When it comes to the term ‘offshore’ used in conjunction with company
incorporation, the term ‘offshore’ generally refers to any jurisdiction
other than one in which the company incorporated will conduct the majority of
its activities.
Usually such a jurisdiction has some degree of taxation or reporting benefit
attached that makes it attractive to the company owner, and the concept of
incorporating a company offshore will bring at least one of the following five
benefits to a business owner: -
1) Ease of Operations – depending on the jurisdiction and the type
of business activity to be conducted under the company name to be incorporated,
the operating restrictions, auditing and accounting requirements and standards
to which the business and its employees and directors must adhere are often far
less restrictive offshore than onshore.
Exceptions to this rule are financial services based companies in many
jurisdictions for example, who have to comply with extra regulatory legislation
for the protection of the company’s clientele.
The advantage of easing operations particularly for a small or start up
company is a reduction in operating costs and in the amount of time a
company’s directors have to dedicate to form filling and report filing.
2) Reporting Simplification – this ties in with the first benefit;
in the majority of offshore jurisdictions favoured for company incorporation the
company activity reporting requirements are often far fewer and simpler as the
business activities entered into by the company are conducted outside of the
jurisdiction in which it is incorporated.
Furthermore personal information relating to the company’s directors and
shareholders need not be declared in all cases or the extent to which personal
information is required is far less intrusive.
3) Taxation Reduction/Negation – the reduction in taxation liability
is one of the main benefits associated with investing offshore, opening an
offshore bank account or incorporating a company offshore.
If you set up your company in a low or no tax jurisdiction you could
potentially save yourself substantial amounts of money legally. Often the rules
are that if the company incorporated in a particular jurisdiction never derives
an income from the local economy it can operate tax free.
It’s therefore possible to use an offshore company in an overall
international business structure and ensure profits are posted in the offshore
jurisdiction and so no tax is liable! Many international corporations operate in
this way and actually negate their tax liability fully.
4) Asset Protection – by operating a company offshore, i.e., outside
the jurisdiction in which the company operates, it is sometimes possible to
position assets away from the reach of any potential litigious action and also
to shield business transactions from the eyes’ of the competition.
5) Personal Privacy Protection – the level to which a director or
shareholder’s personal information is required, held, visible or investigated
offshore is likely to be far less invasive and intrusive than onshore. It is
also possible to appoint nominee directors and secretaries for offshore
companies in many jurisdictions thus keeping the true company owner’s identity
shielded.
The information contained in this article cannot constitute advice. Each
individual’s circumstances are unique and whether or not offshore company
incorporation is something that could benefit your business can only be
determined with personal advice.
