by: Peter Cant
Advantages of Offshore Businesses
There are varying definitions for an offshore company, or offshore
business. Definitions commonly refer to offshore business as involving
the movement of an aspect of a company overseas. Regardless of the
official definition, offshore companies are set up in jurisdictions,
which offer advantages – which include no, or low, taxes on income and
capital gains, no restrictions on employment policies and high
confidentiality from minimal reporting requirements.
Generally, an offshore company is incorporated from outside the
particular jurisdiction in question. It is also restricted from
conducting business within that jurisdiction, although this can be
dependent on the jurisdiction in question. The ultimate purpose of
offshoring is the tremendous savings companies stand to gain by
incorporating in certain offshore jurisdictions.
Offshore company formation can be an excellent way to legitimately
minimize international taxation. For example, incorporation in
Singapore, which is not seen as a traditional tax haven, allows
international profits to be legally tax-exempt provided funds are not
remitted to a Singapore corporate bank account.
Apart from being a legitimate way by which to protect global assets,
international entrepreneurs choosing to form an offshore company in a
reputable jurisdictions such as Singapore or Hong Kong, portray a
positive, reputable image to customers, suppliers, investors and
banks.
To summarise, advantages of using an offshore company can include:
- Minimising tax obligations
- Effective protection of global assets
- Efficient execution of international business
- Procedures for incorporation are usually less complex
- Limited reporting requirements, hence higher confidentiality
- Portrays international image, provided it is a reputable jurisdiction
- Protection against volatility in economic and political elements
'Tax Haven' Stigma
Whilst the benefits of taking a company offshore can be valuable,
consideration should be given to the potential risks. Traditional
offshore jurisdictions are becoming increasingly insecure. Many
offshore jurisdictions have come under pressure from the Organisation
for Economic Cooperation and Development (OECD) to exchange company
and bank account details of foreign clients as a way to assist in
combating tax evasion, money laundering and terrorist financing.
After the recent G20 summit, many traditional 'tax havens' have made
commitments to following the transparency guidelines set out by the
OECD. This increased attention is not only on rich individuals but is
on corporations – large and small. For this reason, it is crucial to
develop the most appropriate corporate structure when undertaking
offshore incorporation so as to avoid the 'tax haven' stigma that can
negatively impact a company's success.
The term 'tax haven' has recently received negative publicity due
largely to the increased efforts of G20 nations, especially the US and
UK, to clamp down on tax evasion. The case between Swiss bank UBS and
the United States government is an example of this.
But is the cause of this attention due to the policies of these common
offshore jurisdictions or the determined efforts of other countries to
maintain, or maximize, their own tax revenues? Hopefully the objective
is focused on reducing tax evasion. Differences between countries in
terms of personal income and company taxes, incorporation
requirements, trade and employee policy restrictions, foreign
investment policies, confidentiality requirements etc. should help
maintain a competitive international business environment. This helps
to avoid larger governments trying to enforce restrictive tax and
trade policies.
Asia provides efficient options for international entrepreneurs
considering offshore jurisdictions. Singapore and Hong Kong are two
jurisdictions that boast excellent international reputations, have
investor-friendly business environments and are economically and
politically stable.
Cooperation and transparency between authorities will increase but it
is not the end of low tax jurisdictions or banking privacy. Offshore
incorporation, when properly structured, is an excellent,
tax-efficient strategy for entrepreneurs to conduct their
international business.
Healy Consultants is an experienced corporate services consultancy
firm. Headquartered in Singapore, the firm assists a broad range of
international clients with all aspects of offshore company formation.
Healy Consultants is able to assist clients in offshore incorporation
along with other valuable support services including opening corporate
bank accounts globally, tax planning, visa requirements, internet
marketing strategies and more.
About The Author
Peter Cant is the Marketing Manager for Healy Consultants. Peter has
over 11 years work experience within media, advertising and marketing
and has worked on a range of business categories locally and
internationally.
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