Who Needs Offshore Companies and Why?

The word “offshore” simply means “outside the borders.” Offshore jurisdictions are typically countries or territories with special benefits for foreign investors. Companies registered in such jurisdictions are referred to as offshore or international companies. Offshore zones offer favorable tax regimes. But tax is by no means the main motivator for going offshore.  Let’s take a closer look at who might need offshore companies today and why?

Offshore

Are Offshore Companies Legal?

Setting up a business abroad is legal. The owners of offshore companies use the legislation of other countries to the benefit of their business. The term “offshore” emerged in the ‘50s in the United States of America. It was an American company that first transferred its operations to another country. Since then, business persons from other countries of the world followed suit.

If your offshore company is not involved in any illicit operations such as money  laundering, financing terrorism, tax evasion and other illegal activities, you should have no issues.

Currently, the global trend  is towards maximum transparency. It affects even ‘classic’ or traditional offshore companies. Under international pressure, many former tax havens are losing their offshore status, subjecting their clients to complicated audits.

But does this mean offshore companies are no longer useful? Absolutely not! It certainly does not mean that offshore companies cannot be of use nowadays. Classic offshore tax have companies, despite what people might try to tell you, are more popular in 2021 than 2011. Safely offshore, you can still enjoy zero tax rates without having to submit audits or reports, and save on transaction costs. Every company incorporation in an offshore zone has its own particular purpose.

Asset Protection

The legal systems of offshore zones are organized in such a way that foreign investors enjoy comprehensive protection. Setting up an offshore company makes it possible to separate the owner’s personal assets from the current and future liabilities of their company. Registering an offshore company can therefore help you protect your assets in case of divorce, forcible takeovers, and court decisions made in other jurisdictions. 

Offshore companies are often used when it is necessary to reduce the vulnerability of valuable assets in case of credit default. Business persons often transfer their capital abroad to protect themselves from corruption or political persecution. The latter has also increased a lot over the past ten years. Trust funds and other fiduciary setups are used as an offshore asset protection  instrument.

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Personal Data Security

Previously, the personal data security in classic offshore jurisdictions was very easy to maintain. The ultimate beneficial owners could hide their personal information, which potentially could lead to abuse. Today almost all offshore jurisdictions have to keep the registers of ultimate beneficial owners. But it is still possible to ensure a certain level of personal privacy. The registered agent will have the information about the ultimate beneficial owners of the offshore company any way, but the agent has no right to disclose it to the third parties.

Financial intelligence units, law enforcement agencies, tax authorities and other institutions with appropriate powers can obtain the information on the company owners. Therefore, personal data security offshore today can be called conditional, but it is still there. That is, anyone who feels like it cannot just look up the ultimate beneficial owner of an offshore company by checking the company data on the Internet. That’s already a good start!

Sensitive data is made accessible for certain reasons only, and those reasons should be compelling. One could also use the services of registered shareholders and professional directors. When choosing the jurisdiction for incorporating an offshore company, one should give preference to the countries with closed registries (Nevis, Malta, the Cayman Islands) if it is necessary to maintain the personal data security to the extent possible today.

Taxes

Along with the asset protection advantage and personal confidentiality, there is another good reason explaining who might need an offshore company and why. The opportunity of not overpaying is always valuable when doing business. And taxation systems of classical offshore jurisdictions are arranged in such a way that non-resident companies that are not engaged in commercial activity in the country’s territory pay almost no taxes. Setting up an offshore company for paying dividends, royalties, interest, working with securities and virtual values would be a good solution in this case. In order to protect patented inventions, software, one’s own trademarks and other intellectual property, one can establish an offshore holding company with the appropriate rights.

A Business Set Up and Run Easily

Usually the conditions for the size and payment of the authorized capital of offshore companies are favorable, as in little start-up capital is required. Sometimes there is no minimum capital, i.e. the newly-established company can do with no authorized capital, or it may be set but not paid up immediately. 

Simpler compliance is often the reason why business persons use offshore companies. Annual meetings can be held anywhere in the world, there are no requirements for physical presence in the jurisdiction of the company’s incorporation, it is possible to conduct any activity not prohibited by law. All of these aspects, of course, make offshore companies quite popular. In addition, incorporation of a legal entity in the classic offshore zone can literally take a single day. The cost of registration and annual maintenance of the company is not high.

Here are several more reasons why one might enjoy setting up an offshore company:

  • for improving one’s company’s image;
  • for entering the international market;.
  • for obtaining a residence permit and permanent residence for business;
  • for making one’s export-import operations easier;
  • for preferences in the field of ship registration;
  • for obtaining various business licenses;
  • for fast transfers of funds, strengthening of control over one’s financial flows.

In order to choose the right country for incorporating your offshore company, start by analyzing your business tasks, decide on the business field, study the corporate law and the taxation system of specific countries, and you’ll end up with the most suitable one.  If you need assistance from an experienced lawyer, we can help with referrals for that too.

It is not a good idea to start a company without a thorough analysis of all the aspects. After all, each particular offshore zone has its own features and requirements for foreign capital. And what is good for one company could be irrelevant for another.

Who can benefit from incorporating an offshore company?

So, who can benefit from setting up an offshore company?

Business persons who make their products in their home country, for example, will be able to sell them all over the world using a well-structured offshore company. Incorporation of a foreign company will also be relevant for diversification of risks, optimization of cash flows using offshore taxation, reduction of inheritance fees, up-scaling of business. Starting an offshore company can be a solution for almost any business activity, especially for the one that is considered specific, underdeveloped or non-existent in the founder’s country of residence.

Is it difficult to open a bank account for an offshore company?

Not all banks welcome offshore companies as their clients. But offshore zones often have their own developed banking infrastructure that will greatly facilitate the matter of opening an account for a local company. If you use the services of experienced experts, ordering a free consultation on the account selection, you can resolve this issue as quickly and efficiently as possible. The main thing is to provide our experts with detailed information about yourself and your business, so that the subsequently offered solution would be as suitable as possible, taking into account all the peculiarities. Therefore, opening an offshore account today should not be considered a problem at all. This task is always successfully carried out with the guidance of experienced consultants.

If you have already decided that incorporating an offshore company may be an answer to your needs, please feel free to contact our experts for assistance at info@offshore-pro.info.

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