What is an offshore company?

An offshore company is a non-tax-resident legal entity incorporated in a jurisdiction different from where you or your company is tax resident. An offshore company does not necessarily need to be formed in a tax haven to be considered an offshore company. So we can define an offshore company as a “non-resident company” as there is no official definition of what constitutes an “offshore company” in tax laws.

In spite of the above, people usually refer to offshore companies as legal entities formed or incorporated in tax havens for several purposes, such as tax elusion, asset protection, diversification of investments, access to foreign investments, and for illegal purposes such as money laundering, tax evasion, terrorism financing, etc.

These companies can have different forms, such as Limited Liability Company (LLC), International Business Company (IBC), Limited Liability Partnership (LLP), Limited Partnerships (LP), Corporations, Limited Companies (LTD), etc.

Some of these entities are tax-exempt but are restricted to not having business activity in the country of formation, or transactions with residents (with some exceptions such as lawyers, tax preparers, registered agents and offices, etc). Other entities are allowed to transact with residents and to have business activities in the country of formation, but doing so would trigger tax liability or even lose the tax-exempt status.

An offshore company can be any foreign company, regardless of whether it is tax-free or formed in a high-tax country, on an island, or in a metropolis.