The importance of the annual offshore company renewal was explained in one of our December articles. The risks and possible sanctions for the non-payment or delay were also analyzed. Let us now compare the annual renewal expenses of offshore companies in different jurisdictions. It is also useful to discuss the timelines and the procedure of the renewal.
Please note: an offshore company registration costs refer only to the first year of its operation. In some rare cases, they cover the second-year maintenance expenses too. To remain active, your business needs annual renewal.
Every offshore business entity must be renewed annually on the date of its incorporation or within a certain period, according to the corporate law of the relevant jurisdiction. If the renewal is not performed, the company needs to be liquidated following a certain procedure. This rule is also relevant to companies that are subject to re-domiciliation to another jurisdiction. Under no circumstances should a commercial entity be abandoned without having completed the necessary legal procedures.
What is the renewal of an active offshore company?
It is very important to carefully check the information submitted by the registered agent for each renewal. All amendments can be made only during the annual renewal process since the state registration authorities have no right to refund the fees paid to the budget, nor can they cancel the annual registration documents.
The annual offshore company renewal means it retains its active status, i.e. the status of a commercial entity with a proper reputation.
The timely renewal will prevent severe penalties and rule out the complete removal of the legal entity from the state register of companies.
Management of the renewal of the active status of your offshore company is normally the concern of your registered agent. In certain circumstances, when for some reason you decide to change your legal representative, it is your task to pay the renewal invoice on time and provide up-to-date information (in case the agent’s non-financial report contains outdated data).
Anyway, you should be aware of the relevant terms of renewal of the active status of the legal entity. The mandatory renewal fee and the price of the agent’s services vary significantly in different jurisdictions.
FREE EXPERT CONSULTATION
on which jurisdiction is best for
your business, preferred tax regime,
on which jurisdiction is best for your business, preferred tax regime, company structure.
The status of an active offshore company suggests its compliance with the following parameters:
- there have been recorded no violations of ethical or legal principles of international business;
- the company has strong and well-established commercial ties and relationships with banks;
- the risk of litigation and potential losses is negligible;
- the company has earned/deserves the trust of potential investors and partners;
- this is a reputable high-profile company recognized for some international accomplishments.
Such a reputation is based on the thorough delivery of the company’s commitments and the dedication of its owner(s) to responsibilities.
The loss of reputation and the non-renewal of the company’s status will unambiguously lead to the refusal of the bank to provide corporate services to such an entity.
A typical annual offshore company renewal involved the following steps:
The customer pays the service fee according to the invoice.
The registered agent in the jurisdiction of incorporation transfers the company’s annual fee.
An agent (usually a licensed legal entity) acts as an intermediary between the local authorities and the company’s registered office.
Some additional documents may be requested for the renewal as some details might need to be amended or updated in the business register.
Please note: the annual renewal procedure differs from the submission of the Good Standing certificate
How much does it cost to perform the annual offshore company renewal?
Unlike incorporation, annual renewals are much cheaper. However, one should beware of dubious proposals offering to arrange the renewal at a too low price. If the company recruits local accountants for compiling financial reports and book-keeping, the cost cannot be cheap by default. If you add the possible costs of a new, larger office (e.g., when expanding the business), the services of nominee directors, and the license/permit renewals, the amount can be quite substantial.
We recommend to contact us if you need to perform the annual offshore company renewal in any jurisdiction. Our team of experts engages only highly professional, proven, and licensed incorporation agents with impressive experience. Our database of office premises for rent includes the most beneficial offers for our clients. Our excellent international reputation as a provider of quality expert services is our well-earned pride.
How much are the annual renewal costs in different registrations?
|Jurisdictions where the IBC, LLC, LP, or other entities are incorporated||Computation of costs||Services included in the package|
|The Bahamas||From USD 5,900, including:USD 1,050 as the state duty for the capital up to USD 50,000 * USD 1,500 for the services of the in-situ agent, office, compliance |
USD 3,000 for the services of the corporate director, president, secretary from USD 350 as office expenses (phone, fax, etc.)
|A full range of services, including bank verification of account signatories.|
|Belize||USD 1,400 (for IBC or LLC)||All IBC companies registered before December 31 must be renewed for the following year – the payment for the renewal must be made between January 1 and July 31. The package includes agent services, the state duty, and the administrative office (domicile)|
|The Bermuda Islands||USD 13,190||The annual renewal fee, the costs of rendering a legal address (office rent), the corporate secretarial services, and bank compliance. The compliance fee is calculated according to the time input and the standard rates and is billed annually in advance. Except for the cases of private practices, the minimum fee must cover the book-keeping and reporting services throughout the year. Please note that we will control the actual time of the services rendered to the Company and will bill you additionally if the time input exceeds the minimum amount.|
|BVI||USD 2,250||The office, an agent’s services, the state duty, the ledger maintenance. In case of a nominee shareholder + USD 1,750 per year, a nominee director + USD 2,400 per year|
|The Cayman Islands||USD 1,500 USD||An agent’s services, the state duty, the office|
|Dominica||from USD 1,500||All companies must be renewed on an annual basis one month prior to the registration date (e.g., if the company is registered July 29, 2020, the renewal must be paid by June 29, 2021)|
|Costs of the office, an agent’s services, compliance, preparation and filing of a brief balance sheet or full accounts with an auditor’s report, CT1 tax return|
|The Isle of Man: With a non-resident director; With a nominee director; A hybrid company|
|Packages can include a different list of services, including nominee services. Provision of a trustee costs EUR 6,500, a council member for the fund – EUR 6,500, a responsible VAT agent EUR 1,200***, the annual compliance fee is EUR 1,700|
|Labuan||EUR 3,050||A tax representative services (EUR 850), audit, depending on the turnover (from EUR 2,200), accounting for 120 transactions per year (additional option on client’s request, from EUR 1,650)|
|The Marshall Islands||USD 1,150||The legal address, a registered agent’s services, the state duty. The partnership renewal fee for LP, GP is USD 2,750|
|Nevis (a trust)||EUR 10,900||All services to the private trust company and the trust|
|St. Lucia||EUR 2,700||The state duty, services of a registered agent, preparation of non-financial annual reports**|
* In the jurisdiction of the Bahamas the state duty for the annual renewal of an offshore company with the authorized capital of USD 50,000 and over is USD 3,750.
