International entrepreneurs register companies in offshore jurisdictions for the following main purposes:
- Asset protection;
- Broaden business horizons;
- Tax mitigation
Of course, every case we see here at International Wealth is different. There are numerous other reasons why business people set up offshore companies. It will come as no surprise, however, that the offshore world has changed dramatically over the recent years and it keeps changing.
The ugly world of politics and blacklists can affect business opportunities for offshore jurisdictions. Self-proclaimed world regulators such as the OECD, FATF, and others force small island states that are attractive for setting up companies to introduce changes to their corporate legislations.
These changes should not necessarily be seen in a negative light, but simply as a natural progression. There is an increase in compliance work, but also a commensurate improvement in the ability to do business internationally – countries like Marshall Islands and St Kitts and Nevis have been moved from blacklists to whitelists. On the other hand, it can take a while for these changes to filter through to national legislations or bureaucratic practise in other countries.
Please apply for a professional consultation on registering an offshore company with the experts of International Wealth portal. Our corporate email address is firstname.lastname@example.org.
Types of offshore jurisdictions where registering a company makes economic sense
Lessening the fiscal burden is one of the most important goals that a company registered abroad can help to achieve. Countries that offer tax incentives of a certain kind can be divided into three groups.
- ‘Classic’ offshores. The old fashioned offshore company has evolved. It used to be that a number of small countries that offered zero taxes and total company ownership confidentiality to foreign entrepreneurs registering companies there. Today, very few such ultra-privacy havens remain in business. Transparency requirements and automatic exchange of fiscal information between countries have proliferated. The Marshall Islands, some Caribbean states, Seychelles, and some other jurisdictions still remain attractive for foreign investors and they are gradually succeeding in adapting to the ‘ new normal’. If you register a company in a ‘classic’ offshore country, it is still one of your best options considering the low cost and ease of set-up.
- Onshore jurisdictions with lower taxes. There are some whitelisted reputable countries where the tax burden is comparatively low. In addition, you can make use of the double taxation avoidance treaties that these countries have signed with other national states. Switzerland, Malta, Hong Kong, and Cyprus will serve as examples of lower-tax jurisdictions.
- Free economic zones. Quite a number of high-tax jurisdictions have Free (or Special) Economic Zones that offer serious tax incentives to the companies domiciled on their territories. Some attractive tax conditions can be found in the Isle Man, Gibraltark, Ireland, the UAE, and so on.
Pluses and minuses of having a company registered in an offshore jurisdiction
What benefits can an offshore company bring? What sort of difficulties are you going to face if you register one? Let us point out the main advantages and disadvantages of having an offshore-registered company.
Advantages of registering an offshore company:
- Tax neutrality (generally no tax is payable in the offshore jurisdiction, although you should always be aware of any filing requirements in your country of residence);
- Customs formalities simplification (for example to import vehicles or equipment);
- Capital and asset protection;
- Freedom from forced heirship rules;
- Clients’ geography expansion;
- Freedom from of currency control;
- Increased profits;
- Access to foreign citizenship by investment opportunities.
Various company ownership forms are available in offshore jurisdictions. You can restructure and optimize your business operations with an offshore-registered company. Some countries offer attractive conditions for licensed or regulated businesses such as gaming, cryptocurrency or brokerage operations.
Some additional advantages that offshore countries offer include the possibility to optimize your export/import operations, purchase real property without paying any taxes, create a holding company, and participate in various investment programs.
The main disadvantages of an offshore-registered company include the following ones:
- Reputational issues – the ‘Panama Papers’ effect for example that has hit Panama and BVI in recent years.
- Possible unpleasant changes to the local legislation. For instance, beginning 2021, dividends and interests are taxed in Cyprus at 15%. This news was shocking indeed for a number of foreign investors in the country. This sort of change can of course happen in any country, offshore or onshore. Obviously, with an increase of the tax rate, you will incur additional costs.
- Difficulties with opening bank accounts as banks consider offshore companies to be a high risk sector.
You should also bear in mind that busybodies who make it their hobby to interfere in other people’s private affairs may be especially curious to know what you are using your offshore-registered company for. Therefore it’s very important to dot all your ‘i’ s and cross all your ‘t’ s so everything is 100% compliant.
We highly recommend that you seek professional adivice you would like to register a company in an offshore jurisdiction. Doing so on your own may lead to unpleasant consequences.
How to use your offshore-registered company: choosing the best set-up
How you organize your offshore company will largely depend upon the business goals that you would like to achieve.
- Zero- and low-tax jurisdictions are great for trading of goods.
- Curacao and Costa Rica are good for setting up online gaming business, which is next to impossible in most European countries.
- A holding company or a trust in Nevis or Cook Islands or Luxembourg will be ideal for family asset protection.
- If you are buying and selling digital goods or services, a Serbian branch of an offshore company could be a great combination of substance with tax efficiency.
- Panama is a great jurisdiction if you need access to US Dollar banking.
