An offshore company is a definition given to a business formed outside the company owner’s home country. Similar to any other company, an offshore company can conduct the same business activities, have identical management structures, and give shares to shareholders. The major differences between an offshore company and other company are offshore companies pay lower or not taxes and the company can remain confidential.
Many countries around the world strive to get people to form offshore companies in their country and the way to do so is to make corporate friendly laws. Tax exemption for foreign companies that do not engage in any business transactions with the locals and client confidentially for foreign companies are among some of the corporate friendly laws.
Why Form An Offshore Company?
The primary reason for forming an offshore company is to make full use of the tax exemptions privilege and the level of confidentially that is not usually found in traditional onshore companies. Furthermore, offshore financial centers often come with supportive corporate laws, reliable legal systems, and suitable asset-sheltering structures.
A lot of businesses, entrepreneurs, and investors choose to form an offshore company over an onshore company to:
- Reduce the unreasonable tax burdens that they faced in their home country
- Protect their assets when they are going through complicated legal issues and/or inheritance issues
- Protect their wealth from consequences that might arise from political and economic instability in their home country
Features and Benefits of Forming an Offshore Company
An offshore company offers multiple ways and benefits for clients who wants to get themselves involved in international financial trade and investments. Some of the different ways and benefits are as the following:
Ease of Incorporation
The registration and incorporation process is very simple and direct with some cases only took within 24 to 48 hours to complete the process. Make sure you prepare all the required documents before submitting the incorporation documents to the relevant authorities.
The cost to form an offshore company is very low. Most countries only charge around USD 200 to 300 a year.
An offshore company only needs a few Directors and shareholders.
Minimal Reporting Requirements
The usual reporting responsibilities including financial reporting, account information, an annual report is not usually not required to main the offshore company’s confidentiality.
No Foreign Exchange Controls
Most countries do not impose any restrictions to offshore companies on the foreign exchange.
Favourable Local Corporate Legislation
Many countries offer favourable legal framework that supports and inspire the offshore industry and foreign investments growth. In addition, offshore companies are given lots of flexibility.
The offshore company’s owner personal details, account details, and financial information are private and this subjects to regulations in different countries. Certain countries such as Hong Kong and New Zealand will publicly display minimal information while other countries such as Nevis, Panama, and Seychelles will not release any information to the public. In addition, offshore companies are also able to use nominee Directors and shareholders to shield their identities.
Most countries that support offshore company formation usually impose zero to low rates for corporate tax, income tax, sales tax, capital gains tax, value added tax, estate tax, succession tax, gift tax, and stamp taxes.
Freedom in Investment Opportunities
Offshore companies are free to involve themselves in any type of business activities including economic and financial activities without worrying about the restrictions. Nevertheless, certain countries may ask the company to apply for the necessary licenses before they are able to form an offshore company in the bank, insurance, and real estate industries.
Most of the countries make it easy for offshore companies to move from one country to another by eliminating the need for restructuring and complicated documents.
Types of Offshore Company Formations
The two main types of offshore company formations are International Business Company (IBC) and Limited Liability Company (LLC). Each type has its own advantages and disadvantages.
How to Form an Offshore Company?
It is very simple to form an offshore company. First, hire an offshore company agent such as Sovereign Management and Legal to draft the Articles of Association and the Articles of Memorandum with the offshore company’s details and regulations. Next, send the Articles of Association, Articles of Memorandum, and company registration to the relevant Register. Finally, the offshore company will receive a certificate of incorporation from the Register to approve the new offshore company’s formation. Additional requirements such as the company’s First Director appointment, the first company meeting, company officers appointments, Directors registrations and company shares issuance will depend on the offshore company owner’s needs and requirements.