Registering an offshore company: pros and cons

The offshore world has changed dramatically over recent years. The ugly world of politics and blacklists can affect business opportunities in offshore jurisdictions. On the one hand, self-proclaimed world regulators such as the OECD and FATF force small island states to amend their corporate legislations to the disadvantage of international business owners. On the other hand, the coronavirus pandemic and geopolitical conflicts have prompted many investors and businesses to look for safer places, relocate, and form offshore companies.

Not all changes should be seen in a negative light. For example, the Marshall Islands, St Kitts & Nevis, and some other countries have been removed from the blacklists and greylists of non-cooperative jurisdictions. The growing network of our experienced international experts ready to help you with registering an offshore company can also be viewed as good news and your advantage.

What pros and cons should you consider when planning your offshore activities in 2023?

Types of jurisdictions where your offshore company formation can be an advantage

International entrepreneurs register companies in offshore jurisdictions to take advantage of their benefits, whatever the primary purposes may be:

• asset protection
• confidentiality of beneficial owners
• extension of business horizons
• tax incentives, and other reasons.

Depending on the most common benefits, purposes, and status sought by most non-resident owners registering offshore companies, experts define 3 types of jurisdictions.

1. Offshore jurisdictions of the old type. Years ago, they decided to offer investors all the above-mentioned lavish benefits and thereby improve their lean national budgets. Such regimes granting 360-degree advantages of absolute confidentiality, tax relief, solid guarantees of asset protection, and unlimited business freedom worldwide are virtually nonexistent in 2023. This is a result of the years-long pressure from international organizations promoting transparency and exchange of information for tax purposes and the relevant standards, agreements, and inspections. Therefore, when registering a company in an offshore zone offering a set of the most attractive tax benefits and other perks, please think ahead and be aware of the possible limitations. The list of such ‘classic’ offshore jurisdictions includes BVI, Belize, Nauru, and Seychelles, A major note of caution: It can be quite difficult to open an offshore business account for companies formed in the ‘old’ offshore jurisdictions. However, when planning the company formation together with a seasoned expert, you can avoid such risks and choose the jurisdiction with the most important advantages for your purposes. 
2. Low-tax jurisdictions. These are some whitelisted reputable midshore countries where the tax burden is comparatively low. They offer some privacy of corporate data and other advantages. In addition, you can benefit from the double taxation avoidance treaties that these countries maintain with other states. Here are some examples of low-tax jurisdictions: Switzerland, Malta, Hong Kong, and Cyprus.
3. Free economic zones. Quite a number of high-tax jurisdictions established their Free (or Special) Economic Zones offering serious tax benefits to the companies domiciled on their territories. For example, attractive tax incentives can be found in some regions of the UAE, the USA, Ireland, Isle of Man, Turkiye,

Advantages and disadvantages of registering an offshore company 

What are the benefits of an offshore company? What sort of difficulties are you likely to face when registering an offshore company? Let us look at the main pros and cans of having an offshore-registered company.

The main advantages of registering an offshore company:

• Tax neutrality. Zero or very low-rated offshore taxes are payable if the business is conducted outside the jurisdiction of incorporation. However, you should always be aware of the filing requirements in your country of residence.
• Simplified customs formalities and beneficial import/export operations.
• Asset protection. The terms of opening a personal and corporate offshore account include privacy. Asset diversification is the first step to protecting your assets. If you have substantial assets, we advise you to consider trusts and foundations. They are the most favorable business forms in terms of asset protection, inheritance rules, and distribution of profits among beneficiaries.
• Clients’ geography.  Unrestricted access to markets and clients is one of the prerequisites for a successful international business and one of the main advantages of registering an offshore company. 
• Freedom from currency exchange control. This means you can make seamless cross-border payments and transfers between different accounts and countries. 
• Second/multiple citizenships by investment. Today, this can be a vital advantage in terms of freedom of movement, immigration, and company registration. The list of most popular countries granting residence permits by registering an offshore company includes Turkiye, UAE, Serbia, Georgia, Cyprus, the USA, some EU countries, etc.

Besides the above-mentioned advantages of registering an offshore company, many jurisdictions offer the following benefits and opportunities: 

• to choose from a variety of legal entity forms
• to restructure and optimize your business field and production structure
• to obtain Forex broker licenses on favorable terms
• to optimize your export/import operations
• to purchase real property and enjoy very favorable (and even zero-rate) taxes
• to set up a holding company
• to participate in various lucrative investment programs.

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The main disadvantages of registering an offshore company:

• Reputational issues. Your potential suppliers, clients, and partners may mistrust or be too cautious about your company, especially if the business is conducted from an old offshore where access to information about beneficial owners is restricted.
• Possible unfavorable changes in the local legislation. For instance, in early 2021, Cyprus introduced a 15% tax on dividends and interests, and many offshore jurisdictions adopted similar rates for non-resident companies in 2022. This came as shocking news to many business owners who had relied too much on tax incentives.  
• Issues with opening bank accounts.: Many banks associate offshore companies with high risks. Therefore, smart entrepreneurs obtain pre-approval from a chosen bank before they select a jurisdiction for registering an offshore company. 

Besides, tax authorities are very keen on offshore companies. Moreover, some busybodies make it their hobby to interfere in other people’s private affairs. They 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.

