International business has changed considerably in the past several decades and “offshore incorporation services” are in demand now, more than ever before. Just as new forms of businesses have emerged over the years, new ways of doing business have also evolved. Accompanying these new developments are new issues as well. A more contentious business type that is fast becoming a catchphrase within legal and financial circles is the offshore company.
While offshore company incorporation is not actually a novel concept, today’s offshore companies differ largely in function, if not in form. At their most basic, offshore companies are businesses incorporated outside the primary or original country of operations of the company. This definition would include all multinational companies in existence.
However, seldom would multinationals refer to themselves as offshore companies. The term nowadays is generally reserved for a subset of out-of-country business operations. Specifically, offshore corporations are found mostly in territories known as offshore jurisdictions or offshore financial centers.
It is often said that the success of any business depends on its location. For offshore companies, the location most preferred for their incorporation is within offshore financial centers which are characteristically tax competitive regimes. The low-tax feature of offshore jurisdictions is undoubtedly the single most important determinant for forming offshore companies these days.
Although traditionally known as tax havens, many offshore centers are trying to alienate themselves from the term. This is because the label “tax haven” since the early 2000’s has been associated with tax evasion and questionable tax mitigation schemes.
Tax avoidance is primarily the main motivation for offshore company formation. Usually, what is sought by owners of offshore companies is the low to non-existent personal income tax as well as the nominal corporate tax rates offered – anywhere from 0% to 10%.
There are also a number of offshore jurisdictions that do not levy capital gains tax and inheritance tax. There are those that also provide other tax exemptions for foreign corporations.
This reduced taxation may amount to very substantial savings for offshore companies engaged in the acquisition and transfer of various assets. As a matter of fact, it is in this “tax liberal” context that professional financial planners argue in favor of offshore company formation in countries that do not impose such taxation.
offshore company Forming certain offshore companies in offshore financial centers is markedly less difficult than incorporating within one’s country of residence. Of course, this is not applicable for businesses that require a prior local license as demanded by legislation in the offshore jurisdiction.
Nevertheless, since offshore companies mostly act as holding companies or trusts, setting one up is quite easy. Many offshore company formation services exist, particularly on the Internet, where one can be assisted for a minimal fee to have an offshore company incorporated on your behalf in under a week.
There are even offshore companies that already exist which can be bought “off the shelf”, so to speak. These “shelf” companies, however, are less common and are commonly regarded as high risk since their history may be more of a liability to the prospective company owner than a benefit.
Related to the effortlessness of offshore company formation is the relatively low maintenance requirements for operating an offshore company. In many offshore jurisdictions, reportorial duties are almost non-existent. If reporting is performed at all, nominee directors can fulfill such requirements.
Once an offshore company is in place, it may perform a wide variety of powerful functions. A particular form of offshore company, the International Business Company (IBC), may not engage in local business activity in the offshore jurisdiction where it is incorporated. Other than that, IBCs, like any other offshore company, may do just about everything else allowed of offshore companies.
Offshore companies may engage in international trading, investment of funds, acquisition and disposal of assets, being a vehicle for asset protection and holding other businesses and companies among many other things. Each purpose has its pros and cons, finance-wise, depending on the intended goal for the offshore company as well as the particular business environment provided by the offshore center.
Lastly, offshore companies enjoy a greater level of anonymity and privacy. This is afforded by strict banking laws as well as the aforementioned simplified reportorial requirements.
Although recent developments point towards the adoption of an international tax standard that would tend to lift the so-called corporate veil, information regarding offshore companies is still considered strictly confidential. Any requests for access to information are subject to terms of international treaties and are provided only for investigated cases of tax evasion, terrorist funding or money laundering
offshore business planIf you want to reduce business costs and increase productivity, you should look at the option of offshore company incorporation. The process of incorporating an offshore company is not so easy, but with the right help, you can simplify the process. To set up your business offshore, you need to find the proper consultant to do the job. Many people think that offshore companies are generally established to hide shady business practices. However, establishing an offshore company is a smart move for any businessman. Finding the right place to set up the company is important when you have decided to open your business outside of your country.
Legal protection of properties is ensured when you open your business offshore. Generally, the assets of the owner are tied to the business when you open a business in your country. Your personal assets are no longer tied to your business, however, when you open an offshore company. In this way, you can separate your personal assets from your business. With an offshore company, your personal assets are immune from any judgment made against your business. You can’t expect this when you start your business in your own locale.
Sometimes, you may want to remain anonymous as a business owner, which is not possible when you start the company with yourself as proprietor. Offshore company incorporation provides the anonymity that you seek. Maximum privacy of business owner information is guaranteed when you have set up your company offshore. You also don’t have to disclose your asset information to the public with an offshore company.
One major reason for starting offshore companies is the tax benefits. The potential savings in taxes are huge for your business when you establish a company offshore. Generally, businessmen are interested in opening a company in a low tax state. If there is the possibility, you can start your business in another country where there may be no tax at all. The savings in this case can be great. However, the amount of money you may save in taxes is determined by the jurisdiction of your business. The benefits you obtain may vary widely depending on where you start your company.
