Establishing offshore and onshore companies
The term offshore company often refers to a company located in a tax haven. Their peculiarity is zero or minimum tax burden.
Other important attributes of their growing popularity include stability of the legal environment, minimum paperwork and bureaucracy needed for administration, opportunity to achieve anonymity of ownership and maximum asset protection. Doing business through offshore companies has many advantages; the company can be managed from any place in the world, majority of offshore jurisdictions do not require keeping accountancy records and there is only a one-off annual fee for license renewal instead of taxes. The term offshore also means that companies can undertake business everywhere in the world except for their home country. They are therefore freed from corporate tax as the whole income is generated outside the country where its HQ is.
To own a company and do business abroad is legal, and it belongs to basic human rights and freedoms guaranteed by the Constitution and the Convention on Human Rights and Fundamental Freedoms. It is thus everyone’s right guaranteed by the Constitution to own an offshore company, account, commodities, shares, property or a yacht, despite negative emotions and efforts of politicians and media to spark envy/hatred. There is no difference between owning a domestic company (e.g. Ltd.) and an offshore company. However, it must be emphasised one has to proceed in accordance with the law when establishing and administering their activities and not to abuse offshore companies for illegal purposes.
Sound international tax planning and optimisation of tax burden are not tax fraud or illegal tax evasion; quite on the contrary, it is utilisation of legal options. A basis for successful functioning is choosing the right structure, jurisdiction and method of asset management. Geopolitical changes together with debt and banking crisis uncover pitfalls which an entrepreneur or owner of an offshore structure has to face; hence it is important to set up an optimal structure from the very beginning, taking into account the needs and activities of each client individually. Entities are often exposed to nonsense changes in legislation and uncertainty by state authorities, which distract from business focus. Constant monitoring of changes, amendments and regulations is more and more time and cost consuming, and may have a serious impact on economic results. Outsourcing services of lawyers and tax advisors costs non-negligible amounts. One of the solutions an entrepreneur can find is to relocate and the business or expand it with a foreign company to a more stable and simpler legal and business environment. An offshore company does not have to be established for the purpose of entrepreneurial activity only, it can function as a holding company to hold share capital in other companies. An offshore company aligned in an appropriate structure with an onshore company can be used for common business operations in the home country environment. However; without excessive bureaucratic burden, an offshore company belongs to important competitive advantages. Through an offshore company it is possible to keep monetary means in different currencies without supervision of local authorities, and to trade securities, currency pairs, stock exchange derivatives, collect dividends from yield on owned securities, etc.
The significance of offshore companies will continue growing, although they will probably be more interlinked in structures with onshore companies.
Onshore companies are situated in countries offering lower tax or administrative burden and that also enable business operations where their headquarters are. Great Britain, the Netherlands, Hong Kong, Cyprus, Malta or Singapore are considered as well-known onshore jurisdictions. Onshore companies have to keep accounting records, submit tax return and pay tax depending on their income. Advantages include the possibility to use double taxation avoidance agreement, jurisdiction’s reputation, easy procedure when acquiring business partners, avoiding some of the withholding taxes; and, by proper choice of structure, a very low/near-zero overall taxation for most of the income.
Other important facts:
Although 80% of all the litigations take place in the USA, their number is increasing throughout the world. A legal action concerning assets, contract or other business interests is filed every ten seconds somewhere in the world. Keeping part of the assets in an offshore company can help substantially when protecting the property and when avoiding inconvenience. Waiting for first signs of a problem and acting by the time of dispute does not have to protect assets; moreover, it is usually punishable. It therefore makes sense to act prudently and have own safe structure available, thus being able to survive unexpected situations smoothly.
If you are interested in establishing a company in a jurisdiction that is not on our basic offer, please contact us. We are in contact with a wide network of important corporate providers and lawyers throughout the world.
More information is available when meeting our representative in person.