Yes. Certainly, it should be used with care and some good advice. Many high-tax countries have introduced some countermeasures in their tax regulations against known offshore finance centres. In particular, some high-tax governments have introduced a sort of discriminating withholding tax on direct payments from domestic businesses out to foreign companies, which are situated in certain listed offshore jurisdictions. Therefore, it is a good idea to check if Your country has such a "blacklist" or any discriminating regulations targeting transactions with offshore corporations. Your domestic tax lawyer or accountant should be able to clarify this question. All-in-all, 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. In itself, it's completely legal to have and use.
Issues Over OffShore Companies
After the litigation over the 'Panama Papers', the word offshore has been highly recognized as illegal and corrupt. The media all over the world are looking out for matters to add to their headlines on this corruption news which has included names of politicians other top celebrities. All the politicians with offshore companies are being targeted, and it's a common concern that the other foreign entities will also be pulled into this.
One has to understand that an offshore company is completely legal when it complies with all rules and regulations of both the countries. It is not the enterprise or setting up of the offshore company that is illegal, but it is the activities of the members of the entity that breaks the law. The tax reduction and asset protection gained through offshore companies are legalized by the rules governing them. Major players like Google and Apple have saved billions of dollars with offshore arrangements.
Saving Tax with Offshore Company
People usually try to cut down on the taxes by moving out of their country. Every nation has different tax rules for expatriates. For example in the US, the emigrants are exempted from paying tax for the amount of $100,000. The tax filing will have to be done, but the tax cuttings can be saved directly. But with offshore enterprises, it does not work the same way through direct tax savings.
Overseas companies have enormous tax benefits can they can easily postpone their tax bills. With a foreign company, the tax documents will have to be filed, but the tax payment can be exempted if the profits are invested back into the business. It can go on as long as one wishes and only when the company is selling off, will the person have to pay the tax at that time. This is known as tax deferment rather than tax savings.
Scope for Offshore Internet Company
Offshore companies are popular recently due to the tax reduction and reduced liability. People move on to set up foreign internet companies to save from the age-old rules governing the country. If your country is stuck with the old rules, you can easy move it to an offshore enterprise. Being an online entity, you can operate from any location, so there is no constraint that you have to stay in your home country. People consider gaining an income source from another country with a stronger currency especially in the current scenario of recession.
Offshore Entity to hold Property Abroad
There might arise several reasons why you would want to own property in another country. Situations may arise that you have to take up a property, or you have some vested interest in buying the property in that country. But most countries does not allow a person who is not a citizen of that country to own property. In such a situation, he can use a trust or an offshore entity to fulfill his requirement.
Passing Property Will in Another Country
Some countries allow foreigners to own property, but the problem arises when the individual dies and the probate laws of that country will have to be followed. This might bring about situations where the laws of the state will require the property to be distributed against the will of the person who owned it. With an offshore element to take care of the property, probate issues can be avoided wisely. The inheritance rights rightly come over to the entity, and there will be no issues later. We might have seen people having offshore entities in several countries, and the sole purpose might be to manage the several properties in these countries.
Preplanning for Offshore Establishment
There are many countries which have welcoming legal clauses governing offshore enterprises and have attractive tax benefits for such companies. Before venturing into it, even the most minute details have to be accessed and studied to prevent any issues in future. An attorney with experience in international law and taxation can help in evaluating the various aspects of offshore establishments in the most favorable countries.
Once you have done your part of research and the decision is made, the next step is to get established. Most companies allow offshore enterprises to carry on most of the documentation and registrations online. And the whole setup process would take less than a month. The first step is to register the offshore business with the proper company name, and the required documents should be sent to the registration department of the country where you plan to set up the entity. To incorporate the establishment into the jurisdiction, it will be required to open a bank account in the name of the business.
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