Please also bear in mind residence and citizenship planning at the same time. Having an offshore company is about having the freedom to live and do business around the world. It is always important to file any papers that are due in your country of residence, and be aware of Controlled Foreign Corporation (CFC) rules that apply in many countries – but it’s worth remembering that if you don’ t want to file such a paper, changing your country of residence is a relatively easy solution to many problems.
Bottom line? Understand what you are letting yourself in for – with professional help if needed. If you fail to do your homework, it could come back to bite you later.
A brief guide to using an offshore company in 2021
Prior to registering an offshore company, find out about factors that are directly relevant to the choice of the jurisdiction where you want to set up a foreign company. Acquaint yourself with the relevant legislation.
1. Corporate laws in the offshore country
The national legislation will determine what residence status your prospective company is going to have, the requirements as to company directors, stockholders, and hired personnel. You must study the local tax code, find out what tax incentives are available, and what the tax rates on global income are in the country.
2. Treaties on avoidance of double taxation
When there is such a treaty between two countries, a company domiciled on one of them and obtaining profits in the other one only has to pay taxes in one jurisdiction. Treaties on double taxation avoidance are especially relevant to those who receive passive income (interest or dividends) from international sources. Note that the regulations concerning such sources of income were changed in such countries as the Netherlands, Cyprus, Luxembourg, and Malta in 2020.
3. De-offshorization and confidentiality protection
Over the recent years, such organizations as the OECD and FATF have started promoting financial and fiscal transparency principles that companies in all countries, including offshore ones, are under pressure to adhere to. Find out if the Register of Beneficial Owners is closed, open, or semi-open in the country where you are planning to set up an offshore company and what are the plans for the future (for example, BVI has announced that it will be publishing this info from 2023 onwards). Besides, it is worth learning about the banking services accessible in the country. Marshall Islands for example is a great jurisdiction for company incorporation, but not for banking.
4. Black lists of countries
There are national and international lists of non-cooperative jurisdictions aka “black lists”. If you register a company in a blacklisted country, you will face difficulties in making international business transactions. A company registered in such a jurisdiction can hardly find a serious international business partner or obtain banking services from a reliable financial institution.
5. Corporate account for your offshore company
There are not too many banks left in the world that will service international corporate clients. Still there are some and you are welcome to inquire with us what banks will take you onboard if you register a company in an offshore jurisdiction. Experience shows, however, that it is breest to acquire a preapproval (a provisional consent to provide services to your prospective company) from a bank or a payment system at the earliest possible stage in the process. Of course, we can help you with this.
6. Economic substance requirements
Establishing physical presence in the foreign country where your company is registered is one of the new requirements imposed by international financial authorities. Depending on the actual jurisdiction, you will have to have a registered legal address in the foreign country where your company is domiciled, rent a company office, hire a local company director or a company secretary, and acquire other types of what is referred to as economic substance. You will also have to clarify the company tax residency issues and the licensing regulations, if applicable.
Pro tip: On January 1, 2021, a new law went into effect in the USA that explicitly prohibits making the company beneficial owners’ information confidential. The names of all business founders and bank account owners shall be disclosed.
Offshore company registration and administration
When registering a foreign company, you have to take a great number of issues into account especially if you want to set up a company in a reputable jurisdiction. Professional assistance in this matter will certainly come in handy.
Registering an offshore company with our help is quite possible. The process is simpler than it might appear at first glance.
All you need to do is collect all the required application documents (we will tell you what documents are needed in each particular case), have them notarized, apostilled (if necessary), and possibly translated. Our friendly staff will walk you through the process step by step.
You will not have to visit the country where you would like to set up a company. Moreover, you can also manage the company from home. We can help you hire a professional company director, an accountant etc.
A step-by-step procedure of setting up an offshore company
Please follow the steps described below to register an offshore company with our assistance:
Please write us an email with the subject line “ New Company Incorporation”. Inform us about your purposes of setting up an offshore company, the jurisdiction(s) that you prefer, and the type of business you are planning.
Our experts will suggest several options that satisfy your requirements.
After you cover the costs of our company registration services, we will ask you to supply the application documents, choose a name for your prospective company, and specify the countries that you plan to have business transactions with. The latter is important for choosing the bank or the payment system for your foreign company.
You can go to the jurisdiction to register the company there if you wish. The majority of our clients, however, prefer registering foreign companies remotely..
If you would like to hire a professional company director, we will be happy to assist you with this matter too.
Our company registration services include preparing the application documentation, having the documents apostilled and translated if necessary, opening a bank account, renting a company office, and registering the company registered office address in the offshore country. In addition to that, we also provide company maintenance services such as accounting support, legal advice, consultations on business-related matters and so on.
If you have any questions related to offshore company registration or if you are ready to set up an offshore company, please contact us without any hesitation. You can use the email address that you can see at the top of the page, our live chat, or you can call us (or leave a message) at +372 5 489 53 37 or +372 5 495 26 39 . We would be happy to welcome you among our clients!