Why Do Wealthy Entrepreneurs Establish Offshore Companies?

The term ‘offshore company’ can refer to a company registered in an island state located off the shores of continents. However, it can also refer to a foreign company registered in any jurisdiction that offers tax incentives to entrepreneurs from other countries as well as asset protection mechanisms, extended financial opportunities, and so on.  

Many offshore companies are engaged in some kind of trading operations but it does not necessarily have to be so. People establish offshore trusts, funds, holdings, etc. to protect intellectual property, to own marine vessels, to provide transportation services, and for many other different purposes. 

Offshore jurisdictions offer serious tax advantages to business companies registered on their territories but this is not the only benefit that you can gain by starting an offshore company. Other advantages include a high level of confidentiality, a wide choice of asset protection instruments, great opportunities for inheritance planning, and so on.

Why do businesspeople choose to register companies in offshore jurisdictions?

Probably the main reason why people from different countries choose to set up offshore companies is the opportunity to save on taxes. In addition to that, offshore countries offer efficient capital protection mechanisms as well as various financial instruments. Besides, keeping your money with an offshore bank can also be a good idea. 

We would like to stress that the phrase ‘offshore jurisdiction’ does not have to refer to a small island country such as Mauritius, the BVI or other Caribbean islands. It is used to describe a country that offers certain advantages to foreign entrepreneurs establishing some economic presence there. Advantages characteristic of offshore zones can be found everywhere – in Europe, in America, in the Middle East, in the Pacific region, and so on. So why do corporations and private individuals choose to go offshore?  

Offshore tax advantages

Many offshore countries charge a 0% tax on corporate profits derived from foreign sources (from the sources located outside the country of the company’s incorporation). This advantage is normally available to non-resident companies. This means that your offshore-registered company has to be a tax resident of some other jurisdiction to be tax-exempt in the offshore country. Clearly, taxes are payable in the jurisdiction where your company is resident for tax purposes. In the modern world, you are free to choose the jurisdiction of your tax residence.

If you set up an offshore trust, it can be totally tax-exempt. You have to realize, however, that when profits are distributed to trust beneficiaries, tax obligations arise at the personal level. In any case, an offshore trust can serve as a highly efficient asset protection mechanism if you approach the matter wisely. A possible option that you may want to consider is establishing a trust in Nevis in a combination with company registered in the same jurisdiction. 

Asset protection

Offshore companies, trusts, and business structures of other types are also often used for asset protection purposes. You can shield your possessions from your home country’s courts of law, from your wasteful relatives, from raids, illegal seizures, etc. by transferring them offshore. This is not to say that your assets are going to be 100% safe but they will be much safer in an offshore jurisdiction than in your home country anyway.

Lower risks

Risk management is an important element of any business venture. You may run the risk of losing money in one of the following cases:

• If one of your company managers is wasteful or unprofessional. 
• If your investment portfolio is flawed or if you keep the money in the wrong bank. An offshore holding company can be a powerful mechanism for capital diversification.
• If the tax legislation in your home country changes. A politician running for a top public office will promise to lower the taxes but in reality, taxes are more often raised than lowered. If you have an offshore-registered company, you will be protected from tax increases.
• If business transparency requirements are enhanced in your home country. We have to admit that the strife for transparency of financial operations is a global tendency these days. However, offshore jurisdictions still offer better privacy to business owners in comparison to many onshore countries.

You can be highly flexible when creating an offshore business structure, which will let you manage the risks in a more efficient way. You can set up an offshore trust, create an offshore asset management company, register an offshore holding, and so on. Such instruments can help you hedge the risks and increase your income.

Confidentiality protection

The level of company ownership confidentiality that was available a couple dozen years ago is unavailable now. Even if you register a company in a faraway offshore country and higher a nominee director/ shareholder, your anonymity cannot be guaranteed. You will have to identify yourself at least to the Business Registrar when setting up an offshore company. Besides, the bank administration will want to have your identity too if you apply for banking services.

