What are the advantages of using an offshore company?

The main advantages are:

• total absence or minimum levels of taxation;
• confidentiality, due to no sensitive personal information available on public file;
• protection, due to secrecy provisions enshrined in law and absence of international information-sharing agreements;
• corporate flexibility: no paid-up capital requirements, no requirement to state operational objects, minimum conditions on directors and shareholders, fast incorporation, etc;
• ease of management – shareholders' meetings can be held anywhere, including by electronic means, flexible decision making process;
• minimum reporting – no audits, no tax reports, no financial information for public file. All in all – a lean, mean international business machine.

Tax Reduction

You might have often come across the word tax haven when you read about foreign enterprises. The countries which welcome foreign investors with tax incentives are widely known as tax havens. States undertake such moves to rake in more investors to bring in foreign wealth. The benefit that it has for the country is mainly economic growth, and usually, small countries with very less population and industries are the ones that are tax havens. Investors set up their corporations in these foreign countries and these work like a shield protecting the assets and profits of the investor from the high tax rates in the domicile country.  Most offshore jurisdictions prevent them from running local business activities and therefore they are not liable to pay local taxes.

Asset Protection

The asset protection provided by an offshore entity can be both real estate or even intellectual property. The structure of property ownership can be distributed with such a move. An individual can transfer his property to an offshore trust, foundation or corporation. Such a restructuring is usually done by people who face lawsuits or have problems from lenders. Total assets or even parts of it are moved across to an external agency across the border. By doing so, any seizure can be tactically avoided. With an offshore trust created to handle the assets, the individual can also gain tax benefits on payments due to the trust.

Confidentiality

Top celebrities and individuals with high net worth need some confidentiality of their assets and incomes. Many countries that promote offshore enterprises have clean jurisdictions that allow the privacy of the people involved. The rules are structured to meet the requirement of high-profile investors who require privacy for corporate and banking sections. Some states even have strict rules to prevent the disclosure of shareholders. It is because of this confidentiality factor that some people have misunderstood the goals of offshore companies. Such laws are not made to safeguard criminals, and the jurisdiction holds the right to disclose all details in case of alleged drug trafficking or other illegal activities by the offshore companies. Usually, investors who make large share purchases do not want the public and media knowing about their investments and also want to prevent any small shareholders in their vested interests.

International Investment

Some countries prevent its citizens from investing in foreign countries and thus puts a block on the development of the business and the opportunity to reap benefits internationally. Investors look forward to an international portfolio of investments, and offshore entity provides the platform for the same. With a single offshore establishment, the investor can gain access to move into any country with investment offers and even provides entry into the major exchanges. It is mostly the developing countries that are targeted for investments where the government sectors have been opened up for private establishments. The recent advancement of China's opening up of government sectors to the private agencies has pulled in several foreign investments.

Lower Administration Arrangements

For an offshore company, the legal responsibilities of the owner and the administration team is very less compared to one set up in the home country. The administration effort can be reduced by cutting down the staff and resorting to a virtual office which can save time and money at the same time. Company administrator services are available which will handle all the sections, and they have reasonable prices too as they make use of automated systems. The individual can work on the profit generation, and an external agent will do the rest of the administrative work like accounting, secretary, finding directors and setting up of the virtual office, etc.

Holding Intellectual Property

Any patents over science and technology can be assigned to an offshore entity. This foreign entity will have the rights to distribute the license to interested people and companies The royalties that come in is entirely exempted or reduced considerably from tax payments according to the double tax treaties. Not all jurisdictions allow offshore intellectual property management and therefore the proper selection of the right administration is inevitable.

Reduced Capital Requirement

The process of registration is rather complicated in the home country, and countries have eased out their registration policies for offshore enterprises to attract more foreign investors. Some legislatures do not even require any capital release during registration.

People who have realized the potential of offshore businesses try to understand the rules and jurisdiction governing the registration and setup operations in the place of interest. It is the ease of creation and the multitude of benefits that have attracted many individuals to move on with foreign investments through offshore entities.