In the news you can often hear about offshore or offshore zones. For many, this concept is associated with something illegal, located on some tropical island, where people are hiding their money. In reality, the concept of “offshore” is not only completely legal, but also differs from the typical stereotype.
An Offshore company is a company operating in a country with a positive investment climate and significant tax benefits.
Offshore companies can provide their customers with services at lower prices, without fear of control by the government.
Advantages, disadvantages
An offshore account is a bank account of a legal or natural person opened in the country of which this person is not a citizen.
An offshore company is a commercial company that was opened in the country, which is part of an offshore zone.
As a rule, new companies are registered in places where conditions are the most for a certain business. But here it is necessary to take into account the inevitable risk associated with offshore companies. There are many scammers in this market and therefore the attitude to offshore companies in some countries one of suspicion.
What attracts people to offshore? First and foremost, there are several very big advantages, which make offshore companies a very attractive option.
• Little or no tax.
• Simplified procedure for registering a new company.
• The owner of the company may remain completely anonymous. They do not even need to live in the same country where his company is registered.
• Independence from the influence of political and economic events of the country where the company operates.
• Highly simplified accounting procedure.
• The opportunity to enter international markets while opening your own account in another country.
• If the owner of the company is declared bankrupt their money is protected in an offshore company.
• Offshore activities are completely legal.
• High level of confidentiality.
Offshore companies have some drawbacks and although not many they are worth noting.
• Each country has its own attitude to offshore dealings as well as its own legal framework applicable to them. Some countries are well suited for one type of business, while others are suited to another. Large countries tend to be against offshore dealings.
• Additional audit costs. Often it all depends on which country the offshore account is registered in. In some countries, an audit requires significant expenses.
• Offshore owners are usually citizens of another country. With rare exceptions, only a foreigner can become a full-fledged owner of an offshore.
• Inability to work in the country where the offshore is registered. As a rule an offshore company is listed in the legal database, but all its activities take place in other countries.
Classification of offshore zones and their functions
The main functions of offshore zones (offshore):
• Investing in markets with a certain level of risk. This also includes investments in emerging market sectors.
•International trade. The lack of taxes attracts a large influx of money.
• Bank licensing. A popular service of many offshore zones.
• Insurance services. Minimum taxes make this service one of the most popular.
• Registration of air or water transport. One of the most popular offshore services located by the sea or ocean: Bahamas, Panama, Bermuda, Seychelles.
Offshore zones are diverse and are divided into two main classes:
• Classic offshore zones. These zones are completely exempt from taxes on income received in the country where offshore activities are carried out.
• Offshore areas with reduced tax. In these areas, taxes are greatly reduced. On the one hand, offshore companies in these areas require the necessary accounting audit and accounting procedures, on the other hand, the companies registered here have a much higher reputation.
Opening a company
Given all the pros and cons of offshore, and you decide you are going to open your own company or join any offshore. What do you need to do?
First of all, you need to choose exactly how you need to create a company. To open a company offshore, there are only two options:
• Creation and registration of your own company.
• Purchase of a company already registered.
For both options it is better to involve specialists in the work in order to avoid mistakes typically made by beginners. Also, you need a legal address for requests from all kinds of authorities. Professional services will also help here, at least initially.
In addition, you must also consider:
• The amount of the authorized capital affects the size of the registration fee. Usually, the numbers are overstated, to reduce the annual payment, in the future.
• The name of the company must indicate the degree of limitation of liability (as in “LLC”, for example) and the form of ownership.
• If the business is not part of the banking sector, then the name should not be associated with this area. Similarly, in any other market area.
• Financial statements, as a rule, have a free form.
• The actions of the registrar are essential! This applies, for example, when changing the name. First you need to contact the registrar, and only then take the necessary actions.
• There are a number of service companies that collect and draw up constituent documents. Their services are very important.
As we can see, offshore companies are an attractive tool on the market, but accuracy and attention are necessary while working with them. Also, before starting work with offshore companies, it is necessary to study information about them and their location. There are countries where offshore companies have a negative reputation.