An offshore international company can prove valuable in managing wealth when established in countries in which there are no
cumbersome restrictions or taxes to prevent the company from
freely conducting its business or investment activities.
Among the numerous benefits of offshore company formation is:
the absence of corporate and capital gains taxes, minimising
exposure to litigation, and conducting business affairs
Tens of thousands of small and mid-sized businesses now participate in the global economy. With careful planning and creativity, the increased investing power gained through the development of an offshore corporate structure can benefit these businesses with substantial growth and profitability.
Offshore companies combine all important features:
- Nominee services through lawyers
- Highest level of privacy protection
- Limited liability without any paid up capital requirement
- Legal tax exemption
- No taxation on any kind of income
- No accounting requirements
- No reporting requirements
- No fees for accountants
- No auditing
- No requirements on profession or financial standing
- Business can be conducted internationally
There is no reason to pass up all these advantages! Offshore companies are more expensive to incorporate than other companies but consider the savings. They do not have to pay any sales tax nor any income taxes. And as there is no taxation they also are exempted from all accounting and auditing. That means you save the costs of a CPA plus you gain the highest level of privacy protection as nobody knows any figures of your offshore company. It could be dormant or generate millions of profit - nobody asks you anything.
After creating an offshore company in the right jurisdiction, its assets are protected from the intrusive efforts of foreign courts, competitors, business partners, family members and others. When properly established, records for the offshore company are not subject to foreign court orders, protecting its owners from the many liabilities associated with legal, onshore ownership of securities, real or intellectual property and other assets.
Utilising offshore corporate structures, any number of special, custom arrangements can be created through which corporate profits can be transferred between and among subsidiary companies as needed to grow and develop the business.
Custom Private Investment Funds
Often, existing investment tools prove unsatisfactory in meeting the needs of business clients. In such cases, it can be most beneficial for the client to establish and operate an offshore mutual fund or private investment fund which is more ideally suited to the client's needs .
Prohibitive regulation can prevent importers and exporters from benefiting from trade with some foreign countries while domestic taxation can effectively eliminate any profits they may earn from global trade. The creation of a well-planned intermediary corporation in a neutral jurisdiction can aid both in the transfer of goods and services as well as the management of taxable income and investment of profits offshore.
When geographic or other factors limit your ability to conduct your business and personal affairs; it is valuable to have the assistance of a company providing management support via your IBC. In this way, standing instructions for managing your affairs can be implemented or assets (stocks, bonds and cash investment) obtained during international operations can be held or invested on behalf of your offshore corporation.
Typical uses to which an offshore company might be put:
An importing or exporting company might establish itself in an offshore area. The offshore company would take orders directly from the customer, but have the goods delivered directly to that customer from the manufacturer or place of purchase. The profits arising out of the difference between purchase price and sales price would then be accumulated in either a tax free or low tax area. With such trading companies, it is important to choose an offshore area which has good communications as shipping and other documentation may be critical to the scheme.
Funds accumulated through investment companies set up in offshore areas can be invested or deposited throughout the world and whilst generally returns or interest payable in respect of these funds will be subject to local taxation, there are a number of offshore areas in which funds may be placed either in tax free bonds or as bank deposits where interest is paid gross. Similarly, in many offshore areas no capital gains taxes are applicable. Use of an offshore company incorporated in a suitable country allows the possibility of investing tax efficiently in a high tax country where there is a concessionary tax treaty in respect of investments made by companies incorporated in the offshore country.
Use may be made of an offshore holding company which would fund the operation of subsidiaries in various countries so that the subsidiaries obtain the benefit of tax deductions on interest paid. If the holding company is situated in an offshore area where there are no income or corporation taxes and no requirement that dividends must be paid, then the profits which are accumulated in the tax free climate can be used to fund the requirement of subsidiaries or reinvested as business convenience suggests.
Probate and Privacy
A high net worth individual with properties or other assets in a number of countries may wish to hold these through the medium of a personal holding company so that upon his demise probate would be applied for in the country in which his company was incorporated rather than in each of the countries in which he might hold assets. This saves legal fees and avoids publicity. Again, not everybody wishes to advertise wealth and an individual may wish to hold property through an offshore entity simply because of the privacy which the offshore arrangement gives.
Property Owning Companies
There are often great advantages in using an offshore property holding company for the purpose of holding an overseas property. Advantages of offshore property ownership include avoidance of inheritance tax, avoidance of capital gains tax, and ease of sale which is achieved by transferring the shares in the company rather than transferring the property owned by the company and reduction of property purchase costs to the onward purchasers.
Taking the example of investment in property in the United Kingdom by an offshore company, use of an appropriate offshore vehicle can offer relief from income tax, capital gains tax and inheritance tax. It should be remembered, in particular, that when a non-resident company disposes of a property investment, no capital gains tax is charged and holding through an offshore company removes the application of inheritance tax which would apply if a non-domiciled investor held a UK property in his personal name.
Individuals who receive substantial fees in respect of their professional services in capacities such as designers, consultants, authors or entertainers, may assign or contract with an offshore company the right to receive those fees. The offshore employment company may not have to pay tax on its profits which can be reinvested in a tax free climate to generate further income from the offshore company. Payments to the individuals concerned can be structured in such a way as to minimise their tax liabilities. One example in this regard in respect of an overseas employment is to increase subsistence expenses as against fees as such which would be paid to the individual.
The use of offshore shipping companies can eliminate direct or indirect taxation on shipping. Shipping companies may own or charter ships, the profits from which activities can be accumulated tax free. Tax and legal requirements generally dictate that the offshore company owning a shipping vessel should be incorporated in the jurisdiction whose flag the ship flies. The historic havens for these purposes have been Panama and Liberia . Latterly, the registries of other nations have expanded and consideration might be given to registrations at British Ports of Registry such as those in the Isle of Man and Gibraltar . A certain prestige attaches to the registration of a ship or indeed a yacht at a British port of registry and the vessel can be surveyed at most ports throughout the world by a surveyor recognised by the UK Department of Trade and Industry. The British flag has always been regarded as one of the world's most dependable.
Patent, Copyright and Royalty Companies
An offshore company can purchase or be assigned the right to use a copyright, patent, trademark or know-how by its original holders with a power to sublicense. Upon acquisition of the intellectual property right the offshore company can then enter into agreement with licensees around the world who would be able to exploit the intellectual property right in various countries. It is thought preferable to acquire, for example, a patent at the patent pending stage before it becomes very valuable so that the capital payment for the acquisition of the patent can be set at a lower amount. Often royalties paid out of a high tax area attract withholding taxes at source. In many cases an interposing holding company may allow a reduction in the rate of tax withheld at source.