Chesterfield registers and incorporates hundreds of international business entities each year, in all offshore jurisdictions. We also provide a wide range of additional services, such as opening and administration of bank accounts, mortgages, property transactions and nominee and registered agent services.
What is an offshore company?
When considering the offshore company setup, there are many factors determining the most suitable company type and jurisdiction. To help you in making your decision, here we outline a basic summary of what an offshore company entails.
There is no precise legal definition, but an offshore holding company is, in reality, a company that is registered, established or incorporated in a jurisdiction outside the home country of the owner. The term is generally taken to mean a company incorporated in a territory which may be beneficial for taxation, and which could impose a zero or low rate of tax, or perhaps indeed exemption from tax. Meanwhile, the business is managed and operated from the individual’s country of residence. All business can be conducted with anyone around the world, apart from inside the country that the company is established in.
Once the offshore company is setup, it works as a corporate entity that can trade, open and hold bank accounts, enter into any sort of lawful agreement, hold physical or digital assets, conduct transactions, start and operate a business, and carry out normal business activity legally, outside of the boundaries of the jurisdiction in which it is established.
Aside from being known as an offshore holding company, other terms used include International Business Company (IBC), non-resident company and foreign corporation.
Because it is owned and exists as a non-resident entity, it is typically not liable to local taxation, provided it limits transactions and dealings to outside of the country’s borders.
Historically, there may have been qualifying conditions attached to such favourable treatment, such as ownership by non-residents. However, the international community is moving rapidly in the direction of the same tax treatment for all companies, by whomsoever they are owned.
Chesterfield has expertise in setting up companies and corporate structures specifically tailored to the needs of our clients. We have a talented and experienced team of salespersons and administrators who are skilled in the formation and running of various types of companies, including, but not confined to, Limited Companies, Limited Liability Companies, Limited Partnerships, Limited Liability Partnerships, Companies Limited by Guarantee, and Hybrid Companies.
Why set up an offshore company?
There are numerous reasons to set up an offshore company, and many well-known international corporations have offshore company formation as part of their company structure.
Offshore company incorporation is considered a relatively easy process, no matter which offshore jurisdiction you select. Most jurisdictions make it straightforward for anybody to incorporate a company, while they are structured in a simple way and are easy to operate.
What’s more, many countries have given offshore companies the ability to operate freely, with minimal restrictions. Laws prevailing in such countries tend to offer unique benefits to these offshore companies. Further, statutory obligations in the operation of such entities have been simplified.
Offshore companies provide an additional scope of benefits to the company and the company principles, including facilitating the growth of your business outside of your country of residence.
Most offshore companies are formed in order to capitalise on local laws that offer low or no-tax advantages to non-resident companies. Offshore jurisdictions seek to appeal to foreign capital through the availability of low-tax and pro-business regulation to international entities and individuals seeking alternative locations.
Aside from a number of tax advantages, offshore companies also benefit from greater privacy and greater confidentiality. The responsible individuals within the offshore corporation are rarely disclosed by the offshore financial centre they are present in (subject to exceptions).
Offshore companies also benefit from legal protection. Since your assets are held within the offshore company, this means they are effectively shielded overseas. Further, offshore companies also benefit from heightened asset protection and simple corporate policies.
Offshore companies can also be used as a form of asset protection. Many companies wish to spread their assets in different locations worldwide, particularly in locations that are more politically and financially stable.
Tax Neutral, zero tax and low tax
Tax-exempt companies are a dying breed. Resulting from the move towards the same tax treatment for all, mentioned above, they are being replaced, in many jurisdictions, by zero tax companies.
One of the perceived benefits of a zero tax regime is that it provides a tax neutral platform to conduct international business.
Some territories have both tax-exempt or low tax regimes and have also negotiated special tax treaties for the avoidance of double taxation by local companies trading with the treaty partner country. These countries typically impose tax at very low rates on companies qualifying for treaty benefits.
In some other countries only local source income is taxed. A company may accordingly be based in a country, but pay no tax there if its profits are generated from activities elsewhere.
Almost all of the major trading nations, certainly most of the E.U. countries and the U.S.A. use tax incentives to try and attract foreign investment by offering special tax treatment for certain activities. Examples are holding companies, headquarter companies and treasury and finance operations.
A blend of onshore and offshore companies can often be used to collect income which qualifies for double tax treaty benefits and route it to a tax neutral country from which it can be re-invested.
Offshore company formation benefits
Offshore companies are used by both individuals and businesses, and some of their reasons for doing so are listed below.
- Tax saving or deferral
- Asset protection
- Increased privacy
- Risk management
- A more favourable business climate
- Less bureaucracy
- Exchange convertibility
- No restrictions on the remittance of profits and capital
- Security of property rights
- Political stability
Contact Chesterfield today to discuss your offshore company formation needs with one of our specialists.