Offshore company formation
Healy Consultants Group PLC
21 February, 2014
Offshore company formation
An offshore company entity can be done in three ways: i) the traditional tax haven entities from island jurisdictions such as the BVI, Isle of Man or Seychelles ii) company registration in a legally tax exempt trading entity from reputable countries such as Singapore, Hong Kong or the UK and iii) offshore company formation in the form of a low ax or legally tax exempt trading entity from reputable countries such as Ireland, Cyprus or Hungary.
Advantages of an offshore company
1. Offshore companies allows international businesses to conduct trade in a more tax efficient manner. For example, investors can efficiently conduct business throughout Asia by incorporating a Singapore offshore entity.
2. Offshore corporate banking enables investors to receive and settle foreign currencies, eliminating exchange rate risk while minimizing transaction costs. For example, a HSBC Hong Kong multi-currency offshore business bank account enables investors to pay Chinese suppliers in Renminbi (RMB);
3. IBC registration can improve cross border sales for the parent company. For example, a tax exempt Irish offshore company is a more effective vehicle to sell goods and services within the EU than its Asian or Middle East parent company. furthermore, an Irish offshore company will look more attractive to EU customers together with EU VAT registration;
4. Another advantage of starting an offshore business is that low tax, or tax exempt, offshore jurisdictions neither i)require annual accounting and tax returns nor do they ii)publish the register of shareholders and directors. For example, an entrepreneur bidding for a large oil and gas contract may appreciate the confidentiality provided by offshore companies. Also, when profits are low, entrepreneurs interested in starting an offshore business entity appreciate the absence of annual compliance costs;
5. It is common to incorporate an offshore business entity to i) optimize confidentiality ii) mitigate financial risk and quarantine iii) legal risk and iv) reputation risk. For example, a Hong Kong offshore setup or Singapore offshore entity is protected by strong local regulations, based on UK common law. These reputable jurisdictions give strong business law support, providing comfort to our Clients when signing contracts with international suppliers and customers;
Apart from the attractive advantages, there are potential downsides to offshore company incorporation, such as:
1. Traditional tax haven entities have limited uses because of their growing negative perception. It is no longer popular to operate international business through companies in offshore jurisdictions such as BVI or the Isle of Man. A customers perception of tax avoidance overwhelms the positive business intentions. As an alternative, entrepreneurs may opt to incorporate in a reputable jurisdiction with similar benefits associated with offshore companies;
2. International banks view offshore companies as high risk customers. Consequently, it is harder to obtain approval for offshore bank account opening following company registration. Plus, banks demand increased due diligence from offshore accounts and there is extra ongoing monitoring of such transactions;
3. There are annual accounting and tax obligations for companies registered in reputable international trading jurisdictions. For example, an offshore setup in Singapore must submit their financial statements to the local tax authority. From a positive perspective, this obligation contributes to the transparency of the jurisdiction, optimizing the image of this offshore corporate structure.
We believe that in the future, international business companies (IBC) will be legally operated through entities from reputable, tax exempt offshore jurisdictions such as Singapore, Ireland, Hong Kong, New Zealand and Dubai.
View our guide to set up offshore company here.
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