A Complete Guide To Offshore Company Formation

The term ‘offshore’ refers to an entity that is held overseas outside the boundaries where the individual resides. An offshore company, therefore, is a corporate structure that is owned by an individual living in one country with the company incorporated in another. Non-resident company structures are used for many reasons, most importantly to diversify one’s holdings, accounts, reduce tax burden and provide additional security.

Offshore companies, also called International Business Companies (IBCs) or Non-resident companies exist in some ways like a traditional domestic companies in being able to take on loans and incur debts yet are able to benefit from strong asset protection no tax liability that comes from incorporated offshore.

Governments create offshore environments as a means to internationalise their financial markets and attract foreign investors. These offshore environments are created to attract capital and businesses from non-residents individuals that are looking for capital friendly jurisdictions. By providing a conducive financial environment these countries in exchange for incorporation fees provide a financial landscape that supports business with low taxes and regulations.

Distinction Between Offshore and Onshore Businesses

There are two different classifications of company types that can be roughly divided between onshore and offshore company structures. Onshore business companies are usually high-tax jurisdictions, where company details and beneficial ownership is publicly available with more stringent legal and accounting guidelines as well as requirements for keeping accounts, records, audits, and tax returns.

Whereas in an offshore jurisdictions, there are usually low tax or zero tax possibilities on all worldwide income. Offshore tax havens also generally have few reporting, financial and auditing requirements as well as more flexible corporate laws that allow companies to exist without onerous regulations and tedious oversight mechanisms.

The Benefits of Setting up an Offshore Company

Most individuals choose to form an offshore company due to the number of advantages that can be had when moving offshore. Some of these advantages include:

• Beneficial tax status
• Favourable legal environment
• Less corporate regulations
• Easy financial reporting and audit requirements
• Investment opportunities
• International financial diversification
• Personal confidentiality
• Asset privacy and security

Offshore Companies have distinct advantages due to their unique situation. Because they exist “offshore” they are legally not obligated to act as a domestic company and are therefore free from many of the regulations that typically exist in traditional financial centres. 

Top Uses of An Offshore Company

An offshore company Any company that is based online can be incorporated in an offshore country that is best suited for their particular business. Each jurisdiction has unique regulations that make it advantageous for non-resident companies.

• Trading Company
• Intellectual or Physical Property
• Real Estate
• Investment company
• Asset Holding
• Offshore Funds
• Overseas Bank Accounts
• Insurance
• Finance Companies
• Captive Insurance
• Offshore Brokerages

Offshore Companies and Taxation

Companies that are formed in an offshore jurisdiction are free from taxation provided the business, transactions and all activities take place outside the boundaries of the country. Some countries like the US or UK though considered more like a modern high tax onshore environments have offshore company corporate laws that allow for the same benefits that can be found in traditional offshore tax havens. Offshore financial centres maintain a no-tax environment including no: 

• Corporate taxation
• Dividends taxes
• Income taxes
• Withholding taxes
• Capital gains tax

Choosing an Offshore Tax Haven to Incorporate

There are numerous counties around the world that offer favourable incorporation benefits. Despite there being many options available, there may be only a few options that are best suited for your specific situation. Each country and financial environment have specific corporate regulations that make each country different from the next. Some questions that are important to ask that may help determine what haven is right for you is: 

1. What are the corporate regulations:
2. What are the company requirements?
3. Does the country have and tax treaties (DTTs)?
4. Are there reporting, financial or auditing requirements?
5. What are the paid-in capital requirements?
6. Do I need a special license for the type of business I am involved in?

Choosing an offshore jurisdiction one should be well informed on the local conditions. Each country has its own set of policies and regulations that govern the corporate environment. Before choosing an offshore jurisdiction be sure to speak with a qualified international tax advisor or accountant  to be sure you are fulfilling your tax obligation. Similarly make sure you do your due diligence so that you are on the right track

Important points When Choosing an Offshore Jurisdiction: 

• Economically and politically stable
• Has a secure rule of law and an independent legal system
• Safe and sound banking system
• Is not blacklisted by the OECD
• Does the country have a stable currency?
• Has privacy laws
• Is a reputable offshore financial centre
• Is not blacklisted by the OECD

Best Countries in the World to Form an Offshore Company

While there are many jurisdictions that likely represent some of the finest offshore financial centres, it is very difficult to narrow it to THE top places in the world due to the fact that it is primarily dependant upon what one is looking for and measuring. However some of the most popular places in the world to form an offshore company are: 

• 1. Panama
• 2. St Kitts & Nevis
• 3. Mauritius

These three destinations still have a strong offshore financial centre that has been in operation for decades. Panama has strong banking secrecy laws, whereas Mauritius has a friendly business environment, and St Kitts and Nevis have some of the strongest asset protection legislation in the world. Depending on what you are looking for will determine what is right for you.

Takeaway

While there are many places in the world to chose to incorporate your company each jurisdiction has its own unique environment that is best suited for your needs. For more information on offshore company, formation go here.

If you would like to have a consultation to see what offshore jurisdiction is right for you, then please contact us.