Updated
GL-I-06
Glossary · Structures and trusts
IBC - an offshore company that now needs real activity and transparency
01 / In 30 seconds
The short answer
- What it is
- An international business company in an offshore jurisdiction
- The idea of the form
- Simple registration and minimal local reporting
- What has changed
- Economic presence requirements, beneficial ownership registers, automatic exchange
- The main difficulty
- Opening a bank account for such a company has become noticeably harder
- Conclusion
- The form makes sense for a specific task, not as a way to “hide” assets
02 / In plain words
What IBC means
An IBC (international business company) is a form of company common in offshore jurisdictions. Historically it was valued for its simplicity: quick registration, minimal reporting requirements and low or zero local taxation for activity outside the country of registration.
In recent years the picture has changed. Economic presence (substance) requirements, beneficial ownership registers and the automatic exchange of tax information (CRS) have appeared. Banks have sharply tightened their approach: a company without clear activity and a link with the jurisdiction often simply cannot open an account, and existing accounts are closed as part of de-risking.
The practical conclusion is simple. Such a company may be appropriate for a specific commercial task — international trade, holding an asset, a joint project — if it has clear activity and fits into the owner’s overall tax picture. As a tool for “hiding” assets the form does not work: the information is disclosed, and the risks fall on the owner.
A case from practice
A client had a long-standing offshore company with no real activity. In preparing for the programme it became a source of questions: the bank refused an account, and the reviewers asked for the purpose of the structure to be explained. We went through the company’s history and put the documents in order before filing.
Where this form is found
- International trade
- Holding an asset or a vessel
- Partners’ joint projects
- Holding purposes
- Clients’ legacy structures
- Restructuring old ownership
03 / What it covers
What is checked today
Presence
- Substance requirements
- Genuine activity
- A link with the jurisdiction
Disclosure
- The beneficial ownership register
- KYB at the bank
- CRS exchange
Taxes
- CFC rules for the owner
- The company’s tax residence
- Permanent establishment
Bank
- Willingness to open an account
- The risk of closure
- The cost of maintenance
04 / How it works
How to approach such a structure
Define the real task
Why the company: trading, holding an asset, a project.
Check the tax consequences
How the company's income will be treated in the owner's country of residence.
Assess the banking reality
Which bank will open an account and which documents it will request.
Ensure presence and reporting
Substance, accounting and reporting as the jurisdiction requires.
Review it regularly
The structure is reviewed when you move or the rules change.
05 / Key facts
What has changed in recent years
01What it is
An international company
A form used in offshore jurisdictions: quick registration, minimal local reporting, low tax on activity outside the country.
02What has changed
Substance and registers
Economic substance requirements, beneficial ownership registers and CRS exchange have made ownership visible.
03Banking
The main bottleneck
Without clear business activity an account is often refused, and old accounts are closed through de-risking.
04When it makes sense
For a specific purpose
Trading, holding an asset or a joint project, provided the income fits the owner's taxes under CFC rules.
Common mistakes
Treating an offshore company as a way to hide ownership
Assume the beneficial owner is disclosed to the bank and the tax authority.
Registering a company without a banking plan
Before registering, find out which bank will open an account and what it will ask for.
Keeping an old structure after moving
Review the company against the CFC rules of the new country of residence.
Applying to a programme with a dormant company
Explain the structure's purpose with documents before applying, or restructure it.
06 / Expert advice
How to prepare in advance
Start with the question of why the company is needed and what task it serves. Then check three things: the tax consequences for the owner, the presence requirements in the jurisdiction and the bank’s willingness to work with such a structure. If an old structure has been “inherited” from earlier times, it is reviewed before applying to a programme — it is the most common source of questions in due diligence.
What we do for you. Old offshore structures are a common cause of difficulties in due diligence. We examine them in advance: what the company is, why it was set up, which documents explain it. A transparent history removes questions; silence creates them.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
An international business company in an offshore jurisdiction. Historically — simple registration and minimal local reporting.
The form itself is lawful. The question is how it is used: whether there is a real task, whether the presence requirements are met and whether the income is declared in your country of residence.
Economic presence requirements, beneficial ownership registers and the automatic exchange of information have appeared, and banks have tightened their approach to such companies.
It is difficult. The bank will want to see genuine activity, a clear ownership structure and a link with the jurisdiction. This is often the bottleneck of the whole arrangement.
No. Beneficial ownership registers, KYB at the bank and automatic exchange make ownership visible. Counting on opacity no longer works today.
Examine it before applying to the programme: its purpose, documents, reporting. Sometimes it is wiser to restructure or close it than to explain it during the check.
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