Offshore Tax Structures and Foreign Exchange Regulations

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Table of Contents

Introduction
Off Shores Tax Structures
Foreign Exchange Regulations in the International Market
Conclusion
Works Cited

Introduction

According to the research by Ernst & Young (2), the Venezuelan currency has faced a number of challenges in the past few years due to a number of reasons. The currency has been changed a number of times in order to meet the international standards. In 2008, Venezuelan boulevards became the national currency of Venezuela. The Venezuelan Central Bank did this after a careful valuation of the currency, which was done with the help of Bank for International Settlement in 2007 (Ernst & Young 6). However, this move did not stop the volatility of the new currency in the local foreign exchange market. This problem is majorly caused by political factors, especially when Hugo Chavez’s administration devalued the currency in 2013 as a way of managing the country’s budget deficit. It is now time to take this currency to the international market, especially in North and South American. To do this, some structures will need to be understood by the authorities before this currency can be traded internationally. Understanding the existing foreign exchange regulations in these countries, and how to manage them will be very important in ensuring that the move is successful. In this paper, the researcher seeks to determine the offshore tax structures and foreign exchange regulations that will affect the decision to take the Venezuelan boulevards into the international market.

Off Shores Tax Structures

According to Derham (89), the foreign exchange market is unique. It may not be easy to introduce this new Venezuelan currency in the targeted regions of North and South America. Ernst & Young (90) says that to trade this currency in a foreign country, there it will be necessary to engage the brokers and convince them that there is a market for this particular currency. According to Derham (67), foreign exchange trading companies would only stock currencies with considerably high demand. They need currencies that moves fast and can generate the profits they need. The demand for this currency in North and South America is relatively low because of the limited exports from Venezuela to North and South America. However, this does not mean that this currency cannot be traded in the international market. The best way of trading this currency in the international markets is through Venezuelan investors who will trade in these international markets. The government can encourage the local investors to venture into the international Forex market in the targeted regions. This can be done using a number of incentives that will make such investments lucrative. These investors can coordinate closely with Venezuelan exporting companies to create a stable demand for the Venezuelan boulevards. The investors in the foreign exchange market will make the currency available in these international markets, and the exporters will create demand for the currency. This will be one of the best ways of introducing this new currency in the international market.

When these local investors move to the international markets, it is important to consider the issue of taxation. The local investors moving to the international markets will need to find an effective tax structure that will ensure that they remain profitable within this market. The investors will need the services of experienced tax advisors in the specific markets they target in order to ensure that they go for the best alternative. The investors may decide to open Forex broker account in these markets. In this case, they shall pay tax as any other foreign company. Alternatively, they may need to use offshore Forex trading companies in order to avoid the stringent measures put in place by bodies such as the American CFTC on foreign Forex companies. In this second alternative, the investors may not avoid taxation, especially if they want their returns sent to them back home in Venezuela.

Foreign Exchange Regulations in the International Market

When trading in the international market, some regulations will have to be observed by the investors in order to operate legally. According to Derham (39), the United States Commodity Features Trading Commission is the body that sets regulatory procedures that should be followed by all players in the Forex market within the United States. Consumer Protection Act defines how Forex companies should operate within the country in order to protect the interests of consumers (Derham 45). It defines how these companies should set their prices based on the information about the currency market. Retail Foreign Exchange Dealers are bound by low to use the standards set by CFTC to determine the fluctuation rates of a given currency against the world majors. These companies are also prohibited from engaging in financial fraud such as hording some currencies in order to increase their demand. This dubious was of increasing the price of a given currency is illegal in all the countries in North and South America. The prices are expected to be controlled by the market forces.

Conclusion

The Venezuelan boulevard is a relatively new currency that is yet to be popular in the international Forex market. For this currency to be taken to the international Forex market, the government will need to collaborate with the local investors to make this a reality.

Works Cited

Derham, Michael. Politics in Venezuela: Explaining Hugo Chávez. Oxford: P. Lang, 2013. Print.

Ernst & Young. Venezuela considering foreign exchange rates: The Effects of Changes in Foreign Exchange Rates. PDF file. 2014. Web.

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Offshore Tax Structures and Foreign Exchange Regulations

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