What is an IBC or International Business Corporation?
An IBC is essentially a limited liability corporation.
A limited company that has the same rights and privileges as that of an ordinary limited company. With the prime difference being that they generally are not allowed to do business in the country where they have formed the corporation. They can do business in all other countries of the world which will allow them permission to conduct their business.
Let me expound. They are not allowed to do business in the country they are formed but they are allowed to have their administrative offices there. They just cannot conduct their normal course of business.
Now you say what is the benefit of having an IBC if they have the same rights and responsibilities but cannot operate in the country in which they are formed.
You have the responsibility of paying the normal taxes and adhering to all of the laws of the country in which you are doing business. Therefore you do have to pay income tax there.
The benefit of the IBC is that once you have taken your taxed paid funds or profits out of the country in which you are doing business and repatriate them back into the country where your IBC is resident then the gain you make on those funds are not taxable. As the profits the company makes are not taxable in the country of residence. This may also include something as simple as interest on the deposits you have in the country of residence. Many of these countries do not charge tax on the interest earned. Or capital gains on the assets of the company. One
Assets of the IBC can grow tax-free or with minimal tax once the tax has been paid in the country where the business was conducted and earned then the asset repatriated to the country of the IBC. Depending on the laws of your country of residence and how they govern your activity.
Another major advantage of the IBC:
The inaccessibility of litigators to get at the assets of the company as in many of these countries since there is no income being generated in the country then there is little or no reporting.
Therefore it is difficult for a litigator to determine the true assets of the company. If they do not know the assets they cannot attach leans or charges against the asset.
Further, because the IBC is in a foreign country the cost of litigating such a company is extremely costly.
Does that mean the cost of setting up these companies is expensive?
In a word no. Generally no more expensive than setting one up in your home country.
Another benefit of an IBC is that is generally possible to
Utilize nominee shareholders and directors for the company
Thereby hiding the true identity of the people who own and operate the company.
Adding yet another layer of security for the principals to prevent or at least slow down the potential legal suits which can fall onto not only the companies but the owners of the companies from hungry litigators.
The major decision is if this type of strategy is of any benefit to your situation. Only you can decide that. As we are not giving either tax advice or legal advise merely stating what does exist out there. It is strongly recommended you talk with a reputable and knowledgeable professional who details with these matters as their main course of business. As there can be far too many potential problems for those not thoroughly familiar with the regulations of both your country of residence and the country you may choose to start your International Business Corporation.