Frequently Asked Questions (FAQ)
What is an offshore company?
An offshore company is a corporation is incorporated or registered in an offshore financial centre or "tax haven"
The extent to which a jurisdiction is regarded as offshore is often a question of perception and degree. Classic tax haven countries such as Bermuda, British Virgin Islands and the Cayman Islands are essentially offshore jurisdictions, and companies incorporated in those jurisdictions are invariably labelled as offshore companies. Thereafter there are certain small intermediate countries such as Hong Kong and Singapore (sometimes referred to as "mid-shore" jurisdictions) which, whilst having oversized financial centres, are not zero tax regimes. Finally, there are classes of industrialised economies which can be used as part of tax mitigation structures, including countries like Ireland, the Netherlands and even the United Kingdom, particularly in commentary relating to corporate inversion. Furthermore, in Federal systems, states which operate like a classic offshore centre can result in corporations formed there being labelled as offshore, even if they form part of the largest economy in the world (for example, Delaware in the United States).
How should we classify offshore companies?
Historically, offshore companies were broadly divided into two categories. On the one hand were companies which were statutorily exempt from taxation in their jurisdiction of registration provided that they did not undertake business with the person resident in that jurisdiction. Such companies were usually called International Business Companies, or IBCs. Such companies were largely popularised by the British Virgin Islands, but the model was copied widely. However, in the early 2000s, the OECD launched a global initiative to prevent "ring fencing" of taxation in this manner, and many leading jurisdictions (including the British Virgin Islands and Gibraltar) repealed their International Business Companies legislation. But IBCs are still incorporated in a number of jurisdictions today including Anguilla and Panama.
Separately from IBCs, there are countries which operate tax regimes which broadly achieve the same effect: so long as the company's activities are carried on overseas, and none of the profit is repatriated, the company is not subject to taxation in its home jurisdiction. Where the home jurisdiction is regarded as an offshore jurisdiction, such companies are commonly regarded as offshore companies. Examples of this include Hong Kong and Uruguay. However, these tax regimes are not limited to conventional offshore jurisdictions: the United Kingdom operates on broadly similar principles in relation to taxation of companies.
Separately there are offshore jurisdictions which simply do not impose any form of taxation on companies, and so their companies are de facto tax exempt. Historically the best example of these countries were the Cayman Islands and Bermuda, although other countries such as the British Virgin Islands have now moved to this model. These could arguably fit into either of the previous two categories, depending on the fiscal point of view involved.
What are the characteristics of an offshore company?
Although all offshore companies differ to a degree depending upon the corporate law in the relevant jurisdiction, all offshore companies tend to enjoy certain core characteristics:
They are broadly not subject to taxation in their home jurisdiction.
The corporate regime will be designed to promote business flexibility.
Regulation of corporate activities will normally be lighter than in a developed country.
Another common characteristic of offshore companies is the limited amount of information available to the public. This varies from jurisdiction to jurisdiction. At one end of the scale, in the Cayman Islands and Delaware, there is virtually no publicly available information. But at the other end of the scale, in Hong Kong companies file annual returns with particulars of directors, shareholders and annual accounts. However, even in jurisdictions where there is relatively little information available to the public as of right, most jurisdictions have laws which permit law enforcement authorities (either locally or from overseas) to have access to relevant information, and in some cases, private individuals.
In relation to flexible corporate law, most offshore jurisdictions will normally remove corporate fetters such as thin capitalisation rules, financial assistance rules, and limitations on corporate capacity and corporate benefit. A number have also removed or watered down rules relating to maintenance of capital or restrictions on the payment of dividends. Beyond the common themes, a number of jurisdictions have also enacted special corporate provisions to try and attract business through offering corporate mechanisms that allow complex business transactions or reorganisations to occur more smoothly.
Is it legal to own an offshore company?
Yes, it is fully legal to own an offshore company. However, it should be used with care. Many countries have introduced some counter-measurements to counter against tax evasions. In particular, some governments have introduced withholding tax on direct payments from domestic businesses out to foreign companies, which are situated in certain listed offshore jurisdictions. An offshore company is just the same as Your domestic business entity, only the offshore corporation is not burdened by excessive tax, is faster to incorporate and easier to manage.
What are the uses of offshore companies?
Offshore companies are used for a variety of commercial and private purposes, some legitimate and economically beneficial, whilst others may be harmful or even criminal. Allegations are frequently made in the press about offshore companies being used for money laundering, tax evasion, fraud, and other forms of white collar crime. Offshore companies are also used in a wide variety of commercial transactions from generic holding companies to joint ventures and listing vehicles. Offshore companies are also used widely in connection with private wealth for tax mitigation and privacy. The use of offshore companies, particularly in tax planning, has become controversial in recent years, and a number of high-profile companies have ceased using offshore entities in their group structure as a result of public campaigns for such companies to pay their "fair share" of Government taxes.
Detailed information in relation to the use of offshore companies is notoriously difficult to come by because of the opaque nature of much of the business (and because, in many cases, the companies are used specifically to preserve the confidentiality of a transaction or individual). It is a commonly held view that most uses of offshore companies are driven by tax mitigation and/or regulatory arbitrage, although there are some suggestions that the amount of tax structuring may be less than commonly thought. Other commonly cited legitimate uses of offshore companies include uses as joint ventures, financing SPVs, stock market listing vehicles, holding companies and asset holding structures, and trading vehicles.
