An offshore company is not always connected with tropical islands: it is simply a company registered in a jurisdiction that differs from the country of the owner’s tax and legal residence. Any destination can be called an offshore jurisdiction if it provides tax incentives and other benefits to non-resident entrepreneurs who establish companies there. You will need to make a preliminary analysis, though, before you choose an appropriate country for your business as some offshore destinations are blacklisted, for example. You need to find a jurisdiction where operational activities are possible and all international rules and regulations are complied with. If the analysis of that kind seems to be beyond your competence, you can get expert advice on a trusted portal.
Offshore Business in 2024
More than half of entrepreneurs from across the globe preferred tax havens some years ago to take advantage of zero tax rates and enhanced confidentiality. The situation has changed, though: you can no longer keep the beneficial owner’s name absolutely secret, and zero taxation requires fulfilling certain conditions. Legal ways of tax minimization still exist, though they require knowing the details of business incorporation and the right choice of a jurisdiction.
Setting up an offshore company seems an easy thing to do if you look at different ads or “how-to” articles. In practice, a lack of sufficient legal and tax expertise often results in problems that make the process time-consuming and painstaking. In short, if you want to enjoy a seamless company registration procedure, it’s better to use professional assistance and focus on the business plans.
Theory and Practice of Company Formation
There are three main things you need to know to successfully set up a company, and we will look at them in detail.
Legal Framework
Make sure you have a basic understanding of an offshore company and related problems to avoid receiving claims from regulatory bodies. You should have a clear idea of how offshore companies function and which countries are on the OECD blacklist.
In the 2020s, the essential thing is to find the right combination of the three things: a high reputation of the destination where the company will be formed, tax incentives offered, and a corporate account with a convenient and reliable bank. There is no one-size-fits-all solution here as it depends on the composition of shareholders, the specific nature of the business, and the profit you are going to receive from your activities.
In addition, you need to be aware of economic substance requirements and know your responsibilities as a non-resident company owner. Remember to consider the legal consequences of company registration in a particular jurisdiction (your country of tax residency may require the declaration of any foreign assets you own, including a foreign company or a bank account).
Offshore Company Registrar
You may decide to venture on your own or engage a professional for company registration – but this decision should be well-informed, with all pros and cons carefully weighed.
An efficient registrar will render the services under the agreement you signed and help you collect the necessary documents and fill out all the forms, find an optimal solution, and set up a bank account with a reliable bank. You can also delegate some administrative tasks to them after incorporation, like the submission of annual tax returns/financial reports or company extension matters.
There are universal and specialized offshore service providers:
- Universal ones will help you set up an offshore company in different countries. Check their experience and engage them to set up an offshore structure that you will develop for many years. Keep in mind that these are not registered agents: they simply cooperate with the latter and coordinate their efforts.
- Specialized service providers are focused on one country where they are usually based and often have appropriate licenses to act as a registered agent. If you know for sure where you want to form your company, it makes sense to work with a specialized provider.
If you feel that you need a reliable provider, you can follow the above link and get in touch with experts.
Offshore Company: Costs
Company incorporation and business extension require some expenses, but these are considered standard. Here are some additional costs you may have to incur:
- Audit, apostille, nominee services
- Corporate seal registration
- Setting up a bank account
- Renting a physical/virtual office
Choosing a Jurisdiction
Let’s look at the main factors to be taken into consideration before you choose a proper destination for your business:
- Think of the reputation and political/economic stability of the country where you are going to set up your company. The geography of your partners, clients, and investors is equally important.
- Check whether the destination is suitable for the activity you are going to engage in, business development, and subsequent use of the income.
- Make sure the company registered in the jurisdiction of your choice will make it possible to open a corporate account with a reputable bank in the currency you need.
- Take into consideration the tax benefits available and their connection with the fiscal residence of beneficial owners, shareholders, and founders. Make a complex analysis of the countries in question or delegate this to a specialist.
- Sanctions and limitations applicable to your country.
Choosing a Legal Form
Let’s have a closer look at the three main offshore company forms available.
International Business Company (IBC):
- 100% tax exemption if all profits are generated abroad
- Straightforward company incorporation
- The highest possible level of banking/corporate privacy
- Minimal reporting requirements
- You need at least 1 director and 1 shareholder, and both positions can be occupied by one person
- The recommended jurisdictions include Belize, BVI, Marshall Islands, Nevis, and St. Vincent and the Grenadines
Limited Liability Company (LLC):
- You need at least 1 member
- Minimum reporting requirements
- No directors or shareholders, only members
- This is a hybrid between a partnership and a corporation
- The liability of members is limited to their contribution to the company
- No local corporate tax is payable on the assets acquired outside the country
- The recommended jurisdictions are Nevis, Cook Islands, Belize, and some US states
Pte Ltd.:
- More reporting requirements than an IBC
- Private business that includes no more than 50 shareholders
- IPO is impossible
- No taxes paid on profits generated abroad
- The shareholders have limited liability
- The recommended jurisdictions are Great Britain and Canada
Do you have any questions you would like to receive expert answers to? Click on the above link and get in touch with a specialist using a live chat – it’s free!