However, there are ways of increasing the level of your confidentiality anyway. We suggest that you should consider the following opportunities that can be found in some offshore jurisdictions:

• Open the company in a country that does not keep a Business Register or one that has a closed Business Register.
• Use the services of a nominee company director/ shareholder.
• Open accounts with financial institutions that disclose the account holders’ identities only to fiscal authorities on official requests. You may be interested in setting up an account with a payment system or with a neobank (electronic bank) instead of a traditional bank.
• Keep your money in different wallets and diversify your financial assets wisely.

You can probably achieve the highest level of anonymity if you create an irrevocable offshore trust. Choosing the right jurisdiction for this purpose is important. Nevis, for example, could be one of the options. The jurisdiction disregards court decisions made in other countries and if somebody wants to sue a Nevis-based trust, he or she has to make an upfront payment of US$ 100,000, which is certainly a deterring factor.

Little personal involvement in offshore company formation

You can form an offshore company without getting personally involved in the process. Hire a Registration Agent (which you will have to do anyway) and he or she will do everything for you. Your personal presence in the country of the company incorporation is not required and besides, some offshore jurisdictions have no reporting requirements. Thus, you can avoid red tape when registering an offshore company and maintaining it.

Speaking about the company maintenance costs, it does cost something to own an offshore company but it does not cost too much. Our Registration Agent will provide you with a legal address and in some cases, this is the only cost that you are going to have (well, you will have to pay an annual company registration fee in addition to that). This said, however, the economic substance requirements have been toughening over the recent years. A growing number of countries now want all companies registered there to have office space, telephone numbers, some company personnel, etc. This is especially true if the company is engaged in some sorts of business activities that require a license. Anyway, company maintenance costs are going to be smaller if you register the company in an offshore jurisdiction.

Offshore banking opportunities

Private individuals and corporate entities from most countries are welcome to apply for banking services to offshore banks. The choice of opportunities is great and you can open an offshore bank account for your business, for asset diversification purposes, for capital protection purposes, and so on. What offshore bank you should choose will depend on the goals that you pursue.

Please bear in mind that in addition to a current/ savings/ corporate account, you can set up a broker’s, a merchant, or an investment account with an offshore bank. In rare cases, your bank account can be anonymous. Please apply for our professional assistance if you would like to make use of all the banking opportunities that offshore banks offer.

EXPERT CONSULTATIONS FROM INTERNATIONAL WEALTH

from 799 EUR

PREAPPROVAL of the application for non-resident banking services: personal account – from 799 EUR, corporate account – from 999 EUR

free counseling services

Choose payment systems for high-risk businesses. Book free professional expert consultations

free counseling services

Choose foreign bank accounts together with professionals. Book free expert consultations

free counseling services

Offshore Merchant Account – Book a Consultation

An offshore company will open the world to you

Setting up an offshore company is a wonderful opportunity to extend the geography of your business operations. When you have clients in many different parts of the world, your turnover increases and so does your profit! You can do business all over the globe and consolidate the revenues in a variety of ways such as:

• Put money in the bank;
• Invest in various industries and countries;
• Transfer the money to an offshore fund or a tax-exempt offshore trust, etc. 

Non-resident companies are not subject to currency control in offshore jurisdictions so you can use any national currency for payments. Besides, you are free to enter business agreements with partners from all countries of the world with only a small number of exceptions. Thus, an offshore company will give you access to the whole world indeed.

Main advantages that an offshore company can bring

Below please find an incomplete list of bonuses and legal opportunities that you can gain by registering an offshore company:

• Minimal capital withdrawal costs;
• Access to tax agreements;
• Access to prestigious jurisdictions;
• Low costs of company registration and maintenance;
• Property rights protection;
• Insurance and reinsurance opportunities for your international business;
• A high level of confidentiality protection;
• Lack of currency control;
• Reduced customs duties;
• Advanced corporate legislation;
• Territorial taxation system;
• Few restrictions for business companies;
• Incentives for foreign investors;
• Legal protection of business deals;
• Long-standing general legislation;
• Opportunities for tax breaks and exemptions;
• Full range of banking services;
• Low overall taxes.

Once again, this list is incomplete. There are many other advantages that an offshore company may bring including the opportunity to establish legal residence in a foreign country, purchase real property there, register a yacht in the name of your offshore company, and many others. 

What business area should you choose for your offshore-registered company?

