conceal the investment relationship between the investor and the investee company. On the other hand, it can simplify and covertly implement the capital operation of the investment exit, thus avoiding the cross-border tax cost. When a domestic A company wants to withdraw its investment in country A, it is not necessary to directly transfer the equity of company B. Instead, the BVI company, the HK company and the intended transferee jointly amend the original equity holding trust plan, and the principal and the After the beneficiary changes to the intended transferee, HK Company then transfers the equity of BVI Company to the intended transferee in Hong Kong, thereby realizing the exit of investment in State A. The above capital operations of BVI and HK companies can be completed with a small amount of tax, thus saving cross-border tax costs.
With the deepening of economic globalization, the offshore structure has become more diversified in the global capital market. Investors from different scales in different fields have become more aware of their knowledge and understanding. Offshore is no longer just an emphasis on tax regulation. The tool, its powerful self-legal protection system, and its perfect capital operation environment have gradually approached the hearts of the public, no longer unfamiliar, and become an essential factor in the overseas greenfield investment structure. It can be said that the establishment of offshore companies has always been one of the most powerful tools for wealth management of high-net-worth individuals. On the basis of tax-saving and risk-avoiding, their wealth appreciation and security are effectively guaranteed. Chinese companies and high net worth individuals should actively seek the help of domestic tax lawyers, rationally plan and use offshore structures to ensure that their overseas investments are protected from commercial and tax risks.
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