Every enterprise is required to have a documented place of location. Entrepreneurs seeking to register a company in low-tax jurisdictions are confronted with the question of what constitutes an offshore legal address. Due to the significant interest in this issue, our experts have prepared an article that thoroughly examines this subject.
- Why can a legal address bring challenges for offshore business?
- Types of addresses for offshore companies
- What is an offshore legal address, and how is it related to a registered agent?
- Is registering multiple offshore companies under one legal address illegal?
- Legal address of an offshore company and postal correspondence
- Changing the address within a single jurisdiction
- Changing the legal address of an offshore company with a change of registered agent
- How to find a new agent and legal address for an offshore company?
- Redomiciliation – changing the legal address of an offshore company along with the jurisdiction
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Why can a legal address bring challenges for offshore business?
The topic of the offshore legal address is not raised without reason. There are clear rules for registering the legal address of an offshore company, especially in the popular island and European offshore jurisdictions. However, even there, unforeseen circumstances can arise, including issues with the company’s legal address, which typically coincides with the agent’s address and can be shared by multiple corporations.
While this does not constitute illegal action, it can easily create challenges for businesses. For instance, if it is a private novice agent who accepts all clients indiscriminately. As a result, an unreliable company with a poor reputation may be associated with the offshore legal address. Even worse, the address may be blacklisted by banks, as one of the so-called neighbors might have outstanding debts or be implicated in dealings with sanctioned individuals.
How to effectively structure a legal entity in an offshore jurisdiction and gain access to a prestigious bank? Where is the best place to obtain tax residency status for an international company? Which countries offer the lowest tax rates? Take advantage of a complimentary consultation with our team of professional experts and obtain answers to all your questions!
Types of addresses for offshore companies
An offshore company typically has three documented types of addresses:
- Mailing address – conditional code of the company’s location, which is not required to be the same as other addresses of the offshore entity. It serves the purpose of receiving correspondence and documentation. The mailing address can be located in a jurisdiction different from the country of registration. For electronic documentation, an email address hosted on a server anywhere in the world can serve as the mailing address.
- Operating address – actual location of the company’s management center. This address is of particular interest to tax authorities as many countries consider foreign companies as tax residents if the management center is located within their territory. When applying to open a corporate account, banking institutions often require disclosing the operating address.
- Legal address – company’s location registered with tax authorities and the Company registry of the respective jurisdiction. Official correspondence from local authorities is sent to this address. Usually, the registered agent provides it on a rental basis and administers the offshore company through this address. Therefore, the cost of the legal address is included in the annual expenses of the offshore entity.
Registering a foreign company with the assistance of our experts is a comprehensive process through which the founder obtains a business entity, a bank account, founding documents, all types of addresses, and can also order additional administrative and consulting services.
What is an offshore legal address, and how is it related to a registered agent?
The address of an offshore company refers to the legal address specified in the company’s founding documents, which is then submitted to the Trade Registry and tax authorities as the entity’s registered location. Typically, this address is provided by a registered agent, a professional organization authorized to establish offshore companies on behalf of clients under a valid license.
Thanks to registered agents, foreign businesspersons are relieved of the need to personally visit offshore jurisdictions to sign documents and submit them to the Trade Registry. All the work is carried out by intermediaries, including the annual administration of the offshore entity.
It is not mandatory for a foreign company to have an office at the legal address which is required to recognize tax residency status in the country of registration. You can use a virtual office service offered by a secretarial company or registered agent. However, the legality of such an option in a specific country should be verified before registering a business structure.
A virtual office is a package of services that includes:
- fixed telephone number
- administrator receiving calls on behalf of the customer’s company
- mailing address
- processing of incoming messages and forwarding to the owner’s personal mailing address.
A virtual office is closely linked to the rental of a legal address from a secretarial company. This option is commonly used by companies that do not conduct business at their place of incorporation (have no source of income) and therefore do not require physical office space.
Reference: certain companies are required to demonstrate substance in the country of incorporation, which entails having an office, a team of employees, and maintaining proper reporting. In offshore jurisdictions, these requirements are often applicable to licensed types of businesses, including financial institutions, holding structures, and insurance companies.
Is registering multiple offshore companies under one legal address illegal?
Depending on specific offshore jurisdiction, local government authorities allow the registration of varying numbers of non-resident companies under a single legal address. The limits can range from a few to tens or even hundreds. Engaging in such practices does not have negative consequences for foreign clients.
Registered agents in offshore jurisdictions operate entirely within the framework of the law and willingly collaborate with government regulators. Both parties share a common goal of attracting foreign capital to their country. It is essential for them to encourage as many foreign entrepreneurs as possible to register offshore companies.