Most often, offshore-registered companies are used for the following business purposes:

• Trade including import/ export operations as well as trading on online platforms;
• Investment holdings;
• Financial services and some other types of licensed activities including gaming/ gambling, brokerage, insurance, offshore banking, etc.;
• Professional services and consultations;
• Companies to hold patent rights copyrights, licenses, and other intellectual property;
• Personal and corporate tax planning;
• Possession of yachts and other marine vessels;
• Possession of foreign real property;
• Many other purposes.

What countries levy no taxes on corporate entities?

The choice of the offshore country to register a company will depend upon a number of factors. If you are primarily looking to save on taxes, you should choose the country where the territorial taxation system is applied. Jurisdictions that use this system tax only the profits that the companies make at home, that is, in the country of the company registration. No income made abroad is taxed.

On the other hand, you have to remember that the USA, for example, taxes its citizens’ income wherever in the world it is made. The IRS watches all the American taxpayers and tax evaders are fined heavily. In any case, you have to find out about the CFC regulations applicable in your home country before registering an offshore company. Our experts will be happy to advise you on the matter.

Below we list the jurisdictions that charge zero or low corporate taxes. If lessening your tax burden is your primary goal, then you should probably consider registering a company in one of these jurisdictions:

• British Virgin Islands;
• Bahamas;
• Cayman Islands;
• Bahrain;
• Isle of Man;
• United Arab Emirates;
• Norfolk Island;
• Nevis;
• Singapore and a number of other countries with certain offshore benefits.

Please also bear in mind that several onshore jurisdictions offer considerable tax incentives to foreign nationals opening companies there and engaging in business activities. Most national governments are happy to see foreign capital coming to their countries.

OFFSHORE COMPANY FORMATION: CUSTOMIZED BUSINESS SETUP SERVICES

from 12000 USD

Combining a Nevis Offshore Trust and LLC Create The Ultimate Asset Protection Combo

from 5049 USD

Set Up an IBC or an LLC in Belize. Apostille and Professional Officers’ Services

from 6500 USD

Registration of a Partnership in the Marshall Islands

2550 USD

Registration of an LLC in Wyoming, USA for Non-Residents

from 2950 USD

Register an LLC in Nevis

from 8500 EUR

Register a Company with a Corporate Bank Account in Serbia

Most popular forms of offshore company ownership

The most popular forms of offshore company ownership include the following ones:

• Limited Liability Company.
• Limited Liability Partnership.
• Public Limited Company – PLC.
• Private Limited Company.
• Limited Partnership.

Besides, you can create business structures of other types as well. For example:

• A trust – a nice instrument of asset protection, inheritance planning, business management, tax reduction, and so on.
• A holding company – to hold offshore business companies.
• An offshore transportation company – for providing maritime shipping services, for example.
• A trading offshore company.
• A financial service company, etc.

Every form of company ownership will have its own advantages and its own limitations. Moreover, different offshore jurisdictions will suit companies of different ownership types. Please seek professional advice on the matter.

Open an offshore company for tax planning purposes

Companies registered in different jurisdictions have to carry tax burdens of different weights: some tax burdens are heavier while others are lighter. There are legal ways of lessening your tax bills by setting up a company in a certain country. First, there are tax havens that we have mentioned above. Second, many countries – from Panama in Central America to Georgia in the Caucasus – have Free Economic Zones (called Special Economic Zones in some places). These are specially designated areas where resident companies are exempted from many taxes that are payable on the ‘mainland’.

Registering an offshore company can help you save on taxes in a number of situations. For instance, this business instrument can help you solve the following tasks:

• Avoid double taxation associated with the payment of dividends, interests, and royalties;
• Manage your international financial operations;
• Engage in a specific type of business activities such as leasing services, for example;
• Manage your personal and family assets in an efficient manner.

International Wealth consultants are knowledgeable about all the advantages that an offshore company can bring. What is more, we are also knowledgeable about all the traps and pitfalls that you might encounter when launching an offshore company. We keep track of what is going on in the areas such as tax legislation, transfer-pricing regulations, economic substance requirements, and so on. Setting up an offshore company is not an easy endeavor but it can bring a large number of advantages and with our professional support, you can certainly hit the target.