With your company based offshore, you can acquire and merge any company without boundary restrictions. Moreover, there are no restrictions related to the owning of shares. The actual company registration takes about 10-20 days as a number of countries all over the world welcome foreign investments. The annual registration tax and resident agent fees will be nominal in the offshore country. Depending on the needs of your business, you can make amendments to the business structure at any time.
offshore company incorporation It is believed that more than 50% of the world’s financial assets are placed in offshore banks, trusts and funds. Every year the number of incorporated offshore companies grows and offshore business is constantly expanding.
Many clients around the world utilize offshore company incorporation, including small private or family entities, as well as large international corporations. These entrepreneurs are involved in different business activities, including but not limited to trading and distribution, consulting, banking, brokerage, investment fund and trust management, energy, building, art, film industry, hotel business and many others.
An offshore corporation has two main elements. One element is that it is a true corporation. That means it is created like any other corporation with an Articles of Incorporation which sets forth the corporation’s purpose, functions, limitations, and structure. Corporations also have By-Laws which specify in greater detail the corporate structure and operations. Corporations must have a board of directors. The board of directors conducts regular meetings to be informed of the corporate actions, projects, duties, contracts, personnel matters, debts, profitability, and functions. The corporation’s board of director’s vote on issues brought before them and publishes meeting minutes which keeps a record of their actions. Corporations also have a chairman of its board of directors. Corporations also have officers which usually includes a president, treasurer, and a secretary who all report to the corporation’s board of directors. Some tax haven jurisdictions require three officers while others only require an offshore corporation to have one officer.
The second element for an offshore corporation is that it is “offshore” meaning it was created in a country outside of the owner’s home nation. These corporations are often formed in countries with little or no taxation on their income earned outside of that country. This is why those types of countries are known as “tax havens”.
Following offshore company incorporation, the corporation can conduct business anywhere in the world. A corporation could sell its products and services exclusively online meaning that its only customers visit the company website and orders products and services using website forms and pays by credit or debit card. Other methods for paying online include PayPal or similar third party credit card processors. Some companies allow bank wires or checks sent by international couriers to pay for their online products or services. Tax haven countries normally do not collect income tax, corporate taxes, or even sales tax or Value Added Tax (VAT) for these online transactions because all of the customers are from other countries.
An offshore corporation can provide products and services to foreigners who visit the tax haven country to conduct business directly with the corporation. These clients are not citizens of the tax haven country. Therefore, the corporation can sell its products and services to these foreigners and still be able to avoid paying income tax or corporate tax on these sales. However, since the corporation is selling its services and products to foreigners within the borders of the tax haven country the corporation will be required by some tax haven jurisdictions to pay a sales tax and/or a VAT. In this instance, the corporation will adjust the sales price to include these taxes.
As you can see, an offshore corporation benefits from being based in a tax haven country while providing their products and services online.
An offshore foundation can be formed with different purposes. Most people think that a foundation is a charitable only entity. That is not the case. Some tax haven countries have laws allowing for the creation of private foundations. While public foundations are usually government, private charity, or church owned for only charitable purposes, a private foundation can be formed for many reasons. Usually they are set up for estate planning and asset protection reasons. That means the foundation holds ownership to someone’s assets and upon death or disability passes the control of the assets to the named beneficiaries (heirs) while the foundation remains as a perpetual (lifetime) legal entity.
Offshore foundations have been around for a long time dating back centuries to Medieval times when churches and governments created foundations for charitable purposes. In the early part of the 20th Century Switzerland created a law allowing for private foundations. A couple of other European countries passed similar laws. The purpose for these private foundations was to protect a family’s wealth and to provide a cheaper and faster method to pass control over a family’s assets to the heirs. An offshore foundation came into existence once wealthy people from other countries used these laws for their own assets held in countries outside of the three European ones.
Following offshore company incorporation, an offshore foundation can act as a holding company for offshore corporations owning different assets. The foundation holds the stocks of the offshore corporations. That way the foundation owns a person’s assets and holds them for the named beneficiaries. When the owner dies or is disabled, the foundation continues to own the offshore corporations assets, but the beneficiaries take immediate control of the foundation and its assets. Being a perpetual (lifetime) legal entity allows the heirs of the beneficiaries to take control of the foundation and continue the lineage forever. Foundations thus avoid costly probate which takes too much time in the civil courts to finally award the rightful heirs with the assets which were mentioned in the will. Offshore foundations can exist for centuries passing on ownership of all assets from the original founder to the descendants and their descendants.
Offshore foundations are usually prohibited from directly engaging in commercial business activities, but can earn income through passive activities such as owning stocks of corporations conducting business, collecting rental income from real estate owned by the foundation or its offshore corporations, getting bank account interest, owning stocks, bonds, mutual funds, commodities, and other securities. Most tax haven countries who allow private foundations will allow the foundation to set up international brokerage accounts to buy and sell securities without being taxed on their profits.
