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Partnerships

Offshore Limited Partnerships

The trade and business income of a partnership is taxable only to the partners. This fiscal transparency avoids the double taxation consequences, which usually result from trading through a company, when profits may be taxed to the company and dividends out of profits taxed again in the hands of the shareholders.

The offshore limited partnership provides the protection of limited liability by the use of corporate partners and the percentage of profits on which tax is payable can be limited to 5% or less. The limited partner will normally operate an onshore banking account for its purposes but the partnership's main banking account will be an offshore account. For the purposes of this illustration we shall assume that the partnership consists of a United Kingdom company and an offshore company.

The partnership can be used for transactions in both goods and services. Care must be taken as to the manner in which the U.K. company is remunerated for services performed.

The role of the limited partner (i.e. the U.K. company) is restricted to that of performing invoicing and other administrative activities under instruction from the general partner, in accordance with the partnership deed. As remuneration for its services the limited partner is allocated a percentage of profits. The actual amount must be reasonable in relation to the amount of work involved but a figure of the order of 5% is usually acceptable to the tax authorities.

The partnership must be controlled and managed from outside the United Kingdom, i.e. ideally from one of the offshore centres in which the Chesterfield Group is represented.
 

Summary of the benefits of the Partnership:

• Enhancement of commercial credibility as the world at large is effectively dealing with a U.K. company under U.K. law
• Only 5% of the global profits are subject to tax, 95% of the profits escape tax
• The tax authorities of the principals’ home state have comfort that the U.K. authorities have properly checked out and are satisfied with the arrangements, as a U.K. company is involved
• For non-E.U. customers, V.A.T. registration is available (depending on the place of management). E.U. suppliers can zero-rate transactions, avoiding irrecoverable V.A.T.

Setting up the Partnership

The partnership comes into existence on the execution of a partnership agreement. This is the document, which defines the relationship between the parties. A typical partnership agreement will include the following matters:

• The names of the General Partner and the Limited Partner
• The nature of the business of the firm
• The name of the firm
• The date of commencement of business
• The address from which the business will be conducted
• The date of ending of the first financial period
• The constitution of the firm
• Management
• Partners' capital and loans
• Allocation of profits and losses
• Accounts
• Dissolution and Winding Up
• Retirement of a Partner
• Expulsion of a Partner
   

To discover how our Offshore Limited Partnerships can help you please call +353 1 431 9663 or Click Here to contact us.