How to set up a subsidiary offshore
Under new CFC (Controlled Foreign Corporation) Rules implemented in UK's Finance Bill 2011, upon meeting certain criteria UK Nationals or UK Companies will be able to establish an overseas company and earn up to £200,000 profit, tax free.
This if the overseas subsidiary is established in an offshore financial centre such as Gibraltar where there is zero Corporation Tax liability for Non resident Gibraltar Companies. Corporation Tax is levied at 10% for companies that trade or remit income to Gibraltar.
UK Companies who satisfy the following activities or conditions may be exempt from CFC Rules :
- Intra Group trading activities where there is minimal connection with the UK and little risk that UK profits have been artificially diverted.
- Where the main business of the company involves the exploitation of intellectual property and where there is minimal connection with the UK.
- For a period of 3 years when a UK Group takes over an overseas group where there are a number of overseas companies which have already been established.
- Where there is a genuine commercial reason (motive defense) for using an overseas company where anti tax avoidance is not the motive.