If you would like to establish an offshore company, you have to take many factors into consideration to understand what country you should prefer. Much will depend on the types of business activities that your company will be involved with, the prospective company structure, and form of ownership. You also have to analyze what tax advantages are available to non-resident companies in the jurisdiction that you are considering. It is also important where this jurisdiction stands with respect to international regulators such as OECD, FATF, and so on.
An offshore jurisdiction of today is very much different from an offshore jurisdiction some fifteen years ago. The anti-money laundering policies implemented by the big and powerful have made small island countries that used to offer ‘classic’ offshore advantages change their legislations and their requirements to foreign business people setting up companies on their territories. Now they require that such companies should have economic substance, that is, some tangible assets in the country of domiciliation. Besides, zero corporate taxes can rarely be found anywhere these days.
What is an offshore jurisdiction, actually?
Linguistically, an offshore country (or territory) is one that is located off the shores of a continental country. Thus, it is a small island state. Historically, such states used to offer serious tax benefits to foreign nationals registering companies and opening bank accounts on their territories. The natural resources are scarce in island states and the foreigners were bringing some money to the state budgets anyway.
Things changed after the 9/11 attack when an international campaign against terrorism financing was launched. Offshore countries had been sometimes used for money laundering (even though most foreigners registering companies there were law-abiding citizens). Therefore, the world financial authorities decided that they had to make these countries reveal the financial and corporate information about all foreigners who had established some economic presence there. While only criminals were targeted, all honest entrepreneurs had to suffer too.
There is little offshore countries can do to fight against the pressure from such huge unions as the EU and USA. However, they have managed to preserve some of their advantages. For instance, many offshore jurisdictions do not levy some taxes that are levied in onshore states. If you acquire tax residency in an offshore jurisdiction, you will be taxed in accordance with the local legislation. This will allow saving on taxes if these are high in your home country.
At the same time, you should not count on hiding your profits from the tax authorities at home. Offshore zones have been forced to exchange their foreign residents’ financial information with the fiscal bodies in their home countries. Evading taxes is not possible any longer. Paying less in taxes, however, is still possible.
Popular uses of offshore companies
There are several reasons why people register business companies in offshore jurisdictions. The most widespread of them include the following ones:
- Export of goods and/ or services via an offshore-registered company. It helps some entrepreneurs economize on taxes.
- Provision of consulting services in a foreign state.
- Electronic commerce. Offshore jurisdictions allow opening merchant accounts and virtual offices, which help reduce the company’s operational costs.
- Funds and trusts for asset protection. The foreign fund or trust founder manages companies located in other countries by use of this instrument.
- Passive income on which low or zero taxes are levies. Some business people transfer dividends, interests, and royalties from their home countries to their offshore company bank accounts thus saving on taxes. If you would like to set up an offshore company for this particular purpose, you recommend that you choose the jurisdiction that has signed a double taxation avoidance agreement with your home country.
Recommendations on choosing the best offshore country in 2020 – 2021
Before you start taking steps towards setting up an offshore company, you have to ask yourself several questions and find satisfactory answers to them.
1. Why do you need an offshore company?
You have to define the purpose of opening an offshore company. Are you planning to do it for entering the international markets, for extending your business horizons, for accumulating and protecting your wealth, for saving on taxes, or for some other purposes? If you give us a clear answer to this question, we will already be able to make some suggestions that are worth considering.
2. What would be the best country to open an offshore company?
The answer to this question will depend on several factors:
- The purpose of setting up an offshore company is important. You have to realize that some countries offer attractive conditions for trust of holding company registration, others are good for the gambling business, still others should be interesting for setting up an intermediary company, and so on.
- The international reputation of the offshore jurisdiction is also important. Some of them will be on international black or grey lists while others will not. Some of them will be referred to as non-cooperating countries in your home country while others will not.
- You have to find out if your home country has made an agreement on double taxation avoidance with the offshore jurisdiction that you are considering (you can ask us!).
- The banking sectors in some offshore jurisdictions are stronger and they are weaker in others.
3. What taxes are levied in the offshore jurisdiction?
There are no zero-tax jurisdictions any longer and you have to realize that. Offshores have been forced to tax non-resident companies and in some countries the corporate tax, for example, is 30% now while it was nonexistent before. However, some tax benefits are still available in many offshore countries and they are worth learning about.
