The New Reality

The landscape for international holding structures has transformed dramatically over the past decade. Global initiatives including the OECD's Base Erosion and Profit Shifting (BEPS) project, Common Reporting Standard (CRS), and the recent Pillar Two minimum tax have fundamentally altered the calculus for offshore structuring.

Yet reports of the death of offshore planning are greatly exaggerated. While the era of shell companies designed purely for tax avoidance has ended, legitimate structures serving genuine business purposes remain viable and valuable—provided they are properly designed and maintained.

"The question is no longer 'how can we minimize tax?' but rather 'how can we structure our global operations efficiently while maintaining full compliance?'"

Regulatory Changes

Understanding the regulatory environment is essential for proper structure design.

OECD Pillar Two

The 15% global minimum tax has significant implications:

  • Top-up tax eliminates benefit of ultra-low tax jurisdictions
  • Qualified domestic minimum tax keeps revenue onshore
  • Carve-outs for substance-based income remain valuable
  • Transition rules affect existing structures differently

Transparency Requirements

Information exchange has become the global norm:

  1. CRS covers 100+ jurisdictions with automatic information exchange
  2. Beneficial ownership registries increasingly public
  3. DAC6/MDR requiring disclosure of arrangements
  4. Country-by-country reporting for multinationals

Substance Requirements

Economic substance has become the cornerstone of compliant offshore structuring.

Core Requirements

Genuine substance typically includes:

  • Decision-making occurring in the jurisdiction
  • Physical presence with adequate office facilities
  • Qualified personnel proportionate to activities
  • Expenditure appropriate for business conducted

Documentation Standards

Proper documentation is essential to demonstrate substance:

  1. Board minutes reflecting local decision-making
  2. Employment records for local staff
  3. Lease agreements and utility bills
  4. Functional analysis supporting profit attribution

Jurisdiction Analysis

Different jurisdictions offer varying advantages in the new environment.

Traditional Centers

Established offshore centers have adapted:

  • Channel Islands—Strong substance capabilities, UK treaty access
  • Luxembourg—Sophisticated holding company regime, EU member
  • Singapore—Asian hub with extensive treaty network
  • UAE—Emerging center with zero corporate tax (subject to BEPS)

Onshore Alternatives

Some onshore jurisdictions offer competitive advantages:

  1. Delaware LLCs for U.S.-connected structures
  2. Dutch cooperatives for European holdings
  3. UK for intellectual property regimes
  4. Ireland for EMEA headquarters

Updated Strategies

Modern offshore planning emphasizes genuine business purpose and proper implementation.

Legitimate Purposes

Structures remain valuable for non-tax objectives:

  • Asset protection from creditors and claims
  • Estate planning for multi-jurisdictional families
  • Business operations in international markets
  • Investment pooling for fund structures

Implementation Best Practices

Successful structures require disciplined implementation:

  1. Clear business purpose documented from inception
  2. Substance proportionate to functions and risks
  3. Proper transfer pricing supporting profit allocation
  4. Regular compliance reviews and updates

Key Takeaways

Offshore structures remain viable when properly designed for legitimate purposes with adequate substance.

  1. Purpose matters—genuine business reasons are essential
  2. Substance is critical—proportionate presence and decision-making required
  3. Transparency expected—assume all information will be shared
  4. Jurisdiction selection depends on specific objectives and connections
  5. Regular review ensures ongoing compliance with changing rules
  6. Expert guidance essential for complex cross-border structures

At Beekman Strategic, we help clients design and maintain compliant international structures that achieve legitimate business objectives. Contact us to discuss your structuring needs.