Discover business topics

Doing business worldwide

Blog about doing business internationally.

Offshore or offshore zones are an excellent tool that entrepreneurs are actively using all over the world to optimize taxes, cash flows, management, etc. In addition to an excellent reputation, offshore companies have bad public opinion and opposition from governments who want to find funds withdrawn and diversified abroad to tax. Today we will look at the advantages and disadvantages of offshore companies from a general business and asset protection point of view.

Benefits of offshore companies

Why do businesses and many wealthy people choose offshore companies for their money and other assets? There are several reasons for this, so we will simply list some of them, commenting on each item.

Low or zero taxes offshore

One of the most important and popular reasons to take your assets offshore, be it personal finances or company corporate accounts, is that there are no or reduced taxes in offshore locations. They are called that – low-tax jurisdictions. This allows you to optimize costs and reduce the tax burden. But here there is a fine line, where, on the one hand, there is legal optimization, and on the other, tax evasion. Now all over the world tax legislation is changing to ensure the collection of taxes even if a company or an individual transfers funds abroad.

Relatively high level of confidentiality offshore

Another major reason why our global companies and wealthy people choose offshore is confidentiality. They are used in the asset protection and privacy system. Because many offshores do not have a register of directors and beneficiaries, it is possible to achieve a certain degree of protection of personal data, information on transactions, etc. Again, 2013 was a turning point, forcing some offshore companies to give up their principles under pressure from large countries. But, despite this, schemes using offshore companies, trusts, foundations, and other structures are still among the most reliable in terms of storing information.

Speed ​​of registration of companies offshore

This is followed by practical advantages, such as the high speed of registration of new companies. Depending on the offshore, the time required to set up a new company can be reduced by up to 1 day. Besides, when creating a company, you do not need more documents, and sometimes the authorized capital. This all means that work can be started in a short time.

The ability to open a foreign currency account in any country

By setting up a company offshore, you are not required to create an account here. Your work account can be located in any country in the world, and you can accept payments in your preferred currency.

Lack of offshore reporting

One of the reasons why a business is having trouble lies in its accounting. Reducing credit with debit is already a classic and not a funny joke. And this has to be done all the time. The difference between many offshore companies is that there is a simplified form for filing financial statements, or it does not need to be submitted at all, limiting itself to paying an annual fee and simply keeping the accounting in a place known to the registrar. This rule is perfect for those who create offshore companies for themselves and their personal affairs. Two birds with one stone are killed: the level of confidentiality is increased and there is no headache about reporting in this company.

Disadvantages of offshore companies

But we do not live in a fairy tale and not in an ideal world. Having advantages, we have to pay for disadvantages. It’s like an army fighter: powerful, fast, armed. But at the same time, it consumes so much fuel that if civil aircraft flew at such a rate, then the companies would go bankrupt every day.

Likewise, offshore has its pitfalls that must be taken into account so that neither your business nor your finances go to the bottom. Consider the disadvantages of offshore.

Differences in legislation

You cannot go offshore and work according to the standard rules for your country. Each state and jurisdiction has its characteristics and its legislation, which is suitable for certain business purposes. Somewhere it is more profitable to create a company that owns a transport, somewhere it is more profitable to open an insurance business, and somewhere it is more convenient to protect your assets. It is at the stage of choosing an offshore company that any person needs expert advice so that a stupid situation does not turn out.

Audit of companies

It also depends on the specific offshore, but sometimes you have to use a local audit, such as in Singapore or Hong Kong. This increases costs, so you need to be clear about whether you need reviewers and whether you can pull their presence.

Only a foreign person can become the owner of an offshore company.

In some classic offshore companies, such as the BVI, the difference between offshore and local companies has been removed. All other offshore companies are for foreigners only.

Operation only outside the offshore

The point of all offshore companies is that the jurisdiction has a base, but all active activities (services, trade) are conducted outside the country. This means that you will not be able to work within this state. On the one hand, the market here is already small and your competition can be deadly for local entrepreneurs, and on the other hand if you work in the world, why do you need such a small market? Better pay attention to the big countries.

Leave a Reply

Your email address will not be published. Required fields are marked *