Benefits of offshore
Offshore company formation provides several potential benefits over the traditional "onshore" corporation including all of the following:
- Legal protection
- Ease of Setup
- Minimize Taxation
- Asset Protection
Offshore company formation and asset protection
Placing your personal assets into a separate legal entity is generally a good idea, whether you place them in a traditional company within your home country, or you place them in an offshore company. Of course, offshore companies and assets are much more difficult to locate and can provide protection against frivolous litigation suits.
Offshore company formation provides an additional layer of legal protection by removing your name from your assets. Lawyers typically perform a preliminary search to locate assets that may be tapped in the case of a winning judgment. Utilizing offshore companies by titling assets and transferring them to your offshore company can be a valuable tool in deterring these lawyers; preventing lawsuits and potential adverse judgments.
Bringing litigation against properly structured offshore companies, offshore trusts and offshore foundations is more difficult due to the added difficulty of locating foreign assets and subsequently proving ownership of them. Further, in many jurisdictions, the lawsuit would have to take place in the country of incorporation since foreign judgments are not recognized, except in cases of money-laundering, weapons and drug smuggling, and criminal tax fraud. It is important to note that tax fraud is an entirely different term from tax evasion and tax avoidance. Tax evasion is only an administrative offense in many countries and tax avoidance is an entirely legal means of minimizing personal and corporate taxes. Often, these terms are conveniently intermingled by Governments of high-tax countries.
Utilizing an offshore entity to conduct your business, bank transactions and/or personal financial investments provides additional privacy and anonymity. In many jurisdictions, the company officers, shareholders and beneficial owners can either be omitted from the incorporating documents and/or are not on any public record at all.
Ease of Setup
One often overlooked aspect of offshore company incorporation is the relative simplicity of the process. Offshore company formation in many jurisdictions is a quick and seamless process and OCA Offshore aims to make your offshore incorporation as simple as possible. Additionally, ongoing requirements for offshore companies are often more relaxed than for "onshore" companies.
Offshore companies established in low or zero tax jurisdictions may reduce, delay or even completely eliminate the tax burden on the company. Of course, there are often taxes to be paid in the country of citizenship/residence or business domicile, but offshore company incorporation may minimize these taxes. For instance, the taxpayer may be able to delay payment of the taxes until gains are repatriated allowing the gains to compound over time.
How to Use
An offshore company is merely a company that has been incorporated in a country other than ones place of residence, citizenship or domicile. Countries interested in attracting global business and expanding their economies compete for international business by implementing competitive tax regimes and guaranteeing privacy levels now, unfortunately, a distant memory in other countries. Global tax competition is not a phenomena; neither are offshore companies nor the offshore industry as a whole. Offshore companies play an integral role in the global economy providing confidential, tax efficient means of international investing and conducting global business. These and examples of additional uses of offshore companies are outlined in the following sections.
Typical uses of offshore companies include the following:
An offshore company may accept orders directly from a purchaser and instruct the manufacturer or other seller to deliver the goods directly to the customer. The resulting profit may be accumulated offshore by the third party offshore company. This generally is useful when the manufacturer (seller), purchaser, and businessman orchestrating the transaction are all located in different countries. The supplier invoices the third party offshore company who then re-invoices the purchaser at the sale price retaining the profit.
Offshore companies are often created for the purpose of holding shares in other companies, international real estate, equities, bonds, commodities or for the trading of forex, shares, derivatives, or any other type of investment. Funds may be accumulated and reinvested throughout the world with the offshore corporation providing maximum anonymity and tax savings. The investments may be taxed in the jurisdictions where they are located; however, some countries offer tax free bonds and allow interest and investments in the form of bank deposits to be accumulated in gross over several years. Additionally, many countries do not tax capital gains on investments. Lastly, a properly structured investment company in an offshore jurisdiction having a tax treaty with the desired investment country may allow for a lower tax rate on dividends, interest and royalties generated from these investments.
Royalties/Patents/Copyright Holding Companies
The purchase or assignment of the right to use a patent, trademark, copyright or other "know how" to offshore companies often allows the royalties to be paid to the offshore company at a lower tax rate than could otherwise be enjoyed. These royalties are often subject to tax withholding at the source country; however these taxes may be lowered through offshore company formation in a second country. This type of offshore corporation is often established utilizing a tax resident entity that is able to access double taxation avoidance treaties such as the Seychelles CSL.
Professional Services Company (PSC)
Expatriates working abroad often utilize personal services offshore companies to minimize tax burdens in their home countries. The contracting company may pay a salary direct to the expatriate capped at a certain sum so as to minimize the tax burden, with the remainder being paid to the PSC. Alternatively, they may pay the full amount into the PSC with the expatriate taking a lesser salary, allowing the offshore company to accumulate and invest the remaining funds.
An offshore company is often used as part of an asset protection structure involving an offshore trust, offshore foundation or two or more offshore companies domiciled in separate jurisdictions. The intention is to make it difficult for prospective adversaries to locate assets and consequently win judgments against these assets. These structures typically employ at least two separate entities domiciled in separate jurisdictions with nominee services including both nominee directors and nominee shareholders.
Inheritance Tax Avoidance/Probate
Individuals, with international assets and are looking to ease matters of probate for his/her heirs, may benefit from the establishment of an offshore personal holding company. Where international assets such as real estate or other offshore investments are owned by an offshore company, the assets may be shielded from inheritance taxes and higher taxation rates in the home country of the offshore corporation owner. Probate can become an expensive nightmare requiring matters to be settled in each country where the assets are held. An offshore company domiciled in a third country can mitigate this problem and provide a clear and simple transfer to the intended heir of all international assets by specifying a transfer of shares upon the passing of the shareholder.
Most people merely want to shield their assets from the public. None of the jurisdictions offered by our company require the filing of the names of directors, shareholders or beneficial owners. A higher level of privacy may be achieved through the use of an offshore company. We can also offer additional guidance concerning how to arrange ones affairs to achieve maximum privacy.
Accessing Tax Treaties
Certain offshore companies may achieve tax resident status allowing for offshore investing in other countries with a lower withholding rate than could be achieved in their home country. The Seychelles Special License Company (CSL) is one such offshore company being utilised to access the growing list of tax treaties signed by Seychelles, amongst which includes China. Cyprus, South Africa and Malaysia. This offers many options to reduce taxes through the network of Double Taxation Avoidance treaties.
Overseas Property Holding
Many of the costs associated with purchasing overseas property can be minimized through the use of an offshore company. Real estate, such as vacation villas, may be purchased through an offshore corporation and the shares sold to the next owner allowing for a quick and easy transfer and avoidance of many taxes associated with the sale of property.
Offshore corporations can take many forms but are generally some form of company with limited liability. The most popular of these structures are the International Business Company (IBC), Limited Liability Company (LLC) or any structure which closely resembles one of these two types of offshore companies.