Which jurisdiction should I choose for my offshore company?
It is all zoom down to what you want to achieve using the offshore company. There are offshore companies that use to hold assets and there are those that use to pay minimal tax and all you to repatriate back to your home country. Below is the comparison table.
|Jurisdiction||Type of company taxation||Minimum number of shareholders||Minimum number of directors||Corporate director permitted||Public disclosure of director and shareholder|
|British Virgin Islands||IBC, None||1||1||Yes||None|
|Cayman Islands||Exempt, None||1||1||Yes||None|
|Hong Kong||Private Limited, Nill on foreign profits||1||1||Yes||Yes|
|United Kingdom||Resident, 19-30%||1||1||Yes||Yes|
|Delaware USA||C Corp, Various||1||1||No||None|
|Delaware USA||LLC, None||1||1||Yes||None|
Why should I use OffshoreCorpServe to open my offshore company?
We sell solutions to our clients, not products.
We are reliable as we are a company registered in Singapore.
We will make sure your transaction is confidential, other than the relevant registration parties that are involved in the process, it is not to our interest to disclose whatever dealings that we have with you.
It is easy to transact with us, all you need to do is to make the payment, prepare the relevant documents, fill up the form and email to us. We will take care of the rest.
Some of the jurisdictions that we have are one of the cheapest in the market, whatever we disclose in our Eshop is the amount that you need to pay, exclude shipping and tax (from your own country if there is any).
We aim to increase our jurisdiction coverage to be the biggest and the most cost effective globally.
We understand the hurdles after you incorporated your company, we are here to solve it for you. We can arrange for you to open a bank account if you need.
A wide range of services and good relationship with offshore professional.
Sign up our newsletter and we will keep you posted on the latest developments in these offshore jurisdictions.
Is offshore company required to keep books and financial records?
In many offshore jurisdictions, there is no requirement to keep books and financial record. However, since recently, some of the offshore financial centres have realised that a formal requirement to maintain some financial records in an offshore company would well be in the best interests of the beneficial owners of the companies, providing them with some a peace of mind. This becomes especially important when an offshore company has several owners, more elaborate system of management and decision-making process.
Do I need to pay tax for profit that I made using my offshore companies?
You may want to consult a tax consultant or an accountant for more detail. In most of the cases, you are not required to pay any tax unless the offshore jurisdiction which the offshore company incorporated required you to do so. We noticed that those IBCs are mainly not taxable on the profit. There are some jurisdictions that the tax is only on the revenue that you made in the jurisdiction which the offshore company is incorporated.
Who should be using offshore companies?
Holding Companies - If the holding company is situated in an offshore area where there are no income or corporation taxes and no requirement that dividends must be paid, then the profits which are accumulated in the tax-free climate can be used to fund the requirement of subsidiaries or reinvested as business convenience suggests.
Probate and Privacy - A high net worth individual with properties or other assets in a number of countries may wish to hold these through the medium of a personal holding company so that upon his demise probate would be applied for in the country in which his company was incorporated rather than in each of the countries in which he might hold assets. This saves legal fees and avoids publicity. Again, not everybody wishes to advertise wealth and an individual may wish to hold property through an offshore entity simply because of the privacy which the offshore arrangement gives.
Property-Owning Companies - There are often great advantages in using an offshore property holding company for the purpose of holding an overseas property. Advantages of offshore property ownership include avoidance of inheritance tax, avoidance of capital gains tax, ease of sale which is achieved by transferring the shares in the company rather than transferring the property owned by the company and reduction of property purchase costs to the onward purchasers. Taking the example of investment in property in the United Kingdom by an offshore company, use of an appropriate offshore vehicle can offer relief from income tax, capital gains tax and inheritance tax. It should be remembered, in particular, that when a nonresident company disposes of a property investment, no capital gains tax is charged and holding through an offshore company removes the application of inheritance tax which would apply if a non-domiciled investor held a UK property in his personal name.
Professional Services - Individuals who receive substantial fees in respect of their professional services in capacities such as designers, consultants, authors or entertainers, may assign or contract with an offshore company the right to receive those fees. The offshore employment company may not have to pay tax on its profits which can be reinvested in a tax-free climate to generate further income from the offshore company. Payments to the individuals concerned can be structured in such a way as to minimise their tax liabilities. One example in this regard in respect of an overseas employment is to increase subsistence expenses as against fees as such which would be paid to the individual.
Shipping Companies - The use of offshore shipping companies can eliminate direct or indirect taxation on shipping. Shipping companies may own or charter ships, the profits from which activities can be accumulated tax-free. Tax and legal requirements generally dictate that the offshore company owning a shipping vessel should be incorporated in the jurisdiction whose flag the ship flies. The historic havens for these purposes have been Panama and Liberia. Latterly, the registries of other nations have expanded and consideration might be given to registrations at British Ports of Registry such as those in the Isle of Man and Gibraltar.
