Is owning an offshore company legal or not?

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Whenever an investigation based on leaked offshore company documents is made public, a question always arises: is having an offshore company legal or illegal? This question is relevant and deserves an answer.

Just owning an offshore company is not illegal anywhere. In Pakistan, for example, the law requires owners of such entities to report them to the tax authorities and to the Securities and Exchange Commission of Pakistan (SECP). Once done, there should be no legal implications unless a false statement of facts is detected in the statement. Ask any businessman, and he / she will explain to you that sometimes the offshore structure is useful to speed up their international projects. Their argument is not without merit.

In the Pandora Papers, we met several businessmen who, when contacted for offshore issues, were quite willing to explain their part of the story. Of course, no one can give someone a good blow just because he or she has been so forthright; any authorization is subject to verification by the competent authorities.

However, getting to know these people was an interesting experience. On the other hand, we also met those whose business practices seemed shady at times, and some of them are known for their financial improbability. Like the other group, they too have set up offshore structures. Before we discuss the positive and negative examples that we have found in the files, it is important to understand what these entities are often used for.

The first relatively plausible explanation offered for using the offshore road is that these companies are quick to set up and easy to operate. Adnan Afridi, Managing Director of the National Investment Trust, had an offshore company, Veritas Advisory Services Ltd, registered in the British Virgin Islands. When asked about the reason for owning such a company, he said he urgently needed it in 2011 “for an urgent international strategy consultancy offer” and that it took him a few minutes to purchase a readily incorporated legal entity. for Rs7,500. He wrote off the company in 2017, according to him.

Another reason given by Pakistani businessmen to justify setting up offshore companies is that, with the Pakistani economy being largely undocumented, red tape is everywhere, making it difficult for businesses to run smoothly. There is an incentive to evade taxes instead of paying them. Things are made difficult for those who want to comply with the laws. Hence, many people opt for such structures where ease of doing business is promised. In our experience, we have seen businessmen who seem to be very transparent and keen to share details when approached.

Khalid Adamjee of the Adamjee group is one example. When contacted about his overseas assets (Catio Trust and Creek Resources Limited), he not only stated that they were declared in Pakistan, but he also shared his wealth statement to prove this fact. . Resident of Singapore, he is involved in the international trade of commodities, he said, and therefore he needed such a structure to buy and source on a global scale.

Syed Sheharyar Ali of the Treet Corporation was offended at being questioned – but for good reason. He was asked about the C&A Trust registered in Singapore. His aunt is the settlor of the trust and he is one of the beneficiaries. He said it must have been stated by her. More importantly is what he said next: “Considering our family history and our heritage, I find it insulting that you even imply tax evasion or such activity on our part. “

However, in the same data, we found people with questionable reputations who were allowed to register businesses. Shoaib Sheikh of the fake diploma operation is an example. Axact, his company used for this purpose, was controlled by an offshore entity, Outreach Global, registered in the British Virgin Islands. It continued to exist even after the fake diploma scandal made international headlines. At no time did the BVI administration exercise due diligence. Bank accounts have been opened in the name of Outreach Global to extort money from international clients for fake diplomas.

Bashir Dawood is another example. In the Pandora Papers he was found, along with his wife, the owner of three offshore companies: Green Ethics Ltd, S. Minor Investments Ltd and Garden Investments Ltd. Previously, his name appeared in the Panama Papers. The Federal Board of Revenue made the highest recovery in history against him in a money laundering case for which he used an offshore company.

In 2016 Ardutch BV, a Turkish company, acquired three companies from Bashir Dawood: United Refrigeration (Pvt) Ltd, Dawlance (Pvt) Ltd and Dawlance Electronics (Pvt) Ltd. The first two were acquired directly and the last via a BVI. company, Pan Asia Equity Limited in order to underestimate the actual amount of proceeds. Despite its shady purpose, the business was still established. FBR recovered him a sum of Rs6.2 billion in terms of tax which he evaded.

Ahsan Latif, son-in-law of former NAB chairman Lt. General (ret’d) Khalid Maqbool, used a BVI company to import LPG from Russia. The company, Dylan Capital Limited, was formed for overseas real estate investment but has been diverted to another business. He used it to import LPG from Russian company Vacus Oil in 2009.

“In order to maintain competitiveness in the market, we don’t want to reveal the name of the supplier in Pakistan,” Ahsan wrote in an email to the service provider. But that’s not the point. What he wrote further suggested that the profits were kept overseas while the import was in Pakistan, thus increasing the country’s import bill, as a 2009 email shows:

“As additional information, we are also working to obtain the exclusive rights to market products from suppliers in the region. To this end, Synergy Resources (Pvt) Ltd intends to open the L / C in favor of Dylan and Dylan and will then open a back-to-back L / C in favor of the supplier. The difference between the L / C value of Synergy Resources (Pvt) Ltd and Dylan will be retained by Dylan as profits which can then be used as investments.

Ahsan received questions about the activities of his offshore companies, but he did not respond.

Naveed Moghees Sheikh, who belongs to one of the richest families in Pakistan, used the offshore road to park the proceeds of the candy he sold in Pakistan. He set up a company, Blue Monk Investments Inc. in the British Virgin Islands, to operate an account at Bank Julius Baer in Geneva “to park the proceeds from the sale of shares of Imperial Sugar Ltd to a large group of Middle Eastern companies. . The sale resulted in $ 40.5 million which was to be received in the company’s bank account, ”reads a Pandora Papers file. Naveed did not respond to questions sent to him to give his point of view

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