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Offshore Companies - Questions and Answers
What is an offshore company?
Formally, any company or other entity formed in and operated out of a jurisdiction other than that of the “owner’s” home jurisdiction could be considered offshore. However, the words ‘offshore company’ are generally understood to mean a company operated from a low tax or zero tax jurisdiction. IBCs (International Business Companies) are almost synonymous with offshore companies.
What are the benefits of setting up an offshore company?
The benefits of an offshore company are to reduce taxes and at the same time to protect privacy. It should be noted that privacy is being eroded by ever more disclosure on the public record.
What can an offshore company be used for?
Offshore companies can trade, hold assets, e.g. houses, boats, or act as a holding company for other onshore companies. It can also be used in joint ventures and in speculative proposals where privacy is paramount.
What does an offshore company cost?
The cost will depend entirely on the jurisdiction and which services are is required. For a relatively straightforward company in one of the low to medium-cost jurisdictions with all the essential elements in place, one would typically expect first-year costs in the region from $950 without a bank account (Wyoming LLC, USA). Some jurisdictions are somewhat more expensive. For example, Singapore includes the local director’s cost, at $3,150. After the first year, costs are lower, and we would usually expect that second and subsequent year costs would be anything from 40% to 80% of the first-year cost depending on the jurisdiction.
Why are some jurisdictions more expensive than others?
Costs depend on many factors: – government requirements, reputation, perceptions, reliability, etc.
Which offshore jurisdiction is the “right one”?
There is no one perfect offshore jurisdiction. A lot depends on the individual circumstances and the client’s preference, taken with the practicality and convenience, and cost of preferred jurisdictions.
Why do you need to structure your business?
Most countries seek to attract new business, but few provide a complete package. On behalf of clients, we carefully select the best that various countries/jurisdictions have to offer and combine them into a ‘package’ with the lowest overall tax rate while remaining “acceptable” to the countries in which it operates.
Is tax avoidance legal?
Yes, of course. Tax avoidance is simply seeking to reduce taxes to the absolute legal minimum using whatever mechanisms are available, including offshore companies.
“Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”
– Judge Learned Hand
What is tax evasion?
Tax evasion, in summary, is the hiding of income to evade paying taxes that are legally due. This is illegal and heavy penalties may result.
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