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BlauStein: Interesting Facts
Self-financing Through a Bank
Capital accrued in the offshore company’s accounts can be used for financing activities in countries with high tax. For this purpose, a specially selected respectable European bank gives the company a back-to-back loan secured against funds in the offshore company’s account. Payment of interest on the loan reduces the taxable base of the company.
The bank, which gives a loan, is always located in a country with a Double Taxation Avoidance Agreement with the country of the company’s residence. In this way, loss from interest payments to the foreign bank will be reduced to zero. The bank returns the received interest to the offshore company minus a commission charge.
Financial credit documents can be used as well as bond security. As a result the company obtains turnover means while the offshore company continues to receive investment income.