Using Offshore Company
Offshore company, being a flexible business structure, can be integrated into a wide variety of tax planning and asset protection arrangements. Reduced or deferred tax liability and increased confidentiality are just two of the benefits which can be achieved by proper usage of an offshore company. In practice, offshore strategy depends on the anti-avoidance laws that may be in force in the country where the beneficial owner is citizen, is domiciled or does business. Therefore, we recommend to all potential customers to receive qualified tax advice from tax specialists in his/her country of residence, domicile or proposed business operations.
These are the main ways how an offshore company may be used:
Trading Company: an offshore company functioning as a trading intermediary in spheres of sales, distribution or import-export. Most often, the company purchases directly from manufacturers or wholesalers, and arranges the goods delivered directly to the end-customer from the place of production or purchase. This offshore company type can be especially interesting in cases where goods originate from one country, are sold in another but the principal is located in a third country.
Offshore trading companies can be used by domestic producers and importers for distributing goods or sourcing them abroad. All profits from the difference between purchase and sales price may be accumulated in an offshore environment and can be re-invested into further development of the business without any excessive tax liabilities.
Investment Company: in many high tax jurisdictions investments are subject to withholding tax at source or capital gains. However, there are still plenty of investment instruments where no such taxation would be applicable. Private funds can be put into investment instruments in all the world, the returns and capital gains being accumulated in an offshore environment. Returns accumulated in a tax-free area would give additional flexibility to their distribution and re-investment. Using private offshore investment company would provide additional confidentiality for the investors and tax benefits for the investment returns.
Holding Company: using holding company can have several objectives. A holding company can be established and used to hold the shares of subsidiaries located in high tax countries. Also, when a person owns assets or porperty in a territory which is not his domicile, then he can protect his assets against inheritance tax and higher rates of taxation by placing them in an offshore investment company. Offshore holding company may be used to hold the title of the property, thus diminishing those difficulties and expenses associated with investment in overseas property.
The property can be quickly and easily sold by saling company shares to the purchaser. This also helps to save legal fees and oversėas transfer and value added taxes levied by certain foreign countries. It can also be used for successful avoiding capital gains and inheritance taxes.
If a holding company is registered in a suitable offshore jurisdiction with appropriate double-tax avoidance treaties in place with the owners' home jurisdiction, such company may be used to hold shares in various offshore trading companies owned by the same owner. This would provide for fully or nearly tax-free repatriation of offshore trading profits directly to the beneficial owner of the company.
Professional Service Company: an offshore company through which the fees for contracts may be routed can be successfully used by international contractors, consultants, designers and other professional individuals. The main principle of using offshore professional service company would be accumulating the bulk of the fee income in the name and accounts of the offshore company in a tax-free environment. Designers, consultants, authors and entertainers may assign or contract with an offshore company the right to receive fees due under a contract for services.
Professional Service Company has an additional advantage: potential liabilities associated with a professional services contract would rather fall upon the company and not the individual.
Royalty/ Copyright/Patent Holding Company: this is a company that has purchased or has been assigned the right to use a copyright, patent, trademark or konw-how by its original holders, with a power to sub-license and exploit the intellectual property rights in different countries. This should be properly planned activity, because many high-tax countries impose on royalties withholding tax at source. An existence of a double-tax-avoidance Treaty between the countries involved may reduce such withholding tax.
Internet businesses may use offshore company to hold domain names and operate websites in a tax-free environment.
Shipping Company: the type of company that can eliminate direct or indirect taxation on shipping. Shipping company may own or charter ships, while the profits from these activities may remain in tax-free area. Ships or yachts may be owned by an offshore company and registered in an offshore jurisdiction. It is cheap and tax efficient method of ownership.