All You Need to Know About Offshore Companies

It should also be added that as a rule, offshore companies have very little or no tax liability. In most cases, they are exempt from corporate income tax, capital gains tax and withholding taxes in the country of incorporation. In contrast to purely offshore jurisdictions, countries with a territorial tax system levy income tax, which can be found here https://www.offshorecorptalk.com/. However, companies that derive profits solely from foreign sources may benefit from an income tax exemption.

What is an offshore jurisdiction?
An “offshore jurisdiction” is usually called a foreign state or territory with low taxes or full tax exemption for business entities. Companies incorporated there also enjoy simplified reporting requirements, low administration expenses, and a high level of confidentiality for business owners. Broadly speaking, “offshore” can refer to any location abroad that differs from the owner’s or investor’s home country. However, we will consider mainly classic offshore jurisdictions, sometimes called “tax havens”.

The list of offshore jurisdictions in the world is quite dynamic due to serious tax reforms in recent years. Some countries are losing the advantages they used to offer, but some remain attractive for international business.

Typical offshore jurisdictions include the Bahamas, Bermuda, the British Virgin Islands (BVI), the Cayman Islands and others. Many countries, among which are some former offshore jurisdictions, have switched to a territorial-based tax system. These include Gibraltar, Guernsey, Hong Kong, Isle of Man, Jersey, the Marshall Islands, Panama, Seychelles, Singapore, St. Kitts and Nevis. The United Arab Emirates continue providing tax exemption for its free zone companies under certain conditions.

What is an offshore company?
An offshore company is a legal entity duly registered in one of the offshore jurisdictions. In most cases, it is created as a private company limited by shares. It may conduct any business that is not prohibited by law and does not require a special licence.

Offshore companies are widely used in international trade of goods or services, agency, holding, investment, intellectual property or real estate activities, as well as for asset protection. They can operate globally and open bank accounts anywhere in the world, subject to country-specific restrictions. Companies engaged in particular activities must have the “economic substance”, which implies adequate office, assets and personnel in the country of incorporation.

Company laws of some countries preserve the status of “International Business Companies” (IBCs) to distinguish international (offshore) companies from entities operating mainly in the domestic market. Such jurisdictions as the BVI or Belize abrogated this division and now provide for a single status for all companies. Other countries, like the Bahamas or Seychelles, continue to have special IBC laws in place.

How to set up an offshore company?
To set up an offshore company, you need to take the following steps:

Choose a preferred jurisdiction.
Develop a desired company name.
Determine who your company’s directors and shareholders will be. Decide if you need any nominees in the corporate structure.
Prepare personal and other documents for customer due diligence.
Apply to a registered agent or a professional intermediary for a company registration.
Get the set of corporate documents from registration and start the business.
Step 1. Choose a jurisdiction
Today there are no perfect solutions that would meet all customer needs. Besides favourable tax conditions, the practical details of registering a business in a specific jurisdiction should also be assessed. For example, a chosen jurisdiction may have no available account opening options or be inconvenient for international payments due to restrictions established by third countries. Some jurisdictions are included in international “blacklists”, which may hinder banking

transactions or cause increased withholding taxes. Therefore, it is necessary to carefully weigh all the “pros” and “cons” of a specific jurisdiction in consultation with professionals.

An existing offshore company may move from one jurisdiction to another through re-domiciliation. For example, Seychelles, BVI, Cayman Islands, Gibraltar or UAE allow continuation procedures for companies incorporated within or outside these jurisdictions.

Step 2. Develop a company name
A company name must comply with the requirements of local legislation and must not be misleading or offensive. It must be unique and not duplicate names of existing companies. The name must be accompanied by the relevant ending, for example, “Limited”, “Corporation”, “Incorporated” or its abbreviation – “Ltd”, “Corp” or “Inc”. We recommend creating several alternative names before incorporation should the Registrar deny the main variant.

Step 3. Determine your company’s structure
Most offshore jurisdictions do not set requirements for director’s or shareholder’s residency or nationality. A company must have at least one director and at least one shareholder. The simplest company structure comprises a sole director and a sole shareholder. A company can stipulate the competence of its management bodies and the decision-making procedures in the company’s Articles or shareholders’ agreement.