Why Incorporate Offshore – An overview of the benefits of Offshore
Incorporation
Most business people have
heard about offshore companies. However, very few are aware of what these
companies are used for and how they differ from other more common corporate
entities. In this article, we will introduce the key concepts related to
offshore companies and outline some of their unique benefits.
First and foremost, it is essential to define the term ‘offshore’. Offshore relates to managing, registering, conducting, or operating in a foreign country, often with financial, legal and tax benefits. Offshore Company is then a company incorporated for the purpose of operating outside the country of its registration and/or the place of residence of its directors, shareholders and beneficial owners.
An offshore company has
three main features:
Firstly that the company
should be registered within the jurisdiction of incorporation; secondly, the
incorporator(s) need to reside outside the jurisdiction of incorporation and
finally, the company should also operate outside the jurisdiction of
incorporation at all times.
Again, this is typically
pursued to realize various financial, legal or tax benefits. Most of legitimate
uses of offshore companies are: international trading, asset protection,
holding company, captive insurance, ship management & yacht registration,
and legal tax avoidance, protection of intellectual property, succession
planning or confidentiality.
Benefits of incorporating offshore
By utilizing an offshore company,
it may be possible to secure a number of advantages. The motivations for individuals and corporations to utilize
offshore planning and offshore companies include the desire to:
1.Low Taxation: Most offshore companies pay no local
taxes on the income derived from offshore operations, i.e. from activities
outside of the jurisdiction of company formation. These offshore companies
include Belize IBC, Seychelles IBC, BVI BC and others.
2.Anonymity: The majority of people who
incorporate offshore companies have no intention to engage in any trading
whatsoever; rather, they use offshore companies simply to shield private assets
from third parties.
Registrars in most
offshore jurisdictions do not disclose information about directors,
shareholders and beneficiaries of offshore IBC companies. Thus, the underlying
principal may carry out all relevant transactions in the name of an offshore
company while remaining anonymous. It is important to note that this applies to
legitimate operations only.
Thus an offshore company
is able to own any assets that an individual can -- cash, securities, real
estate and others. At the same time, however, the identity of the owner of the
company itself can be protected by offshore legislation or even remain
completely anonymous. This enables the individual to retain control over
his/her assets yet makes it impossible for third parties to link the assets in
question to the ultimate beneficial owner.
Whatever the actual
degree of privacy/anonymity offered by a particular offshore arrangement, it is
a fact that assets held in the name of the individual's offshore company, in an
offshore jurisdiction, are far more lawsuit-resistant than assets held by the
individual in his home jurisdiction.
3. Asset protection: In addition to putting assets beyond the reach of potential litigants, investments made through an offshore company which usually avoid being subjected to tax on investment income ultimately protect our assets and wealth. In the international business context, it is usually the laws of the jurisdiction of incorporation that are applied, rather than those, where the company is being sued. Many offshore jurisdictions are renowned for their favorable asset protection laws complementing an offshore company with offshore banking facilities and thereby protect company’s assets even further.
Indeed, offshore
companies are often utilised by people who are restricted by their local
legislation from participating in certain overseas investment opportunities.
Holding overseas real
estate is another popular application of an offshore company whereby wealth
protection is attained. It allows individuals to avoid inheritance tax, capital
gains tax and death duties. The process of sale of property is simplified as
there is no need to transfer property title; instead, sale is achieved by the
transfer of shares in the offshore company, thus saving time and money on legal
and transfer fees.
4. Ease of Reporting: The compliance reporting requirements
for offshore companies are limited, especially in comparison to companies,
registered in onshore jurisdictions. Most offshore IBC companies are not
required to file annual reports and accounts in the jurisdiction of the company
formation. Instead, local authorities charge a flat annual licence fee, which
is insignificant in comparison to reporting expenses and taxes in onshore
jurisdictions.
5. Operating Costs and Fees: With limited reporting requirements, offshore companies generally have lower maintenance and operating fees. The cost of compliance, preparation of accounts and auditing in on-shore countries is often considerable while offshore companies save on these particular expenses.
6. Lower capital requirement: Registering an offshore
company will require minimal capital, usually less than what is required for an
onshore registration. In certain jurisdictions there is in fact no capital
needed for registration.
7. International
Trading: By interposing
offshore companies into international trading transactions, it may be possible
to accumulate profits arising out of these transactions.The offshore company will handle purchases and sales operations,
taking advantage of the fact that its profit will not be taxed, or only at a
low level, depending on the jurisdiction.
8. Wealth
Protection: High net worth
individuals save on professional fees by using offshore companies as Personal
Holding Companies.
9. Holding
Property or Fixed Asset: Offshore
companies are regularly utilized to own property and real estate. In
addition to confidentiality, the benefits and advantages they offer include
exemption from certain types of taxes (e.g. inheritance tax).
10. Holding Company
Stock, Bond and Cash: Cash assets are
held offshore, and may earn deposit interest with no tax. Offshore
companies are very often used for share or foreign exchange transactions. The main reasons being the anonymous nature of the transaction
(the account can be opened under a company name) and little or no tax levied on
profits made.
11. Holding
Investments in Subsidiary Companies: Capital gains
arising from the disposal of particular investments can be made without
taxation. In the case of dividend payments, lower withholding taxes can be
achieved through the use of a company incorporated in a zero or low tax
jurisdiction that has double tax agreements with the contracting state.
12. Utilizing
Double Taxation Treaties through Intermediary Holding Companies: Companies wishing to invest in countries
where a double tax agreement does not exist between both countries can
establish an intermediary company in a jurisdiction where there is a suitable
treaty.
13. Holding Patent,
Royalty and Copyright: Intellectual
property including patents, trademarks and copyrights, can be owned by, or
assigned to, an offshore company upon acquisition of the rights. The rights can then be franchised to companies around the world
and the resultant income can be accumulated offshore.
14. Personal
Service Companies: Individuals who
provide professional services, such as consultants, entertainers, aviators,
film executives etc., can realize considerable savings where fees earned are
accumulated tax free in Personal Service Companies based offshore. Payments may
also be structured to minimize income tax.
15. E-Commerce: Internet traders can use an offshore
company to maintain a domain name and to manage internet sites. People
whose business is on the internet might choose to incorporate the registered
office of your company in an offshore jurisdiction to take advantage of the
various benefits offered by these jurisdictions.
16. Simplicity and
Reporting:
Except for regulated businesses, such as banks or
other financial institutions, some jurisdictions make it relatively simple to
set up.
Offshore companies are easier to maintain especially with
reference to lesser reporting requirements than so-called onshore jurisdictions
- the level of information required by the registrar of companies varies from
jurisdiction to jurisdiction. Offshore company deregistration can be simple and inexpensive.
Offshore Jurisdictions
Several countries and
territories have been designated Offshore
Financial Centres by notable institutions namely, the International
Monetary Fund (IMF) the Financial Secrecy
Index (managed by the Tax Justice Network) and the Organization for Economic Co-operation and
Development (OECD).
Although there are a wide
variety of offshore financial centres and tax havens, we currently recommend
the following locations for offshore company formation from the UK & Europe
1 BVI
2 Bahamas
3 Guernsey
4 Jersey
5 Belize
6 Nevis
7 Panama
8 Delaware
9 Gibraltar
10 Seychelles
11 Isle of Man
12 Dubai
13 RAK
14 Hong Kong
15 Singapore
16 Cayman Islands
17 India
Global Company Formation UK Ltd
Suit 6-Westward House
Glebeland Road
Camberley
Surrey, GU15 3DB
Tel: 02079935929
E
: lekshmirajan@globalcompanyformation.co.uk
W :www.globalcompanyformation.co.uk
Welcome to Pearl Business Start up
We
offer formation advice to start up business globally. We advise you of the mode
of start up like limited company, partnership, sole trader, trust and which is
more suitable to your business. Our professional team consists of Lawyers,
Chartered Accountants & Business Consultants in all major jurisdictions
across the globe.
We guide you to
the country of formation on the basis your domicile status, double taxation
agreement, international plan and repatriation rule of the each country. Now
you can form your business anywhere in the world with us and we care your
business.
Mathew Stephen is the founder Director of
Global Accountancy Services. He isa qualified accountant from the Association
of International Accountants in the UK and the Institute of Chartered
Accountants of India. He is also one of the partners of international Chartered
Accountants firm P. Parikh & Associates. He has 20 years’ experience in
accounts, business consultancy, taxation & statutory audit. He is also a UK
Independent Financial Advisor (IFA) and CeFA qualified at the IFS School of
Finance.
He has won the Online Technology Award in two
consecutive years, 2011 and 2012, from the Tenet Network. He specialises in
Global Company Formation, International Taxation and also as Corporate
Protection Advisor to the directors of Limited Companies.
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