Starting an offshore company for business development goals is a well-established legal and legitimate strategy of many corporations and smaller entities, whatever the malicious media would make you believe.
To protect and grow assets internationally, secure the future wellbeing of heirs, expand business operations across the world, enhance privacy and security, get more affordable access to quality workforce and infrastructure – these and other incentives drive investors and business owners to eventually open offshore companies, subsidiaries, or offices where they would be encouraged and supported.
As a rule, such decisions are taken by persons with tax residency in onshore countries, who consider offshore jurisdictions as providers of flexible and sufficient regulations, more competitive financial and business services, better guarantees of property/capital protection from adverse economic and political trends, benign taxation regime, and other virtues.
A popular question is whether it is better to create a new offshore company or buy a ready-made company in an offshore jurisdiction?
Let us look at the key differences between the two possible solutions, as well as the main privileges of running offshore entities as a legal key to your business success.
The Legal Use of an Offshore Company for Business Purposes
At the moment over 60 countries provide exclusive yet cost-effective solutions for international business development.
The incentives offered by tax havens to foreign investors are impressive. Your young business entity will get entitled to significantly lower or zero taxation in an offshore jurisdiction.
However, there is much more to offshores that mere tax saving.
Offshore jurisdictions are aware of the variety of new companies’ business objectives and needs, which they consider in designing new incentives. A recent study has revealed that among the most popular reasons for going offshore/abroad are the following ones:
- The transfer of the inherited property in the new owner’s name (better service) – 7.9%.
- Financial and individual privacy (peace of mind) – 73.6%.
- Assets protection (investment opportunities)- 86.4%.
- Tax saving purposes (cost savings) – 57.9%.
As we see, starting an offshore company for business tax planning purposes is only one of many reasons. Whatever your citizenship, residency, and intentions are, you have the right to open an offshore company.
Unfortunately, the mass media have created a heavily distorted picture of the allegedly unlimited cost-saving appetite of classic offshore companies, the tax exemption ploys, fake news, and misinterpreted international scandals.
The truth is, you have the right to legally register and use an offshore entity and its assets for any business goals unless you comply with the due diligence norms, taxation rules, and declare your income when required.
Please note: our experts and services are not available to clients who need to open an offshore company to conceal illegal proceeds or money laundering.
We work only with legal businesses. Likewise, we recommend our clients only lawful solutions, including the exceptionally legitimate avoidance of high tax payments and high operating costs.
Our design of offshore business plans and recommendations is always customized and takes into account the actual needs of our clients and their business aspirations.
Some Immediate Advantages of Offshore Companies’ Registration.
First, there is an unlimited variety of business entities that can be registered in an offshore zone. In most cases, foreign investors prefer some of the following most popular options:
- holding companies with IP rights;
- marketing firms;
- real estate companies;
- investment and charitable foundations;
- outsourcing firms;
- financial institutions;
- banking institutions;
- the postal and insurance business;
- forex brokers and traders;
- e-commerce and IT companies;
- legal authorities and solicitors dealing with wills and estates.
Second, it is much cheaper to open a company in an offshore country than, say, in an onshore state in the EU or the United States. This is another advantage of offshore companies as a profitable and efficient business tool.
Moreover, their annual maintenance costs are minimal. Offshore firms pay only a fixed fee for the license in the jurisdiction of their registration. Additional costs include an agent’s services, office expenses, and nominees’ fees.
Besides, an offshore company can obtain all the necessary certificates for its business needs.
Furthermore, an offshore company does not have to submit financial statements and conduct audits (if it is an IBC incorporated without tax residency in the offshore jurisdiction).
Regulation of an Offshore Company’s Business Operation
The offshore market is not a domain of only multinational conglomerates and business corporations. It works similar to the onshore markets and involves companies of different sizes and values. The main difference is the low tax liabilities stipulated for offshore businesses and the absence of currency controls, which means that an offshore company has the freedom to move any amounts of capital.
Offshore entities become part of the system safekeeping the security, protection, and recognition of human rights. That is why many investors and businessmen resort to offshore registration of their companies in such places as, for example, Belize and Nevis, i.e. jurisdictions that are famous for the most effective legal system of protection of foreign investors’ interests.
Regulations promoted by the OECD and FATF for years have led to global shifts in the offshore business landscape and legislation. However, along with the extension and deepening of restrictions stipulated for offshore jurisdictions, the well-known financial centers (formerly called ‘tax havens’) have received strong support for their financial sector.
Legal Structures of Offshore Companies
In light of recent events and growing constraints, there can be no one-size-fits-all business solution for offshore company planning. Our experts observe an increasingly popular current trend: an effective entity is more likely to include several offshore companies, often scattered across several jurisdictions. Such an approach allows the following objectives:
- to merge organizations into a single structure entitled to the most favorable taxation regime (e.g., a Nevis company with a trust in Belize);
- to create a multi-level business entity with enhanced confidentiality protection (in the above example, the name of the ultimate owner is not mentioned twice in the registration documents);
- to legally use the new tax laws concerning international corporations as recommended by the OECD;
- to rule out a necessity for offshore companies’ preparation of financial statements and engagement of certified auditors;
- to find a jurisdiction that does not participate in the international exchange of tax data;
- to merge trusts and foundations using a third-party candidate (nominee) as director and shareholder (thus raising the additional level of protection and anonymity).
