Confidentiality is a primary concern of many offshore practices, particularly
When it comes to utilising an offshore company for trading however, a whole
new category of priorities must be considered. These are the priorities of your
trading partners and the attitude, outlook and sophistication of onshore authorities.
Today legality and appearance -- and not reliance on the grey-area laissez
faire and ignorance of yesteryear -- are the essential requisites for the offshore
Gone are the days of the businessman who carelessly slapped his Panamanian
letter-box company down in the middle of a business transaction and raked off a share.
These days, such sloppy schemes can lead to a spell raking the leaves in a prison
Genuine transactions or
In many circumstances, it is not desirable to raise invoices in the name of
an exotic offshore company, nor is it possible to ask your offshore company's
clients or trading partners to make payments to a bank in an obvious offshore
Remember that the books of your customers or trading partners are open to scrutiny
by their local tax authorities and dealings with offshore havens -- even
though legal -- are viewed with scepticism, if not suspicion.
Tax authorities of high-tax nations are aware that offshore companies can be
used for illegal tax evasion by businesses that need to "reduce" their
taxable profits before year-end. After all, the ownership of an offshore company
is difficult and often impossible to establish. This allows dishonest business
owners to incorporate a company in an offshore haven and use it to siphon money
offshore, usually by having the offshore company raise invoices payable by the
Consequently, trading directly in the name of a tax haven company can cause
loss of business as many prospective customers feel uneasy about being wrongly
suspected of participating in such false invoicing schemes.
In many developed countries, tax authorities do not even allow or recognise
payments remitted to companies based in offshore tax havens. This reflects the
opinion that anyone entering into a transaction with an offshore company is
not doing so out of genuine commercial need, but solely for reasons of tax mitigation
-- if not tax evasion.
Of course, there are times when an offshore company can be used to close a
one-off deal if both your trading partners and the relevant tax office feel
happy about the arrangement. But entering new markets or marketing products
or services to unknown customers under the name of Tropical Island Trading Corp.,
incorporated in the Turks & Caicos, is a tall order nowadays -- unless,
of course, you really are exporting conch shells or lobster.