What is an offshore company? Can this concept be explained in simple and clear language? Absolutely! There are too many rumors, speculations, and even outright propaganda around offshore jurisdictions, accounts and companies, that’s why we decided to break down the nuances for you in this article. We will use simple language to talk about what an offshore company is, what it means to move the funds to the offshores, and why businessmen need offshore accounts and companies.
Below is a list of topics that we will cover in this article. You can go directly to the section you are interested in or study the topic consistently and thoroughly. After reading the entire text, you will clearly understand what an offshore is and how to use it properly.
- What is an offshore?
- What are offshore companies and why do businessmen need them?
- What does it mean to move funds to offshores?
- What is an offshore account and how do I open it?
- What is an offshore company and how to open it?
- Features of using offshores
What is an Offshore?
The concept of an offshore has several meanings as it refers to two things at once:
1. Countries and jurisdictions. They are often mentioned in the context of the black list of offshores made by the Federal Tax Service or as countries with a favorable tax regime. In fact, the main reason for close attention to offshore companies is precisely the fact that they legally offer certain tax benefits to businesses and individuals.
If a company is registered in a classical offshore jurisdiction (Nevis, BVI), the income received is not subject to corporate tax.
The so-called midshores (for example, Singapore or Hong Kong) that adopt a territorial principle of taxation are somewhat similar to offshores: under certain conditions, you can pay zero corporate income tax if income is received outside the country. If we look at its territorial taxation principle, Panama is also more of a midshore than a classic offshore.
On average, offshore business legislation is simpler and clearer than in other countries. This is one of the reasons why international business is actively using offshore companies: reporting and accounting are much easier than in developed countries.
At the same time, we immediately note that offshore zones, or tax havens as they are sometimes referred to, require mandatory reporting despite the established myth that there are no accounting requirements for offshores. Overseas authorities do not always require to submit it for review or audit, but reporting should be kept and available upon request.
2. You may have guessed that the second thing we mean by an offshore is a company incorporated in the offshore zone. An offshore company is the one that is established and operates under the rules and laws of a classical offshore jurisdiction. In most cases, such companies are prohibited from operating in the territory of the jurisdiction itself, and all business activities should be concentrated outside.
What an Offshore Is: the Current State of Affairs
We need to make an important remark before we can proceed with analyzing what an offshore is. The fact is that the concept of an offshore is becoming more of a political, emotional, and propaganda notion than a specific concept in the wake of a process called deoffshorization. The latter can be defined as an ongoing fight against offshore activities, as well as the global tax hunt of residents of developed and developing countries (through various initiatives).
The fact is that there are laws which allow foreign investors and entrepreneurs to receive tax and business benefits in almost any country, including large and developed ones. Singapore is not considered an offshore – it is a midshore, an ordinary high-tax jurisdiction that offers benefits for international business under certain conditions.
The US (even after the tax reform) is not the most favorable country for universal control and regulation. However, international investors are allowed to save on taxes and (which is becoming a rarity) have some degree of anonymity for their investments. The US hardly exchanges any information with other states, so it is difficult to know who invested in what.
At the same time, the countries considered classic offshores with zero or close taxation that worked without registers of beneficiaries (beneficial owners) or with closed registers now have to comply with the strict requirements of international law. Large countries also require offshore companies to provide data on the depositors of offshore banks, company beneficiaries, and so on as part of the automatic information exchange (or on the basis of bilateral agreements);
Not all offshore companies have agreed to such conditions, but we should now conclude that pure offshore companies and pure non-offshore companies (onshore companies) are practically non-existent in the present-day business world. They are becoming a myth, even though you can often see stories in mass media about ‘just another offshore company’ that has actually no signs of an offshore.
Therefore, offshores can nominally include the United States and Nevis, or – with an equal degree of probability – any foreign jurisdiction and company in general.
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What are Offshore Companies and Why do Businessmen Need them?
The next important question that arises in connection with offshores is why they are needed. According to the media and politicians, the only purpose of using offshore companies is tax evasion and laundering of criminal proceeds.
To put it bluntly, it is very far from the truth. An offshore is an instrument that solves various problems. Like any instrument, it can be used for lawful purposes, but some choose to use offshores to break the law. The legal use is permissive, reasonable, and prospective, as evidenced by leaks of confidential data: the Paradise Papers that have recently made a fuss have shown that virtually all offshore industry users, including the Queen of Great Britain, Bono, and Madonna, operate strictly within the existing law.
Illegal use of offshores is punishable, and the hunt for such violators has recently intensified. The world’s tax administrations are actively cooperating and helping to locate fugitives and tax evaders.
Therefore, when we refer to the use of offshores, we are talking about nothing else but legitimate practices that help to optimize operations, increase business stability and protect assets.
What are offshore companies and why do businessmen need them? Here is a small list of possible ways to use an offshore company:
- An offshore is an instrument that helps you protect property rights to assets (companies, real estate, shares, etc.)