The decision to create an offshore company is often associated with the desire to protect one’s assets and oneself against aggressive competitors and even illegal takeovers by relatives of high-ranking officials. Registration of two or more companies in different jurisdictions provides for a higher degree of confidentiality and protection. In such situations, it is quite unlikely that unscrupulous creditors and competitors can bypass all the regulatory laws of these jurisdictions and grab or destroy your business by enforcing foreign court decisions.
By separating the ultimate beneficiary’s data and assets from the corporate data and liability the founders protect the ultimate owners’ interests and peace of mind despite all possible attacks from creditors and other abusers. Any legal entity, whether a corporation, limited liability company, or international company, separates itself from its ultimate owners in terms of business assets and liability.
When choosing an offshore jurisdiction, the following factors should be taken into account:
- the amount of bureaucracy associated with the company incorporation;
- general characteristics and requirements for incorporation of legal entities;
- the flexibility of corporate law;
- requirements, or lack thereof, to be fulfilled to acquire tax residency;
- standards for the creation of legal business structures;
- operational characteristics.
For example, such offshore jurisdictions as Nevis, Belize, Panama have simplified the terms and requirements set for international business companies. Doing business in these jurisdictions is convenient and easy, due to many incentives, including the availability of advanced financial sector and increased opportunities to protect one’s data and property.
How to Open an Offshore Company to Reduce the Tax Burden?
An offshore company with an account can be created from scratch or purchased as a ready-made entity. Registered companies, as a rule, are freely available for sale. All offers can be requested from the registered agents in a particular jurisdiction. Let us repeat it again here: it would not be possible for a foreign or local resident to create or buy such a business without the help of registered agents.
Please note: acquisition of an offshore company involves certain risks. There have been recorded cases of fraud when the shelf offshore companies were sold without necessary documents, with financial burdens and other problems.
What can be done to prevent scams? First of all, we advise you to reject suspiciously cheap offers. The second recommendation is to change the bank account signatories. If you buy a ready-made offshore company with an account, you will have to go through a full customer due diligence procedure all the same, as banking institutions are required to conduct compliance according to the same rules as when opening regular corporate accounts.
If you are faced with the question of what is better – the purchase of a ready-made offshore business or the creation of a new offshore company, you should consider the following observations:
1. The new legal entity may be given a name that suits you best and be incorporated on the desired date of registration.
2. If you acquire a ready-made firm, all changes need to be made through a registered agent.
3. A proven out-of-the-box solution is a firm with a certain history and often an established client base.
4. When you incorporate a new organization, you can draw up the Articles of Incorporation for any legal structure type and any business activity.
Please note that the fiscal burden can be reduced through ownership of an offshore company (which many foreign investors from onshore countries aspire to).
While it is not always easy or not quite desirable to change the residency of the business owners, it is quite feasible to use an offshore company for the successful business start-up, recovery, or development.
However, the task of reducing taxes involves the following legal aspects and actions:
- The maximum effect of tax planning can be achieved through offshore banking or brokerage accounts;
- If you do not have tax residency in an offshore jurisdiction, you do not have to pay taxes on local and all worldwide income;
- Fiduciary structures are the optimal solution when it is necessary to repatriate capital subject to low taxation;
- E-commerce systems, virtual accounts, and electronic payment systems eliminate any dependence of your business on its location;
- An offshore company holding an account opened with the payment system or neo-bank allows you to avoid participation in the automatic exchange of tax information (as opposed to corporate services in banks).
If you need a strong multilevel structure of an offshore company that would not be subject to any demands or requirements stipulated by the controlling authorities of your home country 9tax residence state), please contact our experts at the e-address given at the top of this page.
If you urgently need a ready-made offshore company with a sound history of operation and a decent reputation, our representatives in offshore jurisdictions will select the best option for you. May we assure you that any of the shelf companies recommended by our experts is a credible, thoroughly verified legal entity.
If an investor for certain reasons is not interested in a classic offshore company, we are ready to recommend the best low-tax jurisdictions – Gibraltar, Hong Kong, Cyprus, Singapore, etc. We consider each case and request individually.
Offshore Companies as a Tax Planning Tool
Legislation of many countries allows the legal set-up or acquisition of offshore entities in any suitable jurisdiction. The main requirement is to be sure that all taxes have been paid before such companies’ funds are used.