4. What corporate legislation is applied in the offshore jurisdiction?
Different offshore countries allow opening companies of different forms of ownership. Please seek our advice and we will tell you how an IBC in the BVI is different from an LLC in the Caymans, how an LLC is different from an LLP, and so on.
5. How much does an offshore company incorporation cost?
The costs of company formation in different offshore countries are also different. They depend on the amount of the state duties that you have to pay in every country and the cost of the registration agent’s services. Our service prices are indicated for each offshore jurisdiction.
6. What are the reporting requirements in the offshore jurisdiction?
The requirements to financial reporting, bookkeeping, tax returns, currency control, etc. are different in each offshore country. Some of them require minimal reporting while others require full-scale reporting. Besides, some offshore countries make it obligatory to hire local personnel while others do not. We know all the requirements that each particular offshore jurisdiction puts forward to foreign nationals registering companies there.
7. What are the best offshore banks?
You will have to decide where you would like to set up a bank account for your offshore company: in the country of the company domiciliation or in a foreign state. Our experience shows that an offshore company is better off having at least two corporate bank accounts: on in the country where it is registered and one more somewhere else.
8. Other criteria of selecting the right offshore jurisdiction.
Such characteristics as company registration timeframes, the possibility to acquire tax residency in the country, the availability of double taxation avoidance agreements, the requirements to the company shareholders and the registered capital, the opportunities of remote business management, etc. also differ from one offshore jurisdiction to another.
If you would like to open an offshore company today, we will be happy to assist you in this courageous endeavor. We will also gladly help you set up a bank account for your offshore company.
Best offshore jurisdictions of today
Actually, we are not going to insist that the offshore jurisdictions listed below are the best such jurisdictions. We will only list the most popular countries where foreign nationals like to register offshore companies and indicate the forms of company ownership that they choose.
- Hong Kong Co., Ltd – An offshore company registered in Hong Kong gives direct access to the Chinese market, there is currency control in the jurisdiction, low tax burden for residents, and 0% tax on international deals.
- Singapore Pte Ltd – An offshore company registered in Singapore will find the following advantages there: reputability in the jurisdiction in the international arena, top-class banking system, qualified workforce, limited liabilities of the company owners, ease of transferring property rights, and so on.
- BVI Business Company (BC) – The British Virgin Islands remain one of the best tax havens in the world. Profits obtained from business operations abroad are not taxes, there are no requirements as to the shareholder meetings, no financial reporting requirements, and the information about the company beneficiaries is not available to the public.
- LLC in the Caymans – Registering a company there is going to cost more that setting one up in the BVI but it will suit the purpose of asset protection and fund establishment.
- Belize International Business Company (IBC) – An offshore company registered in Belize will pay no taxes on profits obtained abroad and the US dollar is the official currency in the country.
For your information: beginning 2019, many ‘classic’ offshores including The Caymans, Belize, the BVI and others have economic substance requirements to non-resident companies. This means that such companies have to have some tangible assets in the country of domiciliation. Such assets may include an office space, a hired local employee, production facilities, and so on.
Should you have any questions or any doubts about setting up an offshore company, please contact us by email email@example.com. We will show you all the possible options, help you make the best choice, and offer some turnkey solutions. With our professional assistance, you offshore company with a corporate bank account will be able to go into business very soon!
Are there offshore jurisdictions that levy no profit tax?
Yes, a number of offshore countries do not tax the profit that the company registered there obtains from business operations abroad.
Can I register a foreign company in an onshore jurisdiction rather than offshore one?
Yes, there are certain onshore countries that welcome foreign nationals setting up companies there. They do levy taxes but their advantages are good reputation, strong banking system, multiple agreements on double taxation avoidance, and others. We will be happy to assist you in setting up a company in Germany, Lithuania, Georgia, and many other reputable onshore states.
Can ownership of an offshore company remain fully confidential?
Yes, it can, but only in the countries that are on OECD and FATF black lists. Most offshore jurisdictions have joined the BEPS (Base Erosion and Profit Shifting) project and they reveal the foreign business owners’ information to the fiscal authorities on their home countries on request.