Offshore jurisdictions offer their advantageous legal systems to those who wish to diversify their assets and enhance the ultimate beneficial owners’ data security. Unlike domestic types of legal entities, offshore companies are not subject to court decisions made within their jurisdiction of incorporation. Any enforcement against such companies can only be taken upon international court decisions. Given that the registers of beneficial owners are usually unavailable to the general public, the registration of offshore companies can be an ideal way to enhance the owner’s data security in order to protect them from invasive competitors and illegal takeover.
If you decide to buy an offshore company with an account or set up a new legal entity in a classic tax haven, please do consider all the possible privileges that such businesses have to offer. These are not only zero taxes in the country of origin, but also the possibility of enjoying other incentives, infrastructure features and special conditions for specific types of business.
Top12 Ways to Use an Offshore Company
Certain types of businesses that have the status of tax residents in the country of incorporation are used for tax optimization purposes and the international tax planning not only because of the dividend tax exemption, capital gains and other types of profits. Therefore, the types of offshore companies may involve establishing an intermediate entity in a jurisdiction with zero taxes, for example, to handle the main financial operations for the business.
In certain cases it is better to buy an offshore company with an account in a reputable jurisdiction with substance requirements.
For example, the registration of a private fund in Luxembourg involves standard taxation, but the business maintains a high reputation and can benefit from the double taxation agreements. The local authorities regulate the dividends and capital gains in such a way that opening holdings is rather profitable here.
When it comes to the classic offshore jurisdictions, your business can come across a lot of various restrictions. In this case the important thing is the laws of a particular country, the resident of which the beneficial owner or the controlling person is. If your choice is to register an offshore company within a zero-tax zone, please do study the typical ways of using such legal entities to get the maximum benefits.
Mode 1: Securities Company
The best option for organizing the work of a stockbroker to minimize tax deductions. In most countries from the list of tax havens there are no restrictions on transactions with securities, and there is no currency control, which simplifies bulk payments. In this case one should consider the obligations in the country of one’s tax residency. Income received from the securities sale may be subject to both corporate tax, if the profit is received by the organization, and personal income tax at the level of individuals.
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on which jurisdiction is best for your business, preferred tax regime, company structure.
Mode 2: Offshore Holding Company
Holding companies are the most common option for registering an offshore business in order to own real estate and carry out the basic transactions on mutual settlements. Holding companies are quite attractive in terms of the intellectual property rights ownership: patents, trademarks, brands, software, etc. The second important point is that the registration of offshore entities as holding companies can significantly enhance the owner’s data security and protect the property from illegal takeover.
Mode 3: Offshore Trust
It is an effective instrument for asset diversification with the possibility of avoiding public association of the beneficial owner with a registered offshore company. When establishing trusts in a tax-free jurisdiction, one can build a fairly profitable business where tax liabilities will be minimal. It is an excellent way to protect one’s property and capital in case of divorce, unfavorable economic and political climate in one’s country.
Mode 4: Investment Fund
The establishing of a fund, just like an offshore trust, makes it possible to separate the liability of the ultimate beneficial owner from the obligations of the legal entity. In most offshore jurisdictions, funds are separate legal entities. Proper building-up of the overall structure will reduce both tax and administrative costs. In addition, the establishing of an investment fund offshore is a relatively inexpensive service.
Mode 5: An Instrument to Finance Your Business
In this case we are talking about investing our own companies on behalf of offshore legal entities. This is quite a convenient and legal business instrument allowing the use of all possible privileges offshore. A secondary option is opening corporate accounts for offshore companies to optimize one’s global mutual settlements.
Mode 6: Real Estate Ownership Company
An organization involving a real estate holding company could look as follows: a resident of the country owns real estate, and a non-resident company is its founder. When the non-resident company sells the properties, it transfers the corporate rights to the resident company. However, in this case the possible repatriation tax should be taken into account. Benefits can also be derived from lease agreements if accredited non-resident companies, as well as resident organizations working under a special tax regime are exempt from VAT on the country’s territory.
Mode 7: Offshore Shipping Company
This is quite a popular type of business, since its registration is simplified as much as possible, and the businesses per se receive a huge number of benefits. This mode implies that there are many tax instruments in the calculation of the taxable base both at the level of commercial use and personal income of individuals.
Mode 8: Financial Institution
This is a widespread option for using an offshore company. You can open a bank, a financial institution or set up a digital asset business. It is important to keep in mind that such operations require prior licensing, since without a license banks will refuse to provide corporate services to your company.
Mode 9: Crypto Asset Offshore Company
The current trend is to register offshore companies and open accounts for unlimited transactions with crypto currencies. The lack of official status of crypto assets in many countries allows free movement of capital, and taxes are to be paid only when receiving fiat money. In order to avoid high tax liabilities and build a crypto currency business in the right way please feel free to contact our experts.
Mode 10: E-Commerce Company
Export-import operations using an offshore company are the ideal option for trading companies and e-commerce. In the first case you can get a large number of benefits, including the absence of customs duties and mandatory charges, in the second case you can freely choose the jurisdiction of your tax residency and significantly reduce the fiscal burden.
Mode 11: Captive Insurance Offshore Company
In this case we are talking about establishing a subsidiary company in a tax-free jurisdiction for reinsuring its own founders. This is quite a common option for registering an offshore company, as captive insurance is subject to fewer restrictions and requirements, unlike standard insurance businesses. There are several types of such companies that will allow you to enjoy the maximum reduction in tax payments.
Mode 12: Consulting Services Company
Offshore outsourcing is a common phenomenon for large, medium- and small-sized companies. Any consulting services, for example, in the information field, provides for payment to be made offshore. This allows for maximum reduction of tax liabilities, in particular when fees are received. However, attention should be paid to the bylaws of the country where the conditions for tax residency of the beneficial owner are fulfilled since there is a risk of double taxation.
We have tried to list the most popular ways of using offshore companies with zero taxes. In fact, an offshore company can be only one of the links in a whole chain of legal entities forming a reliable barrier for asset protection.
The sale of offshore companies often involves work in the field of transport and related services which can imply a quick launch of manufacturing or construction.
Other Possible Uses for Offshore Businesses
Types of offshore companies can be broken down into categories according to their legal form. In addition to a certain type of business operations, benefits can be derived from the right type of structure. For example:
- registration of IBC offshore companies (international business);
- establishing of limited liability companies, LLP or LLC;
- establishing of an LLC and a trust where the LLC will act as a trustee;
- incorporation of public companies in classic offshore jurisdictions.
In terms of making business, the advantages of countries with zero taxes are also noticeable in trading operations, in manufacturing and working as a developer of residential/commercial real estate. Offshore companies are interesting as a facility for basic financial transactions since a company account can be transformed into an effective business instrument given the right choice of jurisdiction. For example, Panama, Belize, Dominica, the Seychelles do not have any special reporting requirements, and it is enough for the director to keep the supporting primary documents.
The final choice can be made correctly only after an in-depth analysis of the existing business structure and the peculiarities of the legislation of the countries. In certain situations, a foreign investor or businessman must be prepared to move with their capital. The beneficial owner’s tax residency and their country’s laws do not always allow tax optimization.
One should also keep in mind that offshore jurisdictions like most other countries have certain types of business that non-resident companies cannot engage in. Such lists vary from one jurisdiction to another, so you will need to plan carefully. We also assist with opening accounts for offshore companies, and facilitate our clients in buying ready-made offshore companies with an account. We also help re-register the signatories. In most cases it is much easier and more efficient to register a new company, as the compliance procedure is the same in both cases. Please do not hesitate to find out more details during an individual consultation with our expert.
