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Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies. Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies.

Why incorporate
an offshore company

Is going offshore for everyone? Maybe not. But an offshore company can be your gateway to asset protection, privacy, tax-free trading and more.

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OFFSHORE-FOX.COM
with Peter Widder

There are a number of reasons why so many private individuals and businesses decide to incorporate offshore. Some of the major advantages are:

  • Tax saving
  • Simpler business administration
  • Asset protection
  • Privacy / anonymity
  • Global investing

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:

 

Why so popular? Onshore vs offshore
  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
Company objects Usually limited to a specific business activity Often broad; any business activity except banking or insurance
Ongoing administration Book and record keeping; audits; tax and annual returns Often none, or minimal administration handled by company agent
Corporate tax rate Often 30% to 70% Often 0%, or minimal
Privacy None Identities of directors and shareholders protected; anonymity sometimes possible

 

Offshore for privacy and
asset protection

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 opportunities.

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 offshore.

 



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