About Offshore Companies

The terms "offshore business" and "offshore company" do not have a concrete legal meaning. The Term "Offshore" basically means 'somewhere else', 'overseas', or in a jurisdiction different from your country of residence. The expressions "offshore business" and "offshore company" are used in connection with the structuring of international business, family wealth management, or tax planning.

Offshore companies are used primarily to facilitate international trade and investment. The motivations for individuals and corporations to go offshore include the wish to:

• reduce tax burden (Corporate and Personal);
• protect and enhance assets;
• manage risks;
• maintain privacy;
• avoid bureaucracy in the home jurisdiction;
• reduce maintenance costs for corporate structures.

More broadly, the reasons for going offshore and utilising offshore companies for estate planning and business include:

• Free remittance of profits and capital;
• Access to top-rated credit history jurisdictions;
• Access to tax treaties;
• Security of property rights;
• Access to low cost areas;
• Banking privacy;
• Availability of offshore experts;
• Access to foreign insurance and reinsurance;
• Enhanced privacy;
• Customs and duty exemptions;
• Exchange convertibility;
• Government cooperation;
• Fair treatment;
• Territorial taxation on foreign income;
• Fewer restrictions;
• Sanctity of contracts;
• Foreign investment inducement;
• Tested legal systems;
• Higher yields and returns;
• Sophisticated banking facilities;
• Reduced taxation;
• The search for political stability.

Offshore Companies Applications

Offshore companies are mainly used for:

. Trading;
. Investment;
. Holding assets;
. Holding patents, royalties and copyrights;
. Financing;
. Professional services or consultancy;
. Ship management and yacht owning;
. Personal and corporate tax planning.

Types of Offshore Companies

For tax planning and structuring their international business, our clients usually favour the following types of offshore companies:

• Very low or zero tax offshore companies, incorporated in jurisdictions often described as tax haven islands. Different types of offshore companies can be created in places like the British Virgin Islands (BVI), Belize, the Seychelles or Brunei.
• Companies incorporated in jurisdictions, which offer both offshore companies and onshore companies, where they may benefit from favourable tax regulations and/or special offshore company policies.
• The LLC or Limited Liability Company and the LLP or Limited Liability Partnership.
• LLCs and LLPs are used for offshore business, international business and tax planning, because they have the advantage of limited liability, while offering the flow-through characteristics of a partnership for tax purposes. This means that profits are divided among the members in proportion to their respective holdings and taxed in their own hands. In some circumstances, neither the LLC or LLP company nor their members or partners will be subjected to taxes in the company's country of establishment, on the condition that all the members or partners are tax-exempt residents in the domicile of the LLC or LLP and no business is undertaken in that country. Such companies are said to be "fiscally transparent": The US-LLC is a good example of such type of company.
• Companies incorporated in many onshore countries with specific,  advantageous fiscal policies for specific international purposes.

The world of offshore business is more complex than the black-and-white image pictured by the media. Offshore business is not only related to tax havens. Many onshore high tax countries fiercely compete to attract international companies and individuals with all kinds of tax planning regulations and opportunities. Such regulations are used for a wide variety of tax planning business, such as:

• Double tax treaty planning relating to dividends, interests and royalty payments.
• The establishments of holdings, international headquarter treasuries and finance operations.
• Specialist businesses, for example, leasing.
• Personal and family wealth management and tax planning.

In fact, almost all countries offer by some means or other  tax advantages in order to encourage inward investment.

International tax advisers understand how to improve overall tax efficiency by using special low tax regulations offered by high tax countries in order to encourage international business. However, successful implementation of such structures depends on a wide variety of issues. Those are related to matters such as anti-avoidance provisions, double taxation avoidance, foreign company management and control provisions, transfer pricing, thin capitalization, participation exemptions, capital gains tax and a myriad of other ever-changing tax regulations. More recently, tax collectors have added exchange of information treaties and provisions to their armory.

In summary, the contemporary offshore world includes the implementation of specific and advantageous fiscal structures in high tax onshore countries as diverse as the UK, Portugal, Singapore, Greece, Belgium, Austria, Spain, Switzerland, Luxembourg and the Netherlands.

If you decide to go offshore to do business or protect your assets, the most important steps are choosing the right jurisdiction and the most adequate type of company. For further information, please read our sections: