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Why Should You Consider Re-Domiciling Your Company?

Company re-domiciliation (or company re-domestication) is the process of transferring your company from one jurisdiction to another. The Latin word ‘domicilium’ means ‘place of residence’ or ‘home place’. Thus, you change the home place of your company then re-domiciling it. When you re-domicile your company, you preserve its corporate structure, its history, its name, and its business connection. Only the legal address is going to change while all other features of the company remain the same.
Re-domiciliation is an option to consider if you would like to move your business operations from one jurisdiction to another. You could liquidate your domestic company and create a new one in a foreign country but setting up a company from scratch has some serious minuses. When a potential business partner of yours sees that your company was registered only a few days ago, he or she is going to think that it has no history behind it and, therefore, no achievements in the business sphere. Consequently, it is going to be difficult for you to win the trust of your potential business partner.
The same holds for potential investors. True, there are venture funds that specialize in financing startups but your newly registered company is not a startup, as a matter of fact. You are bringing your experience, your business contacts, and the capital that you have earned with the help of your domestic company that you liquidated before establishing a new one in a foreign country. Long-standing companies normally have better chances for raising funds as their registration documents reflect their long history of success. When you re-domicile your company, the date of its original registration remains the same.
We must admit, however, that registering a new company in a foreign country is easier than re-domiciling an existing company there. The process is as sophisticated as the words that describe it (re-domiciliation and re-domestication are fancy words indeed). It involves many legal formalities and a large number of conditions need to be satisfied. In some cases, it takes several years to re-domicile a company. If you need professional support in re-domiciling your company, please visit the International Wealth web portal and apply for an expert consultation on the matter.
The process of company re-domiciliation
Before you begin thinking of re-domiciling your company, you have to make sure that re-domiciliation is legal both in the jurisdiction where the company originates from and in the jurisdiction where it wants to move. Only in this case is it possible to re-domicile a company from one country to another. If one of the jurisdictions disallows re-domiciliation, this option is legally unavailable to you.
If both jurisdictions allow it, you can start preparing the documents. You will have to submit the following documents to the Registrar in you company’s new home country:
- Company Registration Certificate.
- Company statutory documents.
- Certificate of Good Standing – you will have to supply evidence that your company is solvent, it is not bankrupt, it is not undergoing liquidation, and it does not have any outstanding debts.
- Registers of company directors and shareholders.
- Documents confirming that the decision to re-domicile the company has been made by the majority of company shareholders with voting rights (such as an AGM resolution, for example).
If you are moving your company to a jurisdiction where a different language is spoken, you may want to change its name. If so, you have to submit the proposed company name to the Registrar. The Registrar will inspect all the documents and register the company at a new legal address.
After that, a re-domiciliation certificate will be issued to you and your company can start working from a new location.
Reasons for re-domiciling your company
Why do people re-domicile their companies? Most often, in an attempt to save on taxes. Different countries tax resident business entities at different rates and you might be able to reduce your tax burden by transferring your company to another jurisdiction.
However, you have to find out every detail about the tax system in the foreign country that you are considering. You don’t want to end up paying more in taxes rather than less after re-domiciling your company to a foreign jurisdiction.
You may also have a personal reason to make the move. For example, you are relocating to a foreign country with your family and you want to keep your company going. In this case, re-domiciliation is certainly an opportunity to consider.
Alternatively, the business-related legislation in your home country may change in a negative way. A new requirement may be introduced, for example, that makes conducting business operations much tougher for you. Or taxes may be raised cutting your profits severely. If this is the case, re-domiciliation can also be a good way out.
You may also want to re-domicile your company if you have found new partners and it would be much more beneficial to work with these partners from another jurisdiction. In some cases, it may be impossible to work with foreign partners from your home country. Today, various sanctions and counter-sanctions make life difficult for many entrepreneurs who have clients or partners in foreign countries.
In general, company re-domiciliation can help lessen the overall tax burden, start working under laxer regulations, gain access to cheaper loans, and bring the operational part of the business closer to the raw materials or to the place where the major company shareholders live.
Difficulties associated with company re-domiciliation
As a rule, business owners thinking or re-domiciling their companies look at offshore jurisdictions in the first place. Such territories offer serious tax incentives to locally registered companies and their reporting requirements are quite simple.
However, with the global de-offshorization efforts, having a company registered in an offshore jurisdiction has become not so lucrative. In particular, most offshore countries have introduced economic substance requirements. Previously, an offshore company did not have to have any physical presence in the country of its domiciliation but now it has to have an office, a secretary, a local company director, and so on.
Saving on taxes is an attractive opportunity without doubt but you have to take the company maintenance costs into account too. We would like to give you a hint at this point. If you are thinking of re-domiciling your company, consider the state of Delaware for this purpose. Not all American states allow re-domiciliation but Delaware does. At the same time, companies registered in the state don’t have to pay any taxes at all if they derive profits from business operations in foreign jurisdictions. Thus, you can have a company registered in the USA (which will look impressive for your business partners) while paying no taxes in the country. Sometimes the business world offers wonderful opportunities indeed!
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