What is an offshore business

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    An offshore company is a structure that is an integral part of the global economy today. The legislative foundation of many states provides total or partial income tax exemption for the enterprises operating in other countries, i.e. offshore companies. This is the main reason for the development of offshore business nowadays.

    Currently, offshore structures are considered the primary instruments for reducing the cost of paying taxes, investing, and conducting trading operations. Offshore advantages are also the subject of active use for asset protection strategies. Running a business in the territory of offshore zones makes it possible to implement those projects whose realization in other jurisdictions would require much more time and financial investments.

    Meaning of an offshore business

    What does offshore mean in business? Offshore zones are countries offering political stability, an attractive and flexible tax system for enterprises, and decent infrastructure for business. The correct use of these companies is completely legal. Consequently, offshore business means a business that is conducted outside the main residence and citizenship of the owner of the company. Offshore business is a way to enter the international level, facilitate tax management, and protect assets.

    The main role of offshore structures is the ability to transfer their capital or property to politically and economically more stable jurisdictions legally, according to the principles of international law. Offshores are also considered as the optimal tool for accumulating the company’s revenues.

    Types of offshore business

    an offshore business
    Having anything to do with what is offshore business, is necessary to understand that any offshore company is obliged to pay taxes in the country where it is engaged in any business activities.

    Speaking about what is offshore company would not be complete without mentioning its types and purpose.

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    • Ownership companies. Placing property in the ownership of an offshore company has many advantages, in particular, the absence of the need to pay inheritance taxes and capital gains. An offshore company may move to another owner if the previous owner is resold or dies, but the property will still remain in the company’s ownership.
    • Investment companies. So, what is a offshore company for investing? Such a structure is most often used for conducting investment activities with further accumulation of income. An offshore company, like an onshore one, has the right to invest in shares, securities, products, or property. The main difference is the absence of the need to pay income taxes.
    • Insurance companies. Most offshore jurisdictions allow registering an insurance company in two cases only. The first is when the registered insurance company is a branch of the already existing insurance group. The second is that the institution is sufficiently capitalized.
    • Holding companies. These structures are used most often to receive dividends from their branches, which allow not only to centralize resources but also to get maximum tax benefits.
    • Manufacturing companies. What is the meaning of offshore company engaged in production? Many jurisdictions provide a preferential tax rate specifically to production companies. This advantage can be used in the establishment of an in-house enterprise in such a country with subsequent dividing of the production division and other activities performed in the free trade zone. It’s possible to save a significant amount of money creating the right structure of the company.

    Features of an offshore company

    Having anything to do with what is offshore business, is necessary to understand that any offshore company is obliged to pay taxes in the country where it is engaged in any business activities. This means that conducting offshore operations implies extraterritorial business.

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    The offshore company allows the following:

    • Main activities. Often offshore is used for investment, banking, insurance, tourism, transport business.
    • Keep cash in a tax haven or an international financial center. Offshore provides a guarantee of bank account security and provides tax exemption for large financial transactions.
    • Confidentially carry out investment or business activities.

    Many options for using offshore companies exist nowadays. Most often they are used by businessmen planning investment activities or international trade, with consequent income accumulation and receiving tax preferences on investment income. The offshore company establishing is very sustainable from an economic standpoint especially for import-export operations, protection of intellectual property, obtaining the possibility of transferring real estate or financial assets to more stable offshore jurisdictions, respecting the confidentiality of the ultimate beneficiaries. Holding offshore structures are registered to protect assets and certain types of shares.

    Offshore structures can bring significant benefits in tax planning but only with the correct and clear use of existing agreements.

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    Subject to conducting business activities in another country offshore company can use preferential or zero taxation. At present day, more than 60 offshore jurisdictions around the world provide tax breaks. When operating in the country of registration, the company is taxed under local law, or according to double taxation agreement if any.

    It’s worth pointing out that undertaking import and export operations using an offshore company lets the more favorable tax conditions facilitate their growth and intensity. The use of offshore companies as a mediator between the buyer and seller of services and products in different countries provides an opportunity not only to accumulate but also to keep income in offshore safely. For instance, this way of building business activities is beneficial for operations between EU states because of the high VAT rates problem. The situation can be solved by registering a company in optimal jurisdiction and working in conjunction with another offshore enterprise.

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