Offshore Companies

Offshore companies are legal entities that are used to trade internationally, cut down on tax expenses and protect assets.

Offshore companies are registered overseas and not in the regular domicile or place of operations of the owner. An offshore company is therefore established in a foreign jurisdiction and is regulated by the laws of the jurisdiction in which it is formed.

Formally, offshore companies are referred to as International Business Companies or sometimes names such as Business Company, International Business Corporation or Global Company may appear.

Offshore company laws are relatively uniform and as a result the structure of IBC’s and their advantages do not differ too much. An investor can therefore register three offshore companies, each in a different offshore jurisdiction and be certain of being able to operate globally, reduce taxes and shield his assets accordingly. Some offshore jurisdictions are however more popular than others and therefore tend to generate greater incorporation numbers.

Offshore companies are well known for their flexibility, protection under privacy laws, simple structure and standard management principles. IBC’s for example are required to have a board of directors, at least one director and one shareholder, a share capital, and are companies with limited liability. This structure is the same as a corporation and is therefore standard, being similar to the Sociedad Anónima (S.A.), Société Anonyme (S.A.) and Aktiengesellschaft (A.G.) which are found in French, Spanish and German speaking countries, respectively.

Characteristics that distinguish the offshore company from regular companies include the fact that offshore companies can only be owned and incorporated by non-resident non nationals of the jurisdiction and that offshore companies are tax free.

The latter is based on the grounds the offshore companies are restricted from trading and doing business in the jurisdiction where they are incorporated and as a result are not liable to local taxation. Notwithstanding this, an offshore company is usually allowed to maintain an office in the jurisdiction where it is able to conduct its business offshore, and have relationships with local lawyers, accountants, auditors and other professionals.

Whatever name is chosen for an offshore company must be approved by the local registrar of companies. Offshore company names must therefore be unique, cannot be in use by any other offshore company registered in the jurisdiction, cannot be offensive or appear to mislead the public.

For effective regulation and supervision of offshore company services, jurisdictions have established Financial Services Commissions (FSC) as well as Financial Intelligent Units (FIU) to ensure that offshore company laws and financial services in general are administered and conducted in accordance with established regulations.

Offshore company formation benefits from modern technology and is generally speedy and efficient. Jurisdictions all appoint agents who administer offshore company formation services. These agents are regulated by both international and domestic regulations and are required to adhere to due diligence standards.

Some jurisdictions are not full-fledged tax havens and therefore impose low taxes on offshore companies, such as Barbados and the Channel Island where a zero/ten corporate tax regime exists. However, a very large number of offshore jurisdictions are zero tax locations and exempt offshore companies from tax on income, profits, capital gains, dividends, interest, as well as duties and charges.

In addition to these tax benefits, as an entity for protecting assets and trading globally, offshore companies are valuable vehicles.

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