How to benefit from registering an offshore company?

The choice of an offshore business form and company structure directly depends on the country of registration and your objectives. Registration of a trust helps with inheritance planning and asset protection.  Registration of an offshore company is key to new markets and advantages of benign taxation. A new fund or holding can be a perfect solution when you need to link several structures and different capitals into a single whole.

Where can you find the benefits you need?

– Most countries with zero and low taxes are fine for transfer pricing purposes.

– Gambling businesses can be successfully formed in Curacao and Costa Rica (while it is impossible in most European countries).

– Trusts and funds can be easily incorporated for asset protection in Nevis, Belize, the Cook Islands, etc.

– If your plans include foreign exchange brokerage, your Forex license can be obtained in Labuan, USA, Malta, UK.

To achieve your goals and capitalize on your offshore company without any risk and failure, you need to study and observe the laws of the country of incorporation. Besides, you need to understand the pros and cons of the current tax legislation and norms in your country of residence. Sometimes the solutions come with the change of your tax residency. More often, however, your knowledge of laws will help you focus on the most suitable jurisdiction for registering an offshore company.

Bottom line? Focus not only on pros but also cons.  Understand what you are letting yourself in for – with professional help if needed. If you fail to do your homework in due time, it can turn into an avalanche of difficult and sometimes impossible tasks later. An experienced expert can always warn you against wrong actions and prompt the right strategies. 

A brief guide to registering an offshore company in 2023

Before you submit any offshore application or make any investment, you should know the key facts about the jurisdiction you are choosing for registering an offshore company. You also need to study its corporate legislation. 

1. Corporate laws in the offshore country

The national legislation will determine the possible residence status of your prospective company, the requirements set for company directors, stockholders, and hired personnel, incentives, and the availability of shelf companies. You need to understand the local tax code, find out what tax incentives are available, and what the worldwide income tax rates are in the country you choose for registering an offshore company.

2. DTTs – treaties on avoidance of double taxation

When there is DTT between two countries, a company domiciled in one of them and obtaining profits in the other has to pay taxes only in one jurisdiction. Treaties on double taxation avoidance are especially relevant to those who receive passive income (interest or dividends) from international sources. Please note, that over recent years some countries have revised their DTTs or are going to amend/cancel them.

3. Confidentiality matters and business registers

The OECD and FATF, as well as some other international organizations, have been promoting the principles of financial and fiscal transparency of companies registered in offshore jurisdictions and zones. Jurisdictions are obliged to maintain Business Registers containing information about companies and business ownership. Such registers can be public, semi-public, or closed. Respectively, the information about the company and its owners can be either publicly available or subject to special official requests from the state bodies. Before registering an offshore company, be sure to know which type of Register is maintained in the jurisdiction. You will also need to keep track of the expected changes in the country’s policy of data confidentiality/transparency, double taxation, and nominal services. Many owners believe that registration of a trust or foundation is the most optimal way to protect one’s data from disclosure to other countries. For example, we can recommend trust or LLC registration in Nevis. 

4. Black lists of countries

There are national and international lists of non-cooperative jurisdictions aka “black lists” maintained by self-proclaimed international ‘regulators’. They complicate inbound/outbound transfers and business in blacklisted countries. If you are interested in the advantages of registering an offshore company, you should also be aware of possible risks. Setting up a business in a blacklisted state is fraught with loss of money and finances. 

Banks, as a rule, will not serve such a company, and its founder may not only be deprived of all the offshore advantages but also regret one’s legal shortsightedness and the missed opportunity to refer to reliable services of experts. 

5. Corporate account for your offshore company

It is not a problem to open a corporate account for a company set up in an offshore zone if the jurisdiction is not blacklisted. However, some high-risk businesses (Gambling, Forex, brokerage, insurance, etc.) may find this task rather challenging.

To get access to financial instruments in different currencies, and to avoid worries about sanctions, bans, and high tariffs, we advise considering the world’s reputable banks and payment systems. In the latter case, you can open and use an account online (remotely). The banking services, operations, and level of asset protection with payment systems can be as good as with the most famous European banks. 

6. Economic substance requirements 

Physical presence in the country where your company is registered is one of the new requirements imposed by international financial organizations. It may vary, depending on the actual jurisdiction. In some places, you need to have just a registered address. In others, you may be required to submit proof of a physical address, a brick-and-mortar office, hire a local company director or a company secretary, and acquire other types of economic substance. You will also have to clarify the company tax residency issues and the licensing regulations, if applicable. Our experts will help you resolve all issues with economic substance to your full satisfaction.

Offshore company registration steps

When registering a foreign company, you have to take a great number of issues into account. This is especially important if you want to set up a company in a reputable jurisdiction. 

Registering an offshore company with our help is quite easy. 

All you need to do is collect all the required application documents (we will tell you what documents are needed in your particular case), and have them notarized, apostilled, and possibly translated (if needed). Our friendly staff will walk you through the process step by step. The local registered agent will keep track of the changes in your corporate documents and will notify authorities on your behalf.

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, an expert on tax planning, etc. Our services will allow you to save time, money, and effort while earning income and managing your business from the comfort of your home. This remote mode of business is considered legal in most countries. 

Please follow the steps described below to register an offshore company with our assistance: