We at Offshore Affairs provide Offshore Company Formation services in most tax havens or tax friendly jurisdictions in all continents in the world. We count with partnerships and a broad network that allow us to provide a one-stop shop for our clients needs.
Counseling on where to form company
Offshore Company Formation.
Registered Agent and Address
Nominee Director Services.
Ongoing yearly maintenance assistance.
What is an offshore company?
An Offshore Company is a non tax resident legal vehicle incorporated in a different jurisdiction from where You or your company is a tax resident in. 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.
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.
These entities used 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.
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, and alike). Other entities are allowed to transact with resident and to have business activities in the country of formation, but doing so would trigger tax liability or even lose the tax-exempt status.
What is a tax haven?
A Tax Haven could be a territory where a tax is not levied or where tax is significantly lower than your primary country of tax residency. So for tax purposes, it can be a jurisdiction that exempts all incomes like income tax, estate tax, capital gains, royalties, etc., or it can be a jurisdiction that only exempts one type of tax, like royalty tax, but levies the rest of taxes.
While the term "tax haven" primarily implies tax advantages, it can also encompass jurisdictions that refuse to disclose information about a company's ownership, directors, or beneficiaries. Additionally, these jurisdictions may not enforce economic substance requirements for resident companies. Moreover, it can also include regions with favorable business or investment laws.
Forming a company or offshore vehicle in a tax haven is not illegal at all, but countries have implemented laws or actions to counter the attractiveness of forming a company in a tax haven. Some of these actions are against the tax residents, like local or domestic laws requiring the owner of these offshore vehicles to disclose the ownership of these entities, or not allowing tax residents to deduct costs or expenses of transactions with companies situated in tax havens, etc. They also implement actions against the tax haven, for example, the OECD and European Union may add them to the Grey or Blacklist, and call them non-cooperative jurisdictions, or implement the OECD Action Plan on Base Erosion and Profit Shifting (BEPS).
Nonetheless, a country can be a tax haven and not be black or grey labeled, which can be the case of jurisdictions like the USA, or the UK.
In summary, a tax haven can be a jurisdiction from anywhere in the world, from the USA, Canada, UK, Isle of Man, Cyprus, Andorra, Malaysia, Monaco, to the most “notorious” ones like Cayman Islands, Bahamas, BVI, Belize, Panama, just to name a few.
Are offshore companies legal?
Owning an Offshore Company is totally legal, it is like owning a Gun - a gun may be used for legal purposes such as Self-Defense, or for illegal purposes like robbery or illegitimate killing - so what is illegal is how you use it.
Offshore companies have plenty legal uses, including, but not limited to, asset protection, tax avoidance and international tax planning, access to foreign investments and business opportunities, bypassing capital controls, or carrying any legal business activity.
Some countries, depending on their tax law, might require tax residents to disclose the ownership of foreign entities, regardless if these are formed in a tax haven or in a high-tax country. So for example, if you are from the USA, and you own a company in Spain, as you are required to report interest in foreign entities / offshore entities, you are supposed to report the ownership of these entities. Factor to determine if you are supposed to report this ownership will depend on aspects like ownership percentage.
So the crime would reside in not reporting the ownership of these entities if you are required by law and how you use them, but it is legal to own it and use it in the correct way, even if for reducing your taxes.
How are offshore companies taxed?
Taxation will depend on each jurisdiction code, but in general these might be tax transparent entities (pass through) and there I no tax paid at the company level, and if the company did not engage in business activities, the pass-through income to the owned is not sourced from the country of formation, and hence not subject to income tax.
In general, "Offshore Companies"are tax exempt from all types of tax withholding tax, income or corporate tax, VAT, GST, or any other type of sales tax, payments to non-residents, dividends, interests, royalties, etc., but other jurisdiction might exempt some of just, or just provide a lower or significantly lower tax rate than your jurisdiction of tax residency.
What do you need to open an offshore company?
The documents required will depend on each jurisdiction AML/KYC requirements, but in general you would need:
Proof of Identity (Passport copy, national ID card)
Utility Bill dated no less than 3 months. (translated to the jurisdiction's official language)
Professional or Banking Reference Letter.
Fill out company formation forms for the service provider or lawyer to complete incorporation.
Most of the time, proof of identity and utility bill need to be certified copies.
What are the yearly maintenance requirements of an offshore company?
This varies from country to country, and from entity type to entity type. In general, companies in "pure tax havens" are only required to pay an annual flat fee (+/- $1,000) and to renew the registered agent and address service, and there is no need to file tax returns, audits, bookkeeping, etc.
Other jurisdictions are only required to file information returns (Foreign Owned US DE), while others require tax returns and extra forms to claim tax exemptions for foreign owned income (Hong Kong companies for example).
What is Asset Protection?
Asset protection is putting your assets in a legal vehicle (Company or Trust) out of creditors’ reach.
You can protect your assets by carrying your business ventures through a company (this can be a local or offshore company), this strategy allows you to carry your business without putting at risk your personal assets or your other companies assets; or you could transfer your personal assets to an asset holding company incorporated in your country of personal tax residency, but this strategy still leaves a gap for personal creditors to go after your interest or shares in that asset holding company, but incorporating this asset holding company in a tax haven will make it mostly impossible for creditors to find out the ownership of the asset holding company since one of tax havens main services besides tax enhancement is secrecy, and some jurisdictions make it nearly impossible, if not very expensive, to enforce foreign judgements.
Make sure and do your asset protection before a lawsuit arises, or before bankruptcy is around the corner because most jurisdictions' bankruptcy laws have provisions against fraudulent conveyances dated some months or even years before bankruptcy, to related parties, i.e related companies or relatives.
What is a Trust?
Put simple, a trust is when you transfer certain assets to a Trust, which is administered by a trustee in your benefit or in benefit of who you appoint as the beneficiary. While the Trustee administers such assets, the assets legally do not belong to you, nor to the administrator, nor to the beneficiary, they belong to the Trust. A Trust could be of several types, but the most common are those of administration, wealth management, and warranty. The Trust provides an additional layer to your offshore structure to keep private the ownership of your assets.
The Trust provides asset protection as it separates the assets of the Settlor/Grantor and are administered towards the Beneficiary benefits.
The Grantor sets the rules and how the assets will be administered, and the Trust could sometimes be revoked or irrevocable, depending on the Trust rules.
A Trust provides total privacy as when the trust is created, no one can know who is/are the settlor(s) and/or the beneficiary(ies) since the Trust Deed is an internal document that only the involved parties have knowledge of.
A classical offshore trust structure is the Trust would own one or several companies (LLCs, Corporations, etc.), and those companies are to hold assets (bank accounts, cars, aircrafts, yacht, or any other asset), and the Settlor, or whoever the Settlor wishes, may be appointed as the manager (CEO) of said companies and the CEO would have a General Power of Administration, providing the Settlor full control and administration over the Trust Assets.
Some jurisdictions allow the figure of the “Protector” where you can have more control over the actions of the Trustee.
Need International Tax Advice?
You can check our International Tax Planning Section to learn more about our international tax planning services, and to read our quick international taxation guide.