When people hear the word ‘Offshore’ they get scared, but … what does the word ‘Offshore’ really ‎‎mean?

An ‘Offshore’ company is simply a corporation or a Limited Liability Company which was ‎‎registered in a jurisdiction which is not the place of residence of its founders.

It is important that everyone understands that there is no difference ‎between an offshore and an LLC company, as long as the company is registered and operates within the ‎frames of the OECD regulations.

Although ‎International Business Company Formation is not favored by the government, it is completely legal.

In today’s globalized ‎world, borders do not exist! Many people have only heard of the classic ‎Jurisdictions, but today the whole world open to us! Not to mention that, in today’s volatile and fragile economy, entrepreneurs need all the help they can get when ‎launching a new business or even to keep their old businesses afloat.

The motivations for individuals and corporations to utilise offshore planning and offshore companies include the desire to reduce tax, protect assets, manage risk, maintain privacy, avoid bureaucracy, reduce costs and enhance assets, amongst others.

Reasons for going offshore and utilising offshore companies for tax planning and offshore business include:

Access to foreign insurance and reinsurance
Access to top-rated debt history jurisdictions
Access to tax treaties
Accessing low cost areas
Banking privacy
Customs and duty exemptions
Enhanced privacy
Exchange convertibility
Foreign investment inducements
Free remittance of profits and capital
Higher yields and returns
Security of property rights
Territorial taxation on foreign income
Tested legal systems
The availability of sophisticated banking facilities
The search for political stability

Is setting up offshore illegal?

Setting up offshore is not illegal. However, withholding information about your offshore investments is illegal in some countries. An offshore jurisdiction should be perceived as just another foreign country, but with certain advantages. These can take the form of banking secrecy laws, advantages in forming companies for international trade through tax treaties, no interest tax, no inheritance taxes, no capital gains tax, no individual tax, and many others.Depending on your personal needs or preferences, there will normally be one or more offshore jurisdictions offering the services you are looking for.

What about my personal taxes?

COI does not provide personal tax advice and do not assist you to evade taxes. It is our business to show you the opportunities available on how to reduce or even avoid incurring a tax liability.

We always advise our clients to seek advice from a tax lawyer and/or accountant in their respective country before proceeding with the purchase of a company.

Can I move my existing business offshore?

Some companies move parts of their business offshore almost immediately as separate subsidiaries and profit centres. However, you will need to look at your business with a view to re-structure your activities and maybe look for new business opportunities on a cross-border basis into other countries. The possibilities are quite extensive, and we are able to assist you when it comes to applying offshore advantages to your existing company operations.

Are there any other advantages besides tax?

There are many advantages including anonymity, asset protection, foreign property holding through a company in a third country, limiting of liability in business transactions, unrestricted flow of capital, transfer of assets etc.

What is the future of the offshore industry?

Since the 911 incident, the international crackdown on money laundering has created a divide in the offshore industry, primarily between jurisdictions eager to comply with international standards of anti-laundering regulation and those that are less co-operative. The driving force behind those initiatives, have been influential organizations such as the Financial Action Task Force (FATF). The FATF was established by the G-7 countries in 1989 and is an inter-governmental body whose purpose is the development and promotion of policies, both at national and international levels, to combat money laundering and terrorist financing. As the FATF seek to apply more international pressure, it will become increasingly difficult for the less well-regulated regimes to do business.

Another major issue is the exchange of information, the profile of which has been raised in the current climate. The recently agreed EU Savings Tax Directive will change the face of the offshore industry, although to what extent is somewhat harder to predict. Previously no information was exchanged automatically in Europe unless there were concerns about illegal activities on a bank account. However, with the introduction of the EU Tax Directive, customers living within the EU are likely to be forced to engage with these issues, either by having to pay a withholding tax or agreeing to exchange information. The new directive will affect not only the EU Member States but “all territories under their control”, Switzerland and the USA. The UK has recently announced that if the Cayman Islands fail to voluntarily to comply with these new rules, the United Kingdom will legislate on its behalf.

To this effect, Hong Kong will soon become a much more important jurisdiction for tax planning as it is one of the only respectable and well-regulated “offshore” banking centres which will not be subject to the new EU directive on automatic exchange of information and withholding tax. Hong Kong should also be seriously considered for clients wishing to register an offshore company, as it is one of the few respectable locations in the world that tax on a “Territorial Basis”. Consequently, this means that corporation tax is ONLY charged on profits derived from a trade, profession or business carried on in territory of Hong Kong. Income sourced elsewhere, even if remitted to Hong Kong, is treated as tax free.

Privacy and Wealth Protection

High net worth individuals gain privacy and save on professional fees by using offshore companies as Personal Holding Companies. These entities may be suitable for inheritance planning and reducing the costs and time delays in probate.

Property and Land Ownership

Offshore entities are regularly utilised to own property and real estate.

Patent, Royalty & Copyright Holding

Intellectual property including computer software, technical knowledge, patents, trademarks and copyrights, can be owned by, or assigned to, an offshore company upon acquisition of the rights. The rights can then be franchised to companies around the world and the resultant income can be accumulated offshore. A carefully selected jurisdiction can withhold taxes on royalty payments with the commercial application of double tax treaties.

Stock Market Listings and Capital Raising Exercises

Many large corporations in economically and politically uncertain countries often diminish the perception of risk by moving ownership of assets and the base of their operations offshore.

Why and When Should I use an Offshore Company?

International trading
Holding portfolios of stocks, bonds and cash
Holding Investments in Subsidiary or Associated Companies
Utilising Double Taxation Treaties
Privacy and Wealth Protection
Personal Service Companies for expatriates and individuals
Property and Land Ownership
Employment Companies
Patent, Royalty and Copyright Holding
Stock Market Listings and Capital Raising Exercises
Financing
Ship Management + Yacht Owning

International Trading

By interposing offshore companies into international trading transactions it may be possible to accumulate profits arising out of these transactions.

Holding portfolios of Stocks, Bonds and Cash

Cash assets are held offshore, and may earn deposit interest gross or be placed in collective cash funds.

Holding Investments in Subsidiary or Associated Companies

Capital gains arising from the disposal of particular investments can be made without taxation. In the case of dividend payments, reduced levels of withholding taxes can be achieved through the use of a company incorporated in a zero or low tax jurisdiction that has double tax agreements with the contracting state.

Utilising Double Taxation Treaties through Intermediary Holding Companies

Companies wishing to invest in countries where a double tax agreement does not exist between both countries can establish an intermediary company in a jurisdiction where there is a suitable treaty.

Personal Service Companies

Individuals who provide professional services, such as contractors, entertainers, aviators, film executives etc., can realise considerable savings where fees earned are accumulated tax free in Personal Service Companies based offshore. Payments may also be structured to minimise income tax.

Employment Companies

Payroll costs and travel expenses may be reduced by paying employees working overseas from your offshore base. This may also provide tax relief and social security saving benefits for the employees.

Financing

Offshore companies can be established to fulfil an inter- treasury management function.

Contact Us

Should you require additional information, request a quotation or clarify any related matter, please contact one of our Consultants who will be happy to assist with your enquiries.

Disclaimer

COI ´s services are subject to its Terms and Conditions.The information provided by COI is intended as informative material and should not be relied solely upon in decision-making, especially if it concerns international tax planning and financial structuring as these areas are subject to frequent changes, although its efforts to keep all information on its website regularly updated.

COIstrongly recommends that each potential user of its services seek tax and legal advice before deciding on implementing a solution employing international financial structures. COI will not be liable for any damages, costs and expenses resulting from or incurred as a result of any action taken or omitted based upon any such information provided by COI.