Private offshore foundations are usually exempt from income taxes by some tax haven countries. Especially when the private offshore foundation is only earning income from passive investments or investments made outside of the tax haven country.
It is often advantageous to implement an offshore company into a trading business model, which may act as an intermediary of a producing/buying and distributing/selling process. In many cases, such an offshore company formation provides an excellent tax-optimization opportunity in addition to confidentiality, asset protection and profit maximization.
international investments In investment businesses, an offshore company usually acts as an intermediary, which formally owns an investment portfolio. In addition, it is advantageous to use offshore companies for heritage management, tax optimization and asset protection purposes. However, it is necessary to remember at all times that every offshore company of each particular offshore jurisdiction is different from an offshore entity registered in another offshore country. In order to use an offshore company legitimately, to bring desired results, it is advisable to cooperate with an offshore business advisor, who has adequate knowledge and expertise in different offshore jurisdictions. It is important to choose an offshore jurisdiction which is politically and economically stable, as well as to understand that particular country’s laws, in order to choose the most appropriate type of company and structure it in compliance with the existing regulations, while at the same time extracting the maximum profit.
Persons involved in entertainment or film industry, as well as building, IT and technology, finance, consulting, medicine and other economic spheres may benefit from the use of an offshore company in terms of tax optimization and, thus, profit maximization.
However, it is not always legal to utilize offshore company formation for just any tax optimization purpose: The proper structure must be created in cooperation with a professional offshore financial consultant. A private person should seriously consider an agreement with such an offshore company, which regulates their relations, guarantees provision of agreed-upon services and provides the necessary professional support during the whole cooperation period. As a result, the proceeds of a business activity are received by an offshore company which then pays an individual for his work. The funds kept by the offshore company may often remain untaxed in a 100% legal context.
It is possible to register different types of intellectual property including copyrights, patents and, trademarks through an offshore company, which then enters in relations with other companies that wish to use these intellectual property rights. An offshore company may receive and accumulate proceeds of this type of business.
Use of a correctly structured offshore company in the appropriate jurisdiction may significantly minimize taxes when buying a property or receiving it as a gift or heritage. In such a case, an offshore company becomes an effective asset protection instrument. It is, however, important to remember that not every offshore company may provide these benefits, and it is necessary to investigate each situation individually, in order to determine the most effective strategy for reaching the set objectives.
offshore servicesCarlo Scevola & Partners provides assistance with offshore services, including offshore company incorporation, forming an offshore corporation, an offshore private foundation, or an offshore trust. Once the initial offshore service of setting up an offshore entity is accomplished, the law firm then assists the client with opening an offshore bank account for the offshore entity. In addition, the law firm provides offshore services by assisting offshore entities with acquiring an offshore brokerage account to buy and sell stocks, bonds, commodities, precious metals, and international currency trading (forex).
Probably the most important offshore services provided by the law firm is to sit down with the client in order to determine the client’s needs in terms of asset protection, tax reduction or elimination, estate planning, probate avoidance, wealth management, future investments, and asset growth.
Offshore services include advising the client as to the best tax haven country. Tax haven jurisdictions vary in regards to their corporate privacy laws, bank secrecy laws, ease with forming offshore structures, government fees, reporting requirements, and asset protection. Once the right fit tax haven country is decided upon, offshore services then include choosing the best offshore entity which fits the client’s needs. For instance, one offshore service for a client most concerned about estate planning and avoiding probate would be to advise creating an offshore private foundation or an offshore trust. Another client may be more concerned about global asset protection whereby the best offshore services would be advising to create various offshore corporations to own different assets so they are not co-mingled into just one offshore corporation. Another client might consider paying no income or corporate taxes at all the most important priority whereby the offshore services provided include choosing a total no taxes haven over that of low tax havens.
Bankers also provide offshore services by having full online banking services 24 hours per day 7 days a week so offshore corporate customers can access the banks offshore services from anywhere in the world.
Brokers too can provide offshore services for individuals and offshore corporations to open accounts in order to take advantage of the brokerage offshore services to buy or sell stocks, money market funds, government bonds, or other investment securities.
Offshore services is a term also used to describe “outsourcing” which is finding and hiring part-time or even full-time staff from different parts of the world to work for one company. These offshore services often include programmers, webmasters, researchers, writers, data entry, website and blog maintenance, search engine optimization, etc. Offshore services like these can be done from one’s home. India, Pakistan, China, and the Philippines are well known or their cheap labor force which is why many companies seek their offshore services.
As you can see, offshore services takes different forms. From offshore company incorporation services to banking and brokerage offshore services to outsourcing cheap labor offshore services.
CS&P’s team of lawyers, advisors and agents is spread over the six continents and brings to the table expertise in all the major disciplines relevant to international strategy, finance, operations and marketing when it comes to offshore company incorporation. Find out how our team can help by contacting [email protected]