Advantages of Different Offshore Jurisdictions
There are several offshore destinations around the world, thereby, giving the investors a wide choice to take their pick from. However, you must know that different offshore jurisdictions offer varied benefits. Thus, as a foreign enterpriser, you are advised to study the special incentives that the diverse countries are offering and then, select the ones that are best suited to your offshore investment needs.
Some Raw Data to Open Your Eyes
Recently, the United States Treasury Department has made a revelation that investment worth of US$8 trillion currently sit in 45-plus offshore jurisdictions. And if this trend continues, experts believe that the amount will cross US$10 trillions in matter of few years. So, it is quite expected that offshore jurisdictions will be competing with one another to get their share of the pie. Since billions of dollars are getting channelized into different offshore locations, a wide range of financial products have made their entry into the market to cater to the needs of these foreign investors. As the provision of e-commerce services is on the rise, offshore centers around the world are fighting it out to outsmart each other to win this race.
Why offshore Jurisdictions Are Great for Global
EconomyOkay, irrespective of your political affiliation, you would certainly agree to the fact that the global economy is not in great shape. As we are speaking, the USA and China is locking horns over tariff; with neither side backing down from their position, the turmoil in the global economy is not going to go away anytime soon. Reports have it that the Chinese economy is slowing down steadily and we don’t even want to mention the current state of the Middle Eastern countries.
Some experts are even predicting that the next recession is just around the corner and this time around, it will be the mother of all recessions. The spectacular rise in the value of the derivatives is certainly a matter of great concern and the ups and downs in the global Oil industry is giving economists sleepless nights.
Folks, to be very honest, things are not looking fine and dandy. So, what is plan to brave the upcoming economic mayhem? You would definitely want to put up a good fight before you go down right? Believe us, in this uncertain time, you need to diversify your assets because as you know things may go downhill in a matter of few days. Don’t believe me, ask a Venezuelan and you will get your answer.
Just buying gold coins, investing in precious metals or buying another beach-front property is not going to save your skin when the economy will take a nosedive. You got to have a Plan B and this plan B must involve investing in offshore jurisdictions.
Investing in an offshore jurisdiction is probably the best way to safeguard your personal finance from rude financial shocks. Even in some extreme case your home country’s economy takes a hit, your will not lose everything thanks to your investments made in some remote offshore jurisdictions.
What is an offshore Company?
While some offshore jurisdictions extend tax exemption benefits, others offer the advantages of double tax treaties, business flexibility, and confidentiality clauses. In such a scenario, how does one make the choice of jurisdiction among the many options?
To answer this question, let us first study what is an offshore company.
An offshore company is defined as one that has been incorporated in a foreign country, and not the principals’ home country. Moreover, offshore companies are not permitted to transact in the country where they are registered. Among the many reasons for investors to set up offshore companies are included: security of assets, effective tax planning, and lawsuit protection.
At times, some offshore jurisdictions offer opportunities that cannot be availed in the principal’s home country: and in such a scenario, the investor may decide to establish an offshore company in the foreign country that offers unique opportunities to take advantage of the related benefits.
However, an important point to consider when contemplating the setting up of an offshore company is its location. Well, in such cases, you must learn about the various benefits that are extended by the different jurisdictions and then, base your choice on your requirements.
There are many countries that offer investors the opportunity to set up offshore companies. By doing so, they can add to their country’s reserves by way of filing and agents’ fees. In some cases, countries are not endowed with natural resources and to earn income, they welcome global investors to start offshore companies in their jurisdictions. Both parties – the offshore company principals and countries – mutually benefit through such enterprises.
Choosing an Offshore Jurisdiction
There are over 50 offshore zones around the world; they provide a business-friendly environment by way of giving tax benefits, among others. However, all jurisdictions can be categorized into 2 groups: Offshore and Onshore.
Offshore and Onshore Jurisdictions: A Note
Refer to the below-listed details to know about the 2 primary types of jurisdictions where offshore entities can be incorporated.
- Offshore Zones
If you choose to start an offshore company in offshore zones, then you’ll avail the benefit of tax-free income. Besides, you do not have to submit any financial reports. Only you may have to pay a nominal annual fee.
Unfortunately, in recent times, there has been a crackdown on offshore jurisdictions; they are forced to reveal the lists of offshore company beneficiaries. Mainly, such measures are in line with the latest trends to avoid money laundering, tax evasion, and terrorist activities. For this reason, at times, the principals of offshore companies are not able to open bank accounts or enter into contracts.
However, if you seriously feel the need to reduce tax burdens or secure your assets, go ahead and set up an offshore company. You can choose among the popular choices that are BVI, Seychelles IBC, Belize, and Panama.
- Onshore Zones
Onshore jurisdictions are described as those that follow the traditional tax norms. In other words, they do not offer 100% tax exemption benefits. As an alternative, they have a vast network of double tax treaties that lower the tax liability levels like withholding tax. Some onshore jurisdictions are Singapore, UK, Latvia, Cyprus, and Canada.
Here, companies are required to submit financial reports but are exempted from taxes in these zones.
There are several reasons for investors to register a company in onshore zones: protection of assets, trade pursuits, and a supportivelegal environment.
Legalities of Offshore Jurisdictions
Offshore jurisdictions have to conform to 4 different company law systems; they are discussed in detail below:
- English Common Law
The offshore jurisdictions that follow the English Common Law have provisions that are framed in accordance with the UK Companies Act 1948. The British Virgin Islands (BVI) conform to such laws. Also, Hong Kong and Singapore are other jurisdictions where this law is applicable.
- European Civil Law
Countries that apply the European Civil Law may take longer to incorporate an offshore enterprise. Yet, the provisions under this law are found to be simpler.
- US Law
Both the Civil Law and Common Law are influenced by the American legal system. Jurisdictions such as Panama and Delaware practice the US Law.
- Hybrid Law
Jurisdictions that do not follow any of the above-mentioned company legal systems are the hybrid ones. For instance, the UAE is recognized as a hybrid jurisdiction.
When choosing an offshore jurisdiction, a good choice is one that has a robust legal system and favorable laws governing offshore enterprises.
Likewise, you must, also, take into account factors such as the country’s economic and political stability. The business environment must not be influenced by corruption, political issues, and other such matters.
Types of Offshore Companies
You have a plethora of offshore company options to choose from – such as partnerships, LLPs, trusts, LPs, private limited companies, and LLCs.
In countries such as Panama, Seychelles, Anguilla, and BVI, the investors opt for the International Business Company (IBC) types of the companystructure. Such enterprises do not conduct business within the jurisdiction of their registration.
Thus, the IBCs do not have to pay stamp duty or local corporate tax. Such entities conform to the patterns of private limited companies or LLC, from a legal standpoint.
Countries such as Delaware and Hong Kong offer offshore companies that are similar to the IBCs where the corporations are exempted from local corporate taxes if there is no domestic trading.
Choosing an offshore jurisdiction on your own may not be a good idea. Keep in mind that the tax laws and business environment are ever-changing; and thus, you can save yourself a lot of time by contacting the professionals who are well-versed with any changes in the corporate laws of the different jurisdictions.
Know that registering a company is not difficult, but choosing an ideal jurisdiction that suits your needs is the most important aspect during your offshore company setup expeditions. Thus, relyingon the experts to ensure you make the right choice.