There are a number of reasons why so many private individuals and businesses
decide to incorporate offshore. Some of the major advantages are:
Simpler business administration
Privacy / anonymity
Offshore for business
International trading companies, small and large, are often based offshore.
Many self-employed consultants own offshore companies through which they invoice
their clients. Both are examples of businesses able to gain a substantial tax
saving through the use of an offshore company.
For existing and prospective business owners, the advantages of an offshore
company over an onshore (domestic) one are clear:
Typical onshore company
Typical offshore company
Total expense to form
Varies; United Kingdom from $100, Switzerland from $15,000
Often under $1,000
Time to form
Varies from a few days to several months
Often 24-48 hours
Directors / shareholders
Often requirements or restrictions regarding number,
nationalities, qualifications, etc.
Often one person of any nationality sufficient
Usually limited to a specific business activity
Often broad; any business activity except banking
Book and record keeping; audits; tax and annual
Often none, or minimal administration handled by
Corporate tax rate
Often 30% to 70%
Often 0%, or minimal
Identities of directors and shareholders protected;
anonymity sometimes possible
Offshore for privacy and
But the majority of people who incorporate offshore companies have no intention
to engage in any trading whatsoever; rather, they use offshore companies
simply to shield private assets from third parties.
An offshore company is able to own any assets that an individual can -- cash,
securities, real estate and others. At the same time, however, the identity
of the owner of the company itself can be protected by offshore legislation
or even remain completely anonymous. This enables the individual to retain control
over his/her assets yet makes it impossible for third parties to link the assets
in question to the ultimate beneficial owner.
Whatever the actual degree of privacy/anonymity offered by a particular offshore
arrangement, it is a fact that assets held in the name of the individual's offshore
company, in an offshore jurisdiction, are far more lawsuit-resistant than assets
held by the individual in his home jurisdiction.
In fact, some claim that professional practitioners concerned about lawsuits
-- such as those in the medical field -- make up a greater portion of the offshore
population than entrepreneurs seeking tax benefits.
Offshore for profit
In addition to putting assets beyond the reach of potential litigants, investments
made through an offshore company usually avoid being subjected to tax on investment
income. A cross-border variety of shares, bonds, commodities and other financial
instruments can be held through a single offshore company.
Indeed, offshore companies are often utilised by people who are restricted
by their local legislation from participating in certain overaseas investment
Holding overseas real estate is another popular application of an offshore
company. It allows individuals to avoid inheritance tax, capital gains tax and
death duties. The process of sale of property is simplified as there is no need
to transfer property title; instead, sale is achieved by the transfer of shares
in the offshore company, thus saving time and money on legal and transfer fees.
Having said all the above, going offshore is not for everyone. Whilst incorporating
an offshore company is relatively inexpensive and easy -- as is the subsequent
administration -- you have to look both at your goals (lower tax? privacy? protection
against creditors? tax-free investing?) and the size of your capital, or your business
turnover/profit, to see if buying an offshore company makes financial sense.
But if the cost can be justified, it is hard to find any drawbacks of incorporating