**The annual report is a document filed annually with the Registrar’s Office. It shows that the company data is valid and that the business is still active. All legal entities must file a non-financial annual report to stay in good standing. Penalties always apply for a failure to file these documents on time, which is why we charge an annual fee to keep the company active.
***Services of an agent specialized in VAT issues rendered to an offshore company in the Isle of Man do not include the cost of preparing quarterly tax reports. The price of tax reporting by our specialists is EUR 550 per hour.
What are the consequences of the non-renewal or delayed payment of the annual fee?
Having considered in detail how much it costs to renew (renew) an offshore company annually, let’s turn to the possible negative consequences of a company owner’s decision to simply abandon the company. Unfortunately, such a decision to miss the deadline for paying the mandatory state duty is a quite common and very risky violation.
The first immediate adverse consequence of missing the deadline is the negative corporate reputation, although your business will remain registered formally. As a rule, the waiting period is no more than 9 months (it depends on the rules of a particular jurisdiction), then your company will be completely deregistered. During this period, the legal entity receives penalties, the amount of which depends directly on the jurisdiction of incorporation as well as the period of the non-payment. For example:
- the BVI imposes a 10% renewal fee penalty if the delay in payment is up to 2 months;
- the 50% renewal fee fine must be paid to the BVI if you are up to 5 months overdue;
- Seychelles charges a 10% penalty for late payment from 1 to 91 days;
- after 91 days, the penalty for the late payment in Seychelles is 50% of the renewal fee rate;
- Belize charges a minimum of USD100 for 90 days (3 months) overdue;
- 200 USD is the penality charged from an offshore company in Belize if its overdue payment is not covered within 5 months.
Please note: A legal entity that fails to pay the annual fee and penalties is completely removed from the records.
What are the consequences in case of an abandoned offshore company?
A commercial entity in an offshore jurisdiction will be considered abandoned if no state duty has been paid on its behalf. As we have mentioned above, such a company will remain registered for a certain period, but after a set deadline it will be excluded.
The main danger of abandoning a company in this way is that it can only be restored in the next 10 years if all the state duties accumulated for this period, as well as the reinstatement fees, and the accrued fines are paid in full. In such cases, the nominees usually resign and the beneficiaries are appointed as directors. This allows the nominee director to be completely free of other people’s liabilities and debts.
We recommend to be wary of such decisions and always perform the registration, the annual renewal of the offshore company, as well as the liquidation procedures with corporate lawyers. The assistance of a registered agent and an experienced international law expert is essential in such situations.
Please note: An offshore without a good reputation has no right to conduct business, although it is listed in the registry for some time. In most countries, such businesses are qualified as illegal entrepreneurship and fraud.
Having determined how much it costs to renew an offshore company annually, and why we need such updates, let’s say a few words about the mandatory certificate of Good Standing.
The Certificate of good standing is issued by the Registrar of companies in a particular jurisdiction and serves as proof of the proper status and current legal status of the commercial entity. That is, the certificate confirms that the company is alive and active.
One may ask why to pay twice for seemingly the same service? The point is, the annual renewal will not allow you to do business with the banks. The financial institutions require the Certificate of Good Standing on an annual basis. For them, this is an official and reliable confirmation that the legal entity is in the register and fulfills all obligations. The certificate serves as proof of the lack of any signs of the business closure – reorganization, liquidation, bankruptcy, or exclusion from the registrar records.
You are welcome to contact our experts at the e-address given at the top of this page to request professional services and be sure your business is as steady and solid as it should be. Only full adherence to country-specific laws will allow you to build a truly reliable and efficient international corporation.
Why must the renewal of an offshore company be performed annually?
When you establish a legal entity in an offshore jurisdiction, you are entitled to the services of an annual registered agent, a registered office, and timely payment of mandatory fees. After one year of operation, your business needs to be renewed formerly, otherwise, the company will have to pay serious penalties, and if such obligations are not met, it will be removed from the register. Under no circumstances should an offshore company be left abandoned or operate if it has already spoiled its reputation. Such policies are qualified as a fraud.
How much does it cost to renew a company after the first year of operation?
The costs depend on the specific jurisdiction and the services the client needs. The most inexpensive options mentioned in our table given above are for companies incorporated in Belize, the Marshall Islands, Dominica, the Cayman Islands. The annual renewals may involve additional services that include nominee services, compliance, accounting, and financial statement preparation. In such situations, renewal costs will be more expensive. For more information, please refer to our experts. Our e-address is given at the top of this page.
What happens to abandoned companies?
For a certain period, depending on the jurisdiction, the abandoned company will remain on the business register. The period depends on the legislation of a particular country – if the fee is not paid the jurisdiction will impose a certain penalty. Since the moment of the penalty imposed on the company, its reputation is considered dishonored, and therefore it cannot continue its business operation. Otherwise, the actions will be recognized as illegal entrepreneurship. If fines and fees are not paid, the business entity is removed by the Registrar from the Company Register.