Our consultants are regularly asked: “What can I do with an offshore company?”
The short answer is the same as if asked: “What can I do with my own company?”
Setting up a company in an offshore jurisdiction is simply incorporating your own company outside of the country where you reside. The only difference between your own company onshore and your own company offshore, is one must follow the laws of the land in which the company was incorporated along with legislation from your resident country in regards to international business. This can sometimes cause confusion.
Each country in the world has its own company law guidelines. A self-governed location, such as a country or nation state is called a ‘jurisdiction’ if it implements an independent tax system. Jurisdictions can typically choose their own tax regulations, such as setting corporate tax rates.
These jurisdictions set a rate for taxing corporate profits. Singapore and Hong Kong are amongst the lowest corporate tax rates in the world and have become popular destinations for entrepreneurs undertaking offshore company formation. This gives business owners opportunities to incorporate in a low tax, or tax exempt, jurisdiction with excellent reputations as efficient business hubs.
Tax planning is a significant aspect to address when starting a business, especially smaller enterprises or start-ups. Setting up an appropriate corporate structure in a suitable jurisdiction will help boost an entity’s growth, and can mean the difference between expanding and thriving or scrimping and surviving.
So, to answer the question about what can be done with an offshore company.
Registering an offshore company, whether it is a Singapore company, a Hong Kong company or in a small island nation such as the Marshall Islands allows an individual to set up a business with an efficient corporate structure and take advantage of international opportunities. Forming your own offshore company can also assist you to expand your profits and protect your and grow your assets.
There is liability in starting any new business, and working with foreign and international laws, regulations and tax codes can make conducting business in a different country seem daunting. But different business structures and options exist for achieving different business objectives. Offshore company formation together with offshore banking, are popular and profitable choices regardless of jurisdiction because the benefits of owning your own company appeals to so many.
Many countries permit foreign nationals to freely incorporate, operate and own a business. Jurisdictions that do not allow 100% foreign ownership usually implement schemes to provide the benefits of free market economy competition and entrepreneurship. For example, the United Arab Emirates have free trade zones for this purpose, just as China’s WFOE scheme encourages foreign investment. These jurisdictions have benefitted from the influx of capital, talent and knowledge brought in from global entrepreneurs.
Many times, the term ‘offshore’ can throw people off. There is a stigma in the idea of offshore business and accounts because of abuses by minorities that pursue tax evasion practices. This has resulted in more scrutiny from tax authorities around the world.
Some countries, most notably, the United States, require their nationals to remit tax on all of their profits, whether the income is sourced within the US or internationally. The advantage of using a professional corporate services firm to assist in structuring an offshore company setup is being able to use their experience and knowledge of the different company law requirements. Proper planning can help ensure the legal obligations of all jurisdictions involved are met.
The truth of the matter is businesses incorporate abroad every year for legitimate and legal tax strategies, for protection, for best comparative advantages, geographic advantages, globalisation and more.