Brass plate company

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Corporate tax haven
A brass nameplate

A brass plate company or brass plate trust is a legally constituted company lacking meaningful connection with the location of incorporation. The name is based on a company whose only tangible existence in its jurisdiction of incorporation is the nameplate attached to the wall outside its

corporate tax havens, and offshore financial centres
.

Definitions

In the landmark Inspire Art ruling, the ECJ defined a brass plate company (in an EU context) as being a ".. company (formed under the laws of a member state) which lacks any real connection with the State of formation ...".[2] The ECJ ruled that, with certain caveats, brass plate companies were legitimate in the EU. The ECJ previously used the term letterbox company, in the landmark Centros ruling,[3] in relation to companies using various EU incorporation locations (in a brass plate fashion) to avoid unfavorable local regulations in their home EU location, in conducting their business.

While legally similar (if not identical), the term letterbox company is usually used if the company legally trades with the general public (as per the Centros case) from its location (i.e. appears as the legal address in a catalogue marketing firm), while all other types are called brass plate companies (i.e. private investment firms).

Neither brass plate companies nor letterbox companies should be confused with shell companies. Shell companies can be incorporated in the full "home base" of the main parent company (they don't have to be located in an unconnected foreign location); their key feature is that they have no assets (other than cash, as used in some definitions). A company can be a brass plate shell company (foreign base, no assets), or just a brass plate company (foreign base, many assets), or just a shell company (home base, no assets).

In practice, it is very common for a brass plate companies not to be shell companies; however, many shell companies are often brass plate companies. This is because a very common driver of creating a shell company is often to legally move a business activity to a different location from the "home base".

Etymology

Brass plate company refers to the company's perhaps only tangible existence in its jurisdiction of incorporation: the nameplate (historically, often made of brass) attached to the wall outside the company's registered office.

Controls

While accepted in the EU (from above ECJ rulings), the term brass plate company has become most commonly associated with offshore tax havens (i.e. Cayman Islands, British Virgin Islands etc.)[4] Thus the term brass plate company is often used in the pejorative sense (especially in the media) and associated with undesirable nefarious activities (i.e. tax evasion, money laundering or arms trafficking etc.).

Because of this, more reputable "onshore"

corporate tax havens, and therefore losing access to the global tax treaty networks.[5][6][7]

Regulators in these onshore

tax residency rules that require greater "commercial substance" to occur in the regulator's jurisdiction (also known as the "central management and control" test in UK case law). Typical criteria used include:[8]

  • having a majority of local
    tax resident
    Directors on the Board
  • all the books and records of the company are held in the jurisdiction
  • the audit of the company is carried out by a professional firm in the jurisdiction
  • a minimum number of Board meetings are held each year in the jurisdiction
  • all major decisions regarding the company are made at Board meetings in the jurisdiction

There is a level of scepticism over whether such controls are really effective in controlling brass plate companies. The registered office is often the same office and address of the local professional service firm(s) or

Irish Section 110 SPVs found individual CSP officers acting as "local directors" for hundreds of SPVs, and found little evidence of any substance to the "central management and control" test.[9][10]

Examples

Notable examples of entities accused of using brass plate structures for unsavoury activities include (notice the term "brass plate" being used by the media in the attached references):

See also

References

  1. ^ a b "What is a Corporate Service Provider". Guernsey Register. 2017.
  2. ^ "INSPIRE ART (CASE C-167/01)". European Court of Justice. 30 September 2003.
  3. ^ "CENTROS (CASE C-212/97)". European Court of Justice. 9 March 1999.
  4. ^ "'BRASS PLATE' COMPANIES: WHAT ARE THEY, AND WHAT IS BEING DONE?". Project Alpha, King's College London. 22 July 2013.
  5. ^ "'We don't want brass plate firms that come for tax advantages'". Irish Independent. 24 November 2016.
  6. ^ "Irish Central Bank to resist Brexit 'brass plate' operations in Republic". Irish Times. 4 October 2016.
  7. ^ "Luxembourg denies race to the bottom". The Telegraph. 31 July 2017.
  8. ^ "Company residency rules". Irish Revenue. 22 June 2017.
  9. ^ "Ireland, Global Finance and the Russian Connection" (PDF). Professor Jim Stewart Cillian Doyle. 27 February 2018.
  10. ^ "IMF queries lawyers and bankers on hundreds of IFSC boards". The Irish Times. 30 September 2016.
  11. ^ "The leak of the Panama papers has done the world a huge service". The Independent. 4 April 2016.
  12. ^ "Sensible ways to stop tax evasion". The China Daily. 25 April 2016.
  13. ^ "Apple's lucrative tax loophole". Irish Times. 8 March 2014.
  14. ^ "Noonan to file Apple appeal as MEPs attack Irish tax regime". Irish Independent. 9 November 2016.
  15. ^ "Panama Papers shine a light on Ireland's SPVs". Irish Times. 15 April 2016.
  16. ^ "More than €100bn in Russian money funnelled though Dublin". Irish Times. 4 March 2018.
  17. ^ "How Russian firms funnelled €100bn through Dublin". The Sunday Business Post. 4 March 2018.
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