Offshore Companies: The Good, The Bad, and The Ugly
Offshore Companies – The good: Legally Minimize Taxes and Protect Assets
Anybody can incorporate a business. In our world today, both free and guarded economies alike permit foreign nationals to create businesses and commercial opportunities on their shores.
There is nothing wrong or illicit about owning and running a business abroad, or ‘offshore’. On the contrary, it’s an admirable accomplishment. A person who imports furniture from Asia to sell to European stores is really no different than Coca-Cola selling soft drinks on each continent; and no different from a consultant, who works with clients around the world. What they all have in common is offshore companies and international banking.
For companies large and small, tax planning strategies are necessary part of achieving business objectives. The practice of legal tax minimisation (not to be confused with tax evasion) allows a company to legitimately decide to save its money on taxes. As businesses grow, so do tax obligations, which impede entities from reinvesting, expanding, and growing at the best rate possible. A tax planning strategy that legally minimizes taxes is one of the best means to help a global business flourish.
Offshore Companies – The Bad: Worldwide Taxation and Evasion
But abuse of these advantages has given these practices undeserved reputations. Evading or escaping taxes is not a condoned practice, and carries with it severe penalties and terms, such as payment of back taxes, confiscation of assets and imprisonment. Here stems the notorious reputation of offshore finances: traditional tax havens such as the British Virgin Islands (BVI), Bermuda, and several others. In our professional opinion, traditional ‘tax haven’ jurisdictions and their negative stigmas provide no future for offshore companies.
The optimal solution for any business is to strategize around reputable jurisdictions tax systems and ensure all legal obligations are fulfilled, legitimately.
Offshore Companies – The Ugly: A Few Bad Apples Bring Stricter Regulations For All
For offshore investing and business operations, extreme examples have come to be seen as the norm, abounding with stereotypes and misconceptions. Extreme cases include vastly wealthy individuals or businesses that failing to declare their full tax obligations. This does not represent the main constituency of active offshore finances. The fact is, a high number of SMEs are incorporated in an offshore jurisdiction and transact their business through offshore bank accounts. This is perfectly legal, and not the stuff of legal cases.
Recently, national governments have pursued tax evaders with growing aggression. Take for example the U.S. and the U.K. It is an effect of global recession; there is cause to collect what is rightfully owed for tax obligations. Information exchanges between countries, revealing account holder’s personal details, even from private banks may seem an invasion of privacy but is part of global efforts between the OECD and tax authorities to fight illegal practices. A vivid example would be any person living in politically unstable jurisdictions, where it is legal to confiscate a person’s assets without sanctions. This obliterates security and privacy of many innocent parties who have compelling reasons to seek anonymity, security and protection of one’s assets.
While there may be an ugly side to offshore company incorporation, and offshore banking, these are legitimate business strategies that allow a business to expand and take advantage of international opportunities, improve operational efficiency and maximize financial position and asset protection.
Healy Consultants Group PLC’ preferred offshore jurisdictions
(Click on the image below to download the infographic in high quality.)
If considering setting up an offshore company, engaging the services of an experienced corporate services consultant is one effective way to help ensure the process goes smoothly and all legal obligations are considered.