Global Registration

A Complete Analysis on International Business Company

International Business Company or International Business Corporation is a business model in which a foreign company is exempt from all types of taxes. International Business Company (IBC) as a business model is mostly used for investment or as a vehicle for international trade as they are fully tax exempt in the jurisdiction of incorporation.

Establishing an IBC has the same effect as that of a local company as it can engage in global business and investment activities while taking benefit from tax exemption. IBCs enjoy fewer restrictions and fewer regulations as compared to domestic companies. One major feature of IBC is that it cannot conduct business activity in the country of origin or incorporation.

Functions of International Business Company

The functions of IBCs are identical to that of offshore companies^[1]. The distinguishing feature of between IBCs and Offshore companies is that offshore companies have a wider ambit as compared to IBCs. In simple words, all IBCs are offshore companies however, all offshore companies are not IBCs.

Functions of IBC are as follows:

1. Promotes international trade.
2. Privacy in banking transactions.
3. Minimum embargoes, sanctions and limitations between countries.
4. Operate as special purpose entities.
5. Facilitates asset protection and security.
6. Consolidates intellectual property, licensing and franchising entities.

Advantages of International Business Company

1. Asset Confidentiality
   IBCs shield assets of the company in case of litigation against the company. It protects the company from product liability, malpractices and creditors.
2. Subsidized Tax Rates
   IBCs mostly attract zero taxes however, a nominal tax can be levied depending on the profits. The rate of tax if applicable will range from 0.25% to 3%.
3. Tariff Exemption
   IBCs are exempted from stamp duties and regional corporate taxes. As long as the transactions are carried out beyond the domestic jurisdiction, the IBCs are considered as ghost companies and can evade the general business expenses and keep their profits concealed. As soon as any transaction is conducted in the domestic company, IBC will have to pay taxes and will come under the scrutiny of tax authorities and other governmental authorities.
4. Flexibility in operation
   IBCs have an upper hand in operating any business without restriction whether it be production or trade. This ensures IBCs to carry out business in any corner of the world only with permission to have an office in a particular country.
5. High-end monetary services
   IBCs are business models which can be used as a medium to own rarities, antiques, yachts and other high-value rare items. This makes IBC an ideal choice for wealthy entrepreneurs and businesses to secure their assets, items and fortunes.
6. Instant Formation
   IBCs are easy and very quick to form if the amount required for formation, letters of compliance and one-time return required to be filed are ready. If the licenses and basic registration documents are ready, then the formation of IBC does not take long. The only step which requires some time is when the KYC background check is conducted to verify the owners or people involved.
7. Currency Flexibility
   IBC accounts can store any currency irrespective of the official business currencies of the world. Currency flexibility enables IBCs to retain the integrity of their wealth by not losing its value to stronger currencies and are independent of the fluctuations in the stronger currencies in international market.

Disadvantages of International Business Company

1. Threat of illegal activities
   These companies are prone to threats like cartels, money laundering and rogue businessmen. The local state authorities give flexibility to IBCs to attract business from abroad however, they end up attracting evil businesses due to the anonymity provided by the local state authorities. IBCs have to be vigilant as state authorities do not provide protection or intervention from illegal activities and threats.
2. Flexibility and Dynamism
   The IBCs have the flexibility to operate in whatever field or sector they desire to operate. However, IBCs are restricted from running local businesses or engaging any local officers or agents and evading tax as this is the ground rule for IBC legislation globally.
3. Bound by Law
   Being free from tax liability does not absolve them from the paperwork required to be undertaken for the acquisition of licenses to run the business. These paperworks are standard in every country so IBCs have to reluctantly comply with them. These compliance leave IBCs prone to disclosure and exposure.

Documents required for setting up of an International Business Company

Following are the documents required for setting up of an International Business Company:

1. A business plan stating the object, activities and structure of the IBC.
2. Certified copies of passport, visa and documents/ids for shareholder identification.
3. The Memorandum of Association or any other similar document specifying the name and location of the company, name of shareholders along with details of share distribution.
4. The Article of Association or any other similar document outlining the audit records, shares issued, dividends paid and voting rights.
5. Documents in support of funding and capacity to run the business.
   Fee for incorporation

Procedure for setting up an International Business Company

The procedure may be slightly different in each jurisdiction, however in general the overall procedure is as follows:

1. The International Business Company has to be registered with the regulatory authority of the country by submitting the required documentation.
2. While registration, the business activities along with other requested details are to be provided.
3. Submit any licensing fee, if any.
4. If the authorities are satisfied with the application, then they will approve registration.
5. After approval, the business structure of IBC has to be chosen. The business structure of IBC can be either Sole Proprietorship, Partnership, Limited Liability Company or a Company.

Major ‘IBC friendly’ jurisdictions

There are some countries that have IBC legislation and tax-free policies. IBCs majorly center their business in such countries. A few examples of such countries are as follows:

• British Virgin Island
  This country is one of the legacy countries for IBC legislation however, new laws have been introduced which limit the freedom of such companies.
• Panama
  This country is famous for its secrecy, fluidity and freedom in operating offshore accounts and IBC operations. Panama is immune from British regulations which remove secrecy from banks and corporate books.
• Cayman Islands
  They are not only an exotic destination for holiday goers but also for International Business Companies. One of the major drawbacks of Cayman Islands for IBC destinations is the need to use Cayman Island dollars in the accounts.
• Bahamas
  Among all the attractive IBC destinations, the Bahamas has the most restrictive IBC jurisdiction with proper bifurcation from insurance and banking to operational resources.
• Seychelles
  This country has one of the most attractive IBC legislative regimes in the world and attracts propositions from all over the world due to its high accessibility.

Conclusion

IBC is a business model which brings together like-minded people to an independent society. IBC sets new standards of operations with focus on impeccable quality, professionalism, efficiency and confidentiality. Therefore, it would be wrong to say that IBCs are entities of illegal activities and anomalous owners.

Also Read:
How to Expand into International Business?
International Business Opportunities in India
Understanding Challenges in International Business Environment