- Offshores are active business companies that conduct international activities, including import-export operations, the provision of goods or services, and so on
- Offshores are the companies that receive licenses to conduct specific types of activities – gambling, insurance, or even banking
- Offshore companies help to provide inheritance rights by adopting the rules that you want, not those that your legislation imposes
- Offshore companies help to optimize business processes, reduce reporting time, gain access to new customers and reduce the effective tax rate
Offshores are there to make business more efficient and safer. An intermediary in the form of an offshore company increases the chance for successful cooperation, investment, and the creation of new innovative products.
As you can see, the list of offshore applications is quite wide. Interest in them is shown first of all by prudent businessmen – and not by criminals as authorities and mass media are trying to put it.
What does it Mean to Move Funds to Offshores?
And here is another important topic that is typically brought up after we have clarified the essence of offshores: what does it mean to move funds to offshores? Considering all the above, you can now draw your own conclusions.
First of all, it means putting the assets under the management of an offshore company. This is the way shares of companies are taken out (sold to an offshore company), real estate and movable property are moved to another place (a house or a yacht is registered as a company property in Bermuda), and money is deposited in an overseas jurisdiction.
The last point means that the company also has a bank account to which you can deposit money, and it can be not only a corporate but also a personal account. In this context, moving funds to an offshore bank can mean transferring money to an overseas or foreign bank.
By the way, a foreign account is one of the first instruments you need to get to protect your assets. You will need it not only for personal purposes but also for an offshore company. We offer readers of the portal a free consultation on the selection of a bank account – both for personal and corporate purposes.
Write to us that you want to open an account at firstname.lastname@example.org if you need answers to the following questions: Where to open an account? What bank to choose? How quickly do they open an account? What account do I need for my company?
What is an Offshore Company and How to Register it?
When we talk about the practical application of offshores, in most cases we refer to the use of offshore companies. “To register an offshore company” actually means “to register a company in an offshore/foreign jurisdiction”.
We recommend that you look at the following offshore countries to register your company: Belize, Nevis, and the Marshall Islands.
What is the peculiarity of these states?
They offer high standards of asset protection and confidentiality of ownership information, as well as flexible and well-thought-out legislation. Moreover, company data is not public, and only local court rulings are accepted. The Marshall Islands is by far the purest classical offshore accepted by the international community. If you need the most classic offshore with minimal problems, opt for the Marshall Islands.
You will need to take several steps to register an offshore company:
- Write to our e-mail and tell us that you wish to register an offshore company
- Show up at the online consultation at the appointed time
- Tell us why you need an offshore company and how you are going to use it as this will help our specialist to select a specific service for you to achieve the legitimate goals you have set
- Determine the list of additional services: maintenance of accounting records for the offshore company, nominee service, opening a bank account
- Provide copies of documents – certified copies of passport and document confirming your place of residence (utility bill) are the documents most often required at the start
- After we check the documents and confirm that there are no circumstances that could prevent you from opening an offshore company, you will pay for the service. The amount depends on the place of company registration and the additional services you choose. You can pay by bank transfer, card, Paypal, WebMoney, or Western Union
- The company registration procedure begins as soon as we receive your payment. Please note that it takes from 1 week provided that we have received payment for the service and a full package of documents without errors
- Once the company has been registered, you will send the originals of some documents to us, and the original company documents will be sent to your address. You will receive copies of the documents to launch the activity immediately upon completion of registration.
What an Offshore Is: Features of Using Offshores
Finally, we would like to mention a few points that each future owner of an offshore company needs to know to protect his interests and comply with the current legislation:
- Offshores are legal and no one has the right to prohibit you to use them
- Offshores are the instruments used to do business and optimize business processes
- Offshores allow you to register companies remotely, so you can open a company without leaving your office
- Keeping records is mandatory for offshore companies! If you do not want to do it yourself or do not know how to keep them properly, apply for the Keeping offshore accounting service that we can provide.
- If your offshore company needs a bank account, FIRST learn about the possibility of opening it and only then proceed to the company registration (you can find out more about it at a consultation with our specialist)
What is an offshore?
There are two different things we mean when we talk about offshores. First, these are countries and jurisdictions that offer certain benefits to international business and/or are included in various offshore lists. Second, these are offshore companies that are registered in offshore jurisdictions. In general, an offshore or an offshore company is any foreign company, especially if it uses tax, investment and other benefits.
How do I register an offshore company?
You need to take a few easy steps to do that. First, find a good reason why you need an offshore. Each purpose has its own solution and this is not a whim: some companies will help you, while others will make your life unbearable. Secondly, prepare documents and submit an application for registration with our help. Thirdly, pay the fees and get the documents. Once this is done, you can enable additional services: open a bank account, start the accounting process, and so on.
Can I register an offshore company remotely?
Yes, an offshore company can be registered remotely. This is almost the only option for classic offshores as few people are ready to travel to a tiny island in the middle of the ocean just to register a company. If you mean a foreign company, remote registration is also possible here – for example, by proxy. The specific procedure depends on the country where you intend to register the company.