What offshore companies are incorporated for? Benefits for 8 types of business structures
September 7, 2015
Registering a business as an offshore entity brings many benefits to its owner. Here we provide the information about structures which are mostly appropriate for being registered overseas; use of such entities is also disclosed. The article does not disclose a full range of offshore options and possibilities as some specific benefits, such as loyal taxation or organizational simplicity, depend on laws, policies and anti-avoidance legislation provided by beneficial owner’s country. Moreover benefits available to offshore entities depend on sales markets’ locations and on legislation of the countries with which the companies carry on their business. Our team of experts is experienced in all the aspects of offshore companies creation and will gladly share this knowledge with you. Now you can find out more about the use of an offshore entity for 8 types of business organizations.
- Companies engaged in trading
Companies which specialize in import or export trading transactions are likely to avail of being registered in a tax haven most of all. A trading company interacts directly with the customers while ordered goods or services are delivered to the destination point from manufacturing plant or from point of sale. Taxes which a trading company is obliged to pay might be essentially reduced if the income was accumulated in a tax-free zone. When choosing a country for incorporating an offshore it is critical to pay attention, not just to its tax system. Find out what are the means of communication between your place of residence and chosen jurisdiction and whether you have a chance to send and to get documents, information, necessary calls without time delays.
Offshore holdings accumulate funds and income obtained from subsidiaries located in different countries in offshore accounts. Thus, subsidiaries get their gains without paying a large amount of tax on the earned interest. It is possible to incorporate a holding company in the area with no requirements to paying dividends and getting a 0 rate of income or corporate tax; in such a case, when cash flow can move freely in a tax-friendly environment, holding’s income may be reinvested in business as well as to be used per subsidiaries’ request.
- Investment corporations
Corporations which specialize in investing and are set in an overseas jurisdiction can freely deposit or invest money while accumulating it in an offshore account. This money being treated as interest paid on deposited amount or company’s gain is a subject to taxation. Therefore, there is a variety of offshore jurisdictions in which an investment corporation can store money as a bank deposit with gross interest or as tax-free bonds. Many jurisdictions apply no income tax as well. Being incorporated in an appropriate jurisdiction investment company has a possibility to invest in a high-tax country, which has a concessionary tax agreement with the jurisdiction in respect of foreign investors, as a subject to loyal taxation.
- Companies which own property
It is very beneficial to organize an overseas property owning company in order to hold property abroad. Owners get numerous benefits from offshore property ownership such as the possibility to avoid income and inheritance taxes. Besides the simplicity to sell the property is a valuable option for property investors, as the shares of the company are transferred to a new owner but not the property itself, which is much more easy and fast. As a result the cost of transactions reduces. Considering property purchasing in the UK by a company registered in an off shore area, for example, the smart organization of the process allows an income tax, inheritance tax, and capital gains tax avoidance. Unlike offshore property holding companies non-domicile residents who want to invest in property will be subjects to capital gains tax and will not avoid inheritance tax if they want to hold the property in their own names.
- Shipping companies
Using offshore registration shipping companies get the opportunity to avoid direct as well as indirect taxes on shipping. Shipping service (regular or charter ship transportation) may be organized completely tax-free. According to international laws, offshore companies providing shipping service are required to belong to the jurisdiction whose flag its vessels fly. Traditionally Liberia and Panama were the preferable jurisdictions for such companies. Today, with the expand of registries of other nations, it is popular to have registration at British Ports of Registry, for example in Gibraltar or in the Isle of Man. A ship or even a yacht which refers to the British Ports of Registry gets appreciable prestige throughout the world and the vessel may be inspected by any surveyor approved by the British Department of Trade and Industry (DTI). The flag belonging to the UK has always been treated as one of the most reliable.
- Specific service providers
Individuals who provide professional services such as design, entertaining, consulting, authorship and so on may get fees or awards through an offshore entity thus getting an opportunity to avoid predatory taxation of the most world’s countries. Such individuals make agreements with offshore employment companies which are not obliged to pay income tax and which can use earned money to reinvest in a tax friendly area to generate more income.
- Royalty, copyright and patent firms
A company enjoying tax benefits of an overseas jurisdiction may obtain the rights to use patents, know-how, copyright, trademark, etc. with an option to sublicense. An offshore company owning intellectual property right can choose a licensee to exploit the right in a certain country or throughout the world. When it comes to patent purchase it is better to make a transaction on a patent pending stage to get the lowest acquisition price. And when the patent becomes popular and overall accepted its price significantly increases. Usually, royalties paid by a company located in a high tax country are levied with withholding taxes at source. Offshore companies get the significant reduction of the rate.
- Privacy, probate
People who keep their assets, funds or properties in different countries would certainly wish to manage all the wealth through an offshore holding company because in case of their demise it would be much easier for heirs to apply for probate in the country of company’s registration rather than in the countries of assets’ disposal. This is a good opportunity to preserve privacy and to avoid certain fees. Besides, many people don’t want the general public to be aware of their wealth that is why they set companies in offshore areas to preserve privacy. Feel free to contact our advisors to discover more information or to get answers to specific questions.