Uses of Offshore Companies
An offshore company is a very flexible corporate entity. As such it can be integrated into a wide variety of business arrangements. Reduced tax and increased confidentiality are just two of the main benefits which can be achieved by a proper application of the offshore company. However, it would be erroneous to believe that an offshore company incorporated in a no-tax jurisdiction "flies above" all the complicated tax regulations in force in the high-tax jurisdictions. Contrary to a popular belief, having an offshore company in itself does not relieve its owner from all personal tax liabilities in his home country. A clever use of an offshore company, however, can reduce, defer or completely eliminate some tax that would otherwise be payable by his business. The ability to accumulate revenues in a tax-free and hassle-free environment of an offshore jurisdiction are especially helpful to start-up businesses, allowing them to grow faster be more competitive.
Nevertheless, the practical implementation of an offshore strategy will almost always have to confront some of the anti-avoidance laws that may be in force in the country where the beneficial owner resides or where he does his business. For this reason we recommend that anyone, who considers an offshore incorporation, starts by taking some advice from an accountant or tax advisor located in the clients` country of domicile and in the country where the proposed business operations are due to take place. In case with offshore companies, the laws in the offshore jurisdiction will often have to be considered in conjunction with the laws and regulations of other countries, in particular the countries where the offshore company will have its sales, contracts and assets.
Holding and Property Owning Companies
An offshore holding company can be used to hold the shares of subsidiaries located in high tax countries. Most high tax countries impose witholding tax on dividends paid to non-residents. In these situations the availability of a double-tax-avoidance treaty between the country where the subsidiary is located and where the holding company is established may help avoid some or all of the witholding tax.
Many of the difficulties and expenses associated with investment in overseas property, such as holiday villas, may be avoided through the use of an offshore company to hold the title of the property. Re-sales of the property can be accomplished quickly and easily by simply selling the shares in the underlying offshore holding company. This may also save on some legal fees, transfer taxes and duties levied by the state.
As offshore companies are not subject to capital gains taxes at home, they can be used to hold investment assets with high appreciation value.
Where an individual owns assets (for instance, real estate) located in a foreign country, such assets may be protected against inheritance tax and higher rates of taxation by holding the assets through an offshore investment company. A high net worth individual with properties or other assets in a number of countries may wish to hold these through one personal holding company so that upon his demise the need to obtain probate in each country is avoided. This saves legal fees and avoids publicity.
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 holding company may be used to hold shares in various offshore trading companies owned by the same owner. Such layout would solve one of the most acute problems with offshore arrangements - repatriation of offshore profits. By properly utilizing an offshore holding company, overseas profits can return to the owner for his enjoyment and consumption with minimum or no tax liability at home.