Legal address of an offshore company and postal correspondence
The services provided by administrators for renting out a legal address in offshore jurisdictions as part of a standard package do not include the use of the address for receiving postal correspondence. This is considered an additional service that needs to be paid for separately. In some cases, a secretarial company may provide a separate postal address different from the legal one.
Changing the address within a single jurisdiction
The practice of changing the legal address within a single offshore jurisdiction is standard. Business owners often encounter situations that require them to change the official location of their offshore business, especially in 2023, amid the global crisis and investor relocation to countries with more favorable conditions and a stable economy.
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Changing the legal address of an offshore company with a change of registered agent
A classic offshore company is required to maintain a relationship with a registered agent throughout its lifecycle. The official intermediary, also known as a corporate service provider, must have a license to provide such services in the offshore jurisdiction.
International practice shows that most business owners turn to professional administrators to acquire or register offshore companies, who do not always collaborate with licensed registered agents within a single jurisdiction. Thus, the end-users’ choices are limited.
Without changing jurisdictions, many entrepreneurs opt to change their registered agent and, consequently, the legal address. There can be several reasons for this:
- Opening multiple offshore companies within the jurisdiction linked to the same business. Failure to change the legal address will result in unwanted affiliation.
- The professional administrator (secretarial company) demonstrated unprofessionalism and is incapable of implementing specific services required by the client.
- Due to temporary financial difficulties, the corporate service provider failed to pay the mandatory fees to the registered agent, who subsequently blocked the issuance of documents for the client.
- After signing the contract with the provider, there is a discrepancy between the promised service cost and the established prices.
- The disappearance of the provider and severed business relationships. In such a case, the abandoned client seeks a new agent.
Before announcing the termination of relations with the professional agent, finding a new administrator and obtaining their consent to serve the offshore company will be necessary.
How to find a new agent and legal address for an offshore company?
Finding a suitable intermediary is not an easy task and requires attention, as it directly affects the quality of service and financial burden. For example:
- The pricing policies of different registered agents can vary significantly. There is a risk of not finding an administrator with the same or lower rates, resulting in a substantial increase in service costs.
- There may be disagreements between the client and the registered agent regarding the amount of personal and business information stored in the administrator’s database. However, in practice, all legal norms regarding what is stored by the agent and what is not are enshrined at the legislative level.
- Changing the legal address of an offshore company with a change of registered agent entails providing additional information to the offshore registrar’s file and modifying the existing constitutional documents, such as the articles of association and memorandum of association (changing the documentation format). Therefore, it is necessary to notify counterparties or undergo re-registration.
The nuances mentioned above create uncertainties for business owners when making a decision. It is essential to carefully consider and resolve these issues. Additionally, the aforementioned operations incur costs, including:
- fee for the loss of office, as stipulated in the agreement, in favor of the registered agent
- unpaid fees to the administrator for services rendered
- payment for the services of the new secretarial company and registered agent for the upcoming year.
As a formality, the director of the offshore company is required to sign a brief protocol establishing the owner’s decision to change the legal address together with the change of the registered agent. The processing time for this operation is typically around two weeks.
To avoid encountering such issues and the need for a forced change of registered agent, it is advisable to register your offshore business with the assistance of experienced professionals. We exclusively collaborate with reputable legal agent entities that possess vast expertise and value their reputation, ensuring a high level of service.
Redomiciliation – changing the legal address of an offshore company along with the jurisdiction
There are instances when a business owner needs not only to change corporate service provider but also to transfer the offshore company to a different jurisdiction. This process is called redomiciliation. It often arises from the owner’s desire to minimize taxation even more or is a necessary measure, for example, in response to sanctions and new regulations.
Redomiciliation is when a legal entity transfers its registration from one jurisdiction (country) to another. This process differs from establishing a foreign branch or subsidiary abroad.
For instance:
- If a foreign company opens a branch in Singapore, it remains the same foreign corporation conducting business in Singapore. Thus, its activities are primarily regulated by the laws of its home country.
- When a foreign company incorporates a subsidiary in Singapore, there are essentially two entities: the foreign parent structure and the Singaporean subsidiary. The Singaporean subsidiary has a separate legal status and offshore legal address and can independently enter into contracts. The corporate group will be regulated by both the home country legislation (for the parent) and Singaporean legislation (for the subsidiary).
- During redomiciliation, the owner converts the foreign company into a company registered in Singapore. This means that all foreign entity’s rights and obligations are transferred to a new Singaporean structure represented by a single entity. In this case, the company’s establishment is governed by Singaporean legislation.
Redomiciliation makes sense from a commercial standpoint. As mentioned before, when the company’s location is changed to another jurisdiction, it remains the same organization, with only its place of registration being altered.
This ensures uninterrupted business continuity, and the corporate reputation, credit ratings, and track record remain unchanged. It is advantageous when establishing connections in a new location when the company has an already established reputation and can freely demonstrate its expertise, including for licensing or financing purposes.
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