Today we will try to shed some light into the mysterious field of providing nominee corporate (and personal) services.

So what is a “nominee service”? And are any such arrangements legal at all?

The basics

Nominee service is acting on someone’s behalf in order to manage his finances or business activities. And all that, without having formal relation with the person. The person who is using the services is often related as to being the “beneficial owner” of the arrangement.

Theoretically, the closest to “nominee services” are the “trust” arrangements, often in forms of foundation (see also https://www.euroformat.eu/bulgarian-foundation). These are used broadly through the world, especially in countries with legal system based on Common law. The difference with the “nominee services” is that the “trust” schemes usually foresee some formal and legally binding agreement with the beneficial owner.

The reasons for using nominee services

There are plenty of legitimate reasons why you would want to use “nominee services”. Below are some of the most important ones.

Circumventing restrictions imposed on citizens of countries with totalitarian regimes

Many countries around the world (ie North Korea) are imposing harsh restrictions on their citizens by denying them certain basic rights. In such cases, a North Korean citizen for example may consider using nominee services in order to conduct business abroad. By entrusting his business to a person (or entity) from another (democratic) country, he can have access to banking facilities, corporate services, etc. Obviously, all legal formalities and compliance in the host country must be fully observed.

Preserving anonymity

Anonymity is important, no matter what we are being told in recent years. Using “nominee services” is probably one of the best ways to preserve your anonymity. Of course, abiding by all legal rules is a must in all cases.

Taxation

Tax optimization used to be the hot ticket in the pre-9/11 era. Now it is one of the most comprehensive legal fields that needs to be approached with extreme caution. Only the most experienced tax lawyers should dare exploring the different legally sound options to optimize one’s tax load.

While using “nominee services” will not legally shift directly your tax responsibility to the tax jurisdiction of the nominee, it can be utilized (with extreme legal compliance in mind) to enhance your taxation options.

Capital protection

This is one of the most important reasons for people from around the world to make use of nominee arrangements. Still, if this is your only reason, we would recommend you using trust (foundation) solutions.

Defying bureaucracy and streamlining business operations – VERY IMPORTANT!

In the years after 9/11, the world took very serious actions against all forms of tax evasion and money laundering activities. We fully appreciate the efforts of all governments around the world and are fully supporting all related initiatives. The imposed regulations however backfired seriously and the world became a much more difficult place to do (legitimate) business.

Due to the over-regulated environment, many banks in Bulgaria for instance, became extremely reluctant to open accounts for foreigners. This has had a catastrophic effect on many foreign businesses in Bulgaria. In our digital, cashless world, no bank account means no business at all. And if you think that Bulgarian banks are the only ones to have such attitude, think again.

In such cases, using “nominee services” is a a life saving option. Fighting the bureaucratic hurdles on your own is like hitting your head against a brick wall.

The burning need for TRUST between the parties

Any nominee services arrangement relies on ultimate trust between the beneficial owner and the service provider. Both parties need to have complete confidence in each other.

The beneficial owner is basically entrusting his assets (or business activities) to the provider.

The provider in turn, takes all the risk (even criminal responsibility) from the actions (rather the orders) of the beneficial owner. For instance, the business services that the nominee provides to the beneficial owner may be not fully compliant with the tax codes. This will ultimately invoke penal responsibility for the nominee – something that should be avoided at all costs.

The cost

Nothing in our world comes for free. Using “nominee services” always comes at a price. For example, in Bulgaria, the social security contributions of all nominees (ie company director) need to be covered. The service provider will definitely add his remuneration on top.

The solution for you?

Based on your business or capital protection needs, the use of “nominee services” may be well justified. Do your calculations. Weight all pros and cons. And see for yourself if you need “nominee services”.

If you do, or if you have any questions, please contact us for further support.

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