Module IV·Article III·~1 min read
Offshore Structures: Legal Nature and Regulation
Private International Law
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What is an Offshore Jurisdiction
An offshore jurisdiction is a territory offering preferential tax regimes and simplified regulation for non-resident companies. Classic offshore centers: British Virgin Islands (BVI), Cayman Islands, Jersey, Guernsey, Panama, Seychelles.
Legal Functions of Offshore Structures
Holding company — ownership of shares in operating companies. A BVI holding company is often used to structure Russian businesses for attracting Western PE/VC.
Investment funds — Cayman Islands is the largest center for the establishment of hedge funds and PE funds.
Special project companies — SPV (Special Purpose Vehicle) for securitization, project financing.
Asset protection — trusts in Jersey/Guernsey for the protection of wealthy individuals.
International Regulation: BEPS and CFC
BEPS (Base Erosion and Profit Shifting) — OECD's plan to combat the erosion of the tax base. 15 actions, including: minimum corporate tax of 15% (Pillar Two), requirements for “economic presence” (substance), exchange of tax information.
CFC (Controlled Foreign Companies) — Russian rules: if a Russian resident controls a foreign company, the undistributed profit of the CFC is included in their Russian tax base. Exception: active companies in “white” jurisdictions.
Practical Assignment
You are assisting a client in structuring a family business (a trading company in Russia, annual income of 500 million rubles). The client wants: (1) to optimize their tax burden, (2) to protect assets from raiders, (3) to prepare for a possible sale to a strategic investor. Propose a structure taking into account Russian CFC rules and international transparency.
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