An offshore entity initiated as an international tax planning tool can be incorporated in different forms:
- as a company specialized in a particular type of economic activity entitled to special tax incentives in a jurisdiction;
- as a subsidiary, representative office, IBC in a jurisdiction maintaining a special patent box tax regime;
- as a business in a jurisdiction offering special privileges to certain companies;
- as a structured business group of several intermediate entities registered in several offshore jurisdictions.
The above-listed variety of business forms and legal structure types for incorporation means that every company can choose a tax regime and tax planning methods. An effective entity can be built only after a thorough analysis of the possible business profile, the field of activity, legal structure, organization structure, and a host of relevant aspects.
An offshore company with an account is a quite promising option in terms of its access to innovative business incentives. Firstly, the offshore company registration is quite easy and simple, and non-residents get maximum support. Secondly, setting up a company is a fairly cheap solution in comparison with midshores or onshore companies.
The main task of our experts is to design a customer-specific roadmap for incorporating your offshore company. We are ready to help you practically with the opening of an offshore company that will meet your business needs. Our experts will design a customized strategy to protect your assets and select the best financial institution for corporate services. No risk. No liabilities. Complete confidentiality guaranteed.
You can request our expert services right now by writing to the e-address given at the top of this page.
How can I make the most of going offshore?
Going offshore is not an end in itself, but a means to achieve your specific objective. Before going offshore, like before any journey, you need to answer some basic questions: why, where, how, with whom to go, when, and at which expense. An offshore company can be a powerful tool that gives you more independence and control over your business and life. But its impact needs to be well-planned and prepared. An offshore company is a legal entity that is incorporated in a jurisdiction other than your country of tax residence. An offshore jurisdiction (often called financial centers or tax havens) is a country with no taxes or with a low tax burden for international businesses, i.e. where the tax rate is 20-50% lower than corporate tax in your country of residence. There are more than 60 such countries (of over 200 independent states in the world today). Legislation of most countries allows setting up companies in offshore jurisdictions. However, if the country of tax residence maintains the residence-based taxation plus has adopted International tax laws, also known as CFC rules (controlled foreign company), a foreign/offshore company of the tax resident faces complications or has to pay local taxes, i.e. at the corporate tax rate in the country with the higher tax burden. However, there are many countries with residence-based taxation that lack CFC rules. if the country of your tax residence does not have the CFC rules, the incorporation of an offshore company is a legal opportunity to reduce your taxable corporate income and increase financial confidentiality. There are some very important details one needs to be aware of, though. For example, a country with low corporate tax rates may charge much higher social security rates or high fees for residence. Besides, one should distinguish between whether territorial taxation applies on the personal level or only to companies. Wherever the territorial taxation is used for individuals, your residence permit, citizenship, or even just the proven domicile can exempt you from paying taxes on all your profits derived in any other country. However, some countries award residence permits in exchange for quite a substantial investment, while others have set simplified rules and lower tariffs. Besides the thorough selection of the jurisdiction, one needs to choose the business form in which to incorporate your offshore business entity – as an independent offshore company, a subsidiary, or an office. You should also choose the right corporate structure type which would be more beneficial for your objectives. Anyway, before setting up your offshore entity it is important to look into details of the offshore incentives and constraints, analyze the general international trends, set feasible objectives, and get the right guidelines. That is why your particular plans and expectations need to be discussed with a professional expert who can advise the best solutions for your specific situation. Our experts are at your service.
What type of an offshore business entity would better help my business succeed?
The most popular offshore company types are an International business company IBC, an Ltd., or an LLC established in a jurisdiction other than the tax residence of the ultimate owner/beneficiary. They differ by the geography of business operations, financial accountability, degree of shareholders’ liabilities, privacy, access to local banking services, need to maintain the local headquarters and local staff, incorporation and maintenance costs, and some other important aspects. Besides the three above-mentioned types, there can be other legal entity structures or even a combination of entities registered in several jurisdictions under the umbrella of one corporation. The owners decide to incorporate such companies aspiring to protect their and their family assets, to flee from the area of political and economic instability, to cut the audit and accounting costs, to escape the heavy tax burden, or for some other reasons. The most common goals are to reduce the tax burden and enhance confidentiality. However, nowadays, due to the undergoing changes in the corporate tax legislation of many offshore and onshore jurisdictions, and because of the impacts of the pandemic on the national and global economies, the former simple schemes do not work. So we recommend opening an offshore company together with professional international experts. You can refer to our relevant articles for some background information and request our experts’ services by writing to the e-address given at the top of this page.
How to start an offshore business?
The first step is to contact our experts who will guide you through the entire process of the offshore company incorporation. The second step is to select the name for your company (from the available options). Then you should compare and choose the jurisdiction(s). Next, you will need to involve a licensed registered local agent who will protect you from any expensive mistakes or critical violation of the registration procedure under the laws of the chosen offshore state. Our experts will check your offshore business plan, incorporation documents (if any), preliminary application forms to be approved by the selected bank. During the first consultation with our experts, you will receive a complete list of other things and objectives they will help you perform.