Companies are obliged to keep accounting records in all offshore jurisdictions. The documents include Contracts, invoices, receipts, bank statements, ledgers, etc. These documents have to reflect all the financial operations of the company and serve as the basis to compiling financial reports.
These requirements were introduced in the first half of the 2010s when the AML/ CTF campaign became more active. Jurisdictions that violate the requirements face serious fines. Moreover, they can be put on various black lists.
In addition to making financial and accounting records, offshore companies have to keep them for a certain period of time defined in the law. The documents have to be kept at the address that is known to relevant authorities. They have to be submitted for analysis should the need arise.
As a rule, companies are not obliged to keep the financial records in the country of their incorporation – they can be kept in another jurisdiction. If the documents are kept in a foreign country, the registered agent has to be informed about the address where they are kept.
For instance, companies registered in Belize and the BVI can keep the corporate documents at their offices (at their registered agents’ offices) or in other places if such is the decision of the Board of Directors. In the latter case, the registered agent has to have a written document where the storage address is indicated. Besides, the company owners have to supply the corporate documents at the agent’s request, in accordance with the legislation.
Serious changes have taken place in Seychelles, as far as the matter is concerned. Beginning 2021, corporate records for the last 7 years have to be kept at the registered agent’s office. In other words, the agent has to have direct access to the documents. The corporate records have to be passed to the registered agent every 6 months. Electronic versions of the documents are allowed.
Here we provide only brief information about the record keeping and reporting requirements applied in offshore jurisdictions. If you would like more details concerning the matters, please contact the International Wealth team as they have expert knowledge of all the requirements.
Reporting requirements in offshore jurisdictions
Lack of necessity to submit financial reports has always been an important benefit that offshore jurisdictions offer. This allows reducing the company maintenance costs by saving on accountants and auditors. Besides, the financial flows have been highly confidential: only the banks know about them. It has also been impossible to get hold of the corporate records without a court decision and banking privacy has guaranteed that the company’s financial information remains secret. However, the situation in this area has also been changing.
Reporting requirements in Belize
Belizean-registered companies including former IBCs now have to attach financial reports to the tax declarations that they file. As a rule, the financial reports do not have to be audited but the tax authorities of Belize have the right to request an audit in special cases. In particular, if the annual income of a company exceeds USD 6 million, its records may be audited.
Reporting requirements in Seychelles
Seychelles-based IBCs do not have to file financial reports nor conduct audits if they do not earn any income in the jurisdiction. If a locally-registered company does not do any business in Seychelles and it is not a holding company or a ‘large’ company (with a turnover that does not exceed SCR 50 million or USD 3.8 million), it does not have to file a detailed financial report. All it has to submit is a Financial Summary consisting of the Balance Sheet and Profit and Loss Statement. These requirements can be referred to as simplified reporting requirements because no detailed reports nor audits are required. The records have to be kept in a registered office in Seychelles.
Reporting requirements in the BVI
In addition to the obligation to keep financial records, companies registered in the British Virgin Islands have to submit annual financial reports to their registered agents. The requirement was introduced in 2023. The annual financial report consists of the Balance Sheet and the Profit and Loss Statement. No auditing is required.
Companies registered in the BVI have to submit annual financial reports to their registered agents within 9 months after the end of the financial year. If the agent does not have the report for 30 days after the deadline, he or she has to inform the Register about the fact.
The information in the annual report is not going to become public. Neither is the agent obliged to share the reports with any Government bodies. An exception from this rule may be a court decision that obliges the agent to do this.
Company directors, shareholders, and UBOs: confidentiality of their personal information
Personal information confidentiality protection available in offshore jurisdictions has always been one of the benefits that many international entrepreneurs appreciate very much. This is the reason why there is often an offshore company at the end of the corporate ownership chain. Information about offshore company directors/ shareholders/ beneficial owners can be disclosed only in exceptional cases and only on a court decision.
The key tendency of the recent years, however, has been enhancement of transparency of corporate information. This is in keeping with the international efforts against tax evasion and the increase of the fiscal information exchange. Within only a few years, all offshore jurisdictions have become members of the Convention on Mutual Administrative Assistance in Tax Matters. Besides, they have made dozens of Tax Information Exchange Agreements.
Today, every company has to have registers of directors, shareholders, and beneficial owners. These are internal documents – they are not available to the public. The information that the registers contain is available only to the registered agent, the intermediary (such as a legal or an audit firm), and the bank. Disclosure of this information is possible only on an official request from an authorized Government body or on a court decision.
Some offshore jurisdictions (such as Cayman Islands, BVI, Seychelles, Bermuda, Crown Dependencies of the United Kingdom) are creating centralized registers of company UBOs following the example of the European Union countries. Some jurisdictions are considering the opportunity to make the registers open to the public in the future.
Taking the recent changes into consideration, one has to admit that secrecy of corporate information is not what you could expect from offshore jurisdictions today. At the same time, this fact should not bother a law-abiding entrepreneur who is not looking to evade taxes.
