Offshore corporations explained

Offshore corporations under attack

Incorporation strategies for today

Alternative corporate tax havens

Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies. Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies.


• Offshore Company (KFT)
• Little-known, low profile option
• Low tax of 2.7%

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with Michael Isaacson

Just outside of the European Union, there lies another corporate tax haven that the OECD seems to have missed -- Hungary.

Hungary is a home to just over ten million people. The country's capital, Budapest, is a beautiful, ancient city situated on the banks of the river Danube. At the end of the millennium, when Hungary also celebrated a 1,000 years since its founding by King Stephen I, its economy continued to boom, registering a growth in gross domestic product of 5.5%.

Hungary's offshore legislation has been around since 1994. It provides for the incorporation of a low-tax offshore company (KFT).

The share capital for the Hungarian offshore company (KFT) is approximately US$ 7,000. At least half of the authorised capital has to be paid in cash at the time of registration, with the balance to be issued and paid within 365 days.

Interestingly, KFT-companies do not have shares. Instead, quotas representing equity participation are issued to members. The quotas of ownership are registered with the Regional Company Registration Court; using a corporate shareholder or a nominee is therefore necessary to prevent revealing ownership.

While absent from the OECD list of tax havens, Hungary did manage to get itself onto the 2001 FATF NCT list -- the new polite term for the blacklist of "money laundering centres" -- mainly due to the existence of anonymous bank books.

The Hungarians do not seem unduly concerned by the attentions of the FATF and anyone with any sense will see their inclusion for what it is -- ridiculous.

A Hungarian offshore company pays a mere 2.7% effective tax on its profits, and a further 3.25% withholding tax on dividends.

Regrettably, bureaucracy and the rubber stamp still rule in Hungary, although things are increasingly getting better. The actual details are not worth going into here, but the formation of a KFT quickly requires an experienced guide.

Once successfully formed, a Hungarian KFT is a low profile trading vehicle that is unlikely to attract the scrutiny of any suspicious tax spy.


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