Company Incorporation and Bank Account Setup Abroad: FAQs

Offshore company registration and bank account opening are subjects that frequently prompt inquiries. People seek to understand the roles of beneficiaries and nominees. As International Wealth experts, we have curated a collection of FAQs and prepared detailed answers to offer thorough insights into these matters.

What offshore jurisdiction works best for company incorporation?

Offshore jurisdictions, commonly referred to as traditional tax havens, are specific legal domains that offer tax benefits, such as minimal or no tax obligations. 

In recent times, offshore nations and territories have undergone legislative changes, incorporating taxes and introducing transparent registries for beneficiaries and companies. An offshore company now means any entity registered outside the entrepreneur’s country of residence.

What country is the top option to form a non-resident company? 

The answer to the question depends on the specific objectives you have in mind. If asset protection is a priority, companies based in the Cook Islands or Nevis would be worth exploring. These jurisdictions offer safeguards against foreign courts and provide the option of trust agreements that you may use to manage capital, business affairs, and even inheritances without personal involvement.

For those seeking a gambling license, jurisdictions such as Curaçao or Malta are recommended.

When it comes to international online businesses, Canada and certain European nations, including the United Kingdom, offer favorable conditions.

For both local and international business ventures in Asia, Hong Kong and Singapore are popular choices worth considering.

Each of the scenarios incorporates offshore elements:

• tax benefits, including zero or reduced tax rates
• asset protection strategies
• incentives tailored for startups.

The choice of country is also contingent upon the desired bank account location.

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

It is certainly feasible to open a bank account for a foreign company, including offshore entities. Nevertheless, take note of specific factors beforehand:

• Establishing a conventional offshore bank account in Europe is highly challenging.
• For high-risk ventures such as gambling, Forex, insurance, and similar sectors, opt for account openings in payment systems, including those in Europe.

What jurisdiction should you choose to open a bank account?

The choice of the most suitable country for opening a bank account depends on several factors specific to your business. These include its jurisdiction of registration, nature of operations, geographic reach of clients and partners, and the financial requirements. Factors like anticipated transaction volume and the minimum balance threshold also play a crucial role.

Presently, the optimal approach involves opening an account in the country where your company is registered. For international business structures, it is advisable to have access to multiple currencies and maintain several accounts to facilitate capital diversification. In certain cases, you may need to provide evidence to substantiate why you require a specific banking account. If you need a Portuguese account but your company is registered in Estonia, the bank may consider opening the account if you demonstrate an existing client base in Portugal.

Selecting a jurisdiction to open a bank account involves 2 stages. Initially, you should open an account in a readily accessible location, such as a payment system or a non-European offshore jurisdiction. Subsequently, once your company has established a credible track record, you will explore opportunities to open an account with a more reputable and esteemed financial institution.

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What sets apart offshore jurisdictions from low-tax jurisdictions?

While these terms hold distinct meanings for many people, the line between them is becoming increasingly blurred. Offshore jurisdictions still offer advantages such as reduced bureaucracy and the potential for zero or low taxation.

Low-tax jurisdictions come with tax rates that typically range from 9% to 12%, along with various additional benefits. Some of them use a territorial taxation system. This means profits earned within the country are subject to taxation, while those earned outside its borders are tax-exempt.

The most significant difference lies in reputation. Offshore jurisdictions face growing scrutiny from banks and regulators. In contrast, traditional jurisdictions, despite potentially offering comparatively lower tax rates, are considered more reputable.

What does annual company renewal mean?

To maintain the active and compliant status of a company under the laws of its incorporation country, several actions shall be taken promptly:

• regular payment of government fees, typically in the form of annual fees in offshore jurisdictions
• renewal of the lease agreement for the company’s legal address
• payment for the services of a registration agent, if necessary
• payment for nominee services, if applicable.

Some jurisdictions require the submission of annual reports to prevent penalties, company freeze, and potential lawsuits.

What is a nominee service and is it safe to use?

A nominee acts as a representative in positions such as shareholder, director, or secretary on behalf of another individual or entity. Nominees do not have ownership rights in the company and typically do not actively engage in its day-to-day operations.

Traditionally, the main purpose of a nominee service is to provide an added layer of confidentiality, safeguarding the identity of the true owners and shielding them from public disclosure. The control and ownership of the company are maintained through a trust agreement.

In today’s business environment, it may appear challenging to use nominee services. The involvement of nominees may lead to increased scrutiny when it comes to opening bank accounts or conducting specific transactions.

The trend is growing toward hiring professional directors who possess genuine expertise within the company. These individuals assume representative roles on behalf of the company, especially in situations where a resident representative is necessary to establish a bank account, for example.

Who is a beneficiary and why does everyone want to know about them?

The beneficiary is an individual who gains the ultimate benefits of conducting business. They receive undistributed profits and may employ offshore schemes and other tactics to evade taxes and obscure the tax base. 

Beneficiaries own more than 25% of the company’s share capital, engage in active management of business operations, control crucial decision-making, and receive generated profits.

Currently, international organizations such as the FATF and OECD, along with regulatory bodies worldwide, are actively identifying beneficiaries, custodians (both individuals and legal entities), and the ultimate beneficiaries of business benefits. These persons and entities seek tax advantages and may emerge as key figures in investigations related to financial misconduct.  

Is it possible to purchase a pre-established company abroad? 

Indeed, you may purchase a pre-established company abroad, either one with a proven history and active operations or a dormant business entity. Here’s what a foreign entrepreneur is free to do:

1. acquire an operational company with an existing business that may be customized to fit their specific needs and objectives
2. purchase a shelf company, i.e., a registered entity without ongoing operations, and use it to expand an existing business structure in another country or initiate a new venture.

Since ownership thereof may be acquired in just 1 day, the 2nd option is favored for time efficiency. In the past, it was common to acquire matured companies. Presently, however, challenges are possible when you attempt to open a bank account for such a company. 

Is purchasing an off-the-shelf company with an open account realistic?

Whether you’re interested in acquiring a pre-established company with an open account or an off-the-shelf business, it is indeed a feasible option. However, no one can guarantee that the account in question will remain open. The new owners will be required to undergo thorough identification at the bank to proceed with the account.

When it comes to shelf companies, it is not recommended to open an account upfront due to the uncertainty surrounding the future owner and the business’s nature. A much wiser step is to open the account after the company acquisition has been finalized.

Another approach is selling the company along with a nominee or professional director. This arrangement allows the director to retain access to the account, thereby ensuring uninterrupted operations for the company. However, whether this alternative suits your specific circumstances and preferences remains highly questionable.

May a currently operating business be moved to a different jurisdiction while preserving its original name?

Re-domiciliation, also known as the transfer of a company, occurs when the laws of both the source and destination countries permit it. Many offshore jurisdictions support re-domiciliation, allowing you to retain the existing company name and historical records.

Alternatively, if the name is not already taken or registered in the official registry, you have the opportunity to establish a new company under the same name.

Can you register a company and open an account remotely?

The opportunity to register a company remotely is widely accessible in numerous countries across the globe. To accomplish this, the guidance of a local lawyer or an authorized representative is typically required. In certain cases, it is possible to navigate the entire process independently through online channels.

Remote account opening is also available for non-resident companies in offshore jurisdictions, although certain limitations do exist compared to establishing the actual business structure. While some banks are equipped to accept remotely submitted documents, a personal visit may be necessary at the final stage.

Payment systems generally facilitate remote account openings, with occasional instances where personal communication might be necessary. The service is offered by digital non-banking institutions that operate solely online, eliminating the need for physical branch visits.