The patent, Copyright and Royalty Companies - An offshore company can purchase or be assigned the right to use a copyright, patent, trademark or know-how by its original holders with a power to sub-licence. Upon acquisition of the intellectual property right the offshore company can then enter into an agreement with licensees around the world who would be able to exploit the intellectual property right in various countries. It is thought preferable to acquire, for example, a patent at the patent pending stage before it becomes very valuable so that the capital payment for the acquisition of the patent can be set at a lower amount. Often royalties paid out of a high tax area attract withholding taxes at source. In many cases, an interposing holding company may allow a reduction in the rate of tax withheld at source.
Can I choose the name of my company?
Yes, you may do so. In fact, you should provide three company names, in order of your preference. We will check with the offshore jurisdiction company registry if those names are available for incorporation. We will reserve the name for 2 weeks on your behalf.
What is a shelf company?
A shelf corporation, shelf company, or aged corporation is a company or corporation that has had no activity. It was created and left with no activity - metaphorically put on the "shelf" to "age". The company can then be sold to a person or group of persons who wish to start a company without going through all the procedures of creating a new one.
Common reasons for buying a shelf corporation include:
- To save the time involved in taking the steps to create a new corporation.
- To gain the opportunity to bid on contracts. Some jurisdictions require that a company be in business for a certain length of time to have this ability.
- To show corporate longevity in order to attract consumers or investors.
- To gain access to corporate credit.
A shelf company list is usually generated by the service provider and the transfer of ownership usually takes place in less than 24 hours. You have the option to name your own company but you can't if you are selecting from the shelf list.
What is an apostille?
An apostille is a way to authenticate documents for use outside the country where they were created. Specifically, an apostille certifies the identity of the signer by means of an authentic signature from a designated apostille authority. An apostille does not certify the content of the document to which it is affixed.
An apostille is valid only in a country that has signed the Apostille Convention, which is also called the Hague Convention of 5 October 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents. An apostille does not certify a document in the same country that issued the document.
What is a certificate of incumbency?
A Certificate of Incumbency is a company’s document confirming the identity of officers/ directors or members/managers. A Certificate of Incumbency is also known as an Incumbency Certificate, a Register of Directors, and as a Secretary Certificate. This certificate may be issued by a company itself or its registered agent.
This document is required in the process of opening bank or investment account.
If I change my mind after I made payment about the offshore company, can I get at least a partial refund?
We are sorry to inform you that we are unable to do so as we usually send the money to the company registry as soon as we received the payment from the client. Certainly, if the client informs us before we send into the company registry, we will refund the payment.
Is the information I give to you confidential? What about my proof of my identity?
For proof of your identity, you must provide one picture identity document, such as a current valid passport or current valid national ID card or current and valid driver's license. A clear copy of one of these must be certified scanned and emailed to us.
Your identity documents which you send to us will be kept in the strictest confidence. We may only reveal such information if a court order requires us to reveal the information.
I don't want to use registered shares, what do you recommend bearer or nominee shareholder?
We recommend the use of the nominee shareholder who will issue a Declaration of Trust to the Beneficial Owner ensuring that the shares cannot be used in any way without the express consent of the real owner. Secondly, some banks will not open accounts for Companies with bearer shares.
When I have incorporated an offshore company, are there any other fees or costs of which I should be aware?
Yes. Every company has to pay a small annual government fee. This fee is due from the anniversary of the incorporation every anniversary thereafter. Some jurisdictions may require offshore companies to have a registered office and registered an agent in the country of incorporation. These fees are commonly referred to as maintenance fees and are not expensive.
Can I use another company as a director/shareholder of my offshore company?
Yes, you can. In most cases, corporate shareholders and corporate directors are allowed.
What is a nominee shareholder?
A nominee shareholder is officially registered as the holder of shares in an offshore company. The purpose of the nominee shareholder is to uphold client secrecy by protecting the ultimate beneficiary owner of the company from being associated with the offshore company.
In this situation, declaration of Trust will be issued by the nominee and held by the beneficial owner. Such documents suggest only the beneficial owner has the right to dispose of those shares and is entitled to all benefits and profits deriving from those shares.
What is the purpose of the nominee director?
The objective of employing a nominee director is to prevent the public, especially potential business competitors, from knowing that a direct relationship exists between the ultimate beneficial owner and the offshore company. By employing a nominee director, it offset potential implications that the beneficial owner is in the control and operating the offshore company.
What is a Power of Attorney?
In order for the ultimate beneficiary owner of the offshore company to remain anonymous, there are 2 steps to be taken.
The first step to take is to have a "nominee shareholder" which allows this 3rd party to act as the nominee shareholder. A declaration of trust should be held by the ultimate beneficiary owner of the offshore company, signed by the nominee shareholder.
The next step to take is to have a "nominee director" which appoint a 3rd party to make decisions for the offshore company. In that case, the ultimate beneficiary owner will need to sign a "Director Service Indemnity Agreement" with the nominee director. In return, the nominee director will have to sign a Power of Attorney to the ultimate beneficiary owner in order for the ultimate beneficiary owner to act as the company’s authorised representative in commercial negotiations.