Many individuals choose to incorporate a company in an offshore jurisdiction for as many different reasons as there are potential destinations. Whilst the reasons may differ, the incentives are obvious with low personal and/or corporate taxes and comprehensive privacy protection measures. The privacy protection laws in place have their advantages but the obvious, and in most case primary, selling point is the low taxes which save many corporations around the world billions each year in tax payments, with over 80% of the worlds largest publicly traded companies having a subsidiary in one or more offshore jurisdictions.
Another key reason that individuals opt for offshore company formations is the flexibility in both their company structure and in their operating procedures. UK companies are governed by a strict set of rules set by the government and the HMRC with regards to the maintenance of accounts and minutes, predominantly for taxation purpose. However, offshore jurisdictions such as the British Virgin Islands, Belize, Seychelles, Singapore, the Isle of Man and the Cayman Islands provide a flexible option with regards to the annual maintenance of accounts and details – essentially allowing the directors and company to continue as they please with no interference as long as they abide by the quite flexible rules they do have in place. This flexibility also extends to the company structure and the role of the shareholders and directors with a high-level of privacy, allowing those involved to act as they wish (assuming that their wishes do not break any criminal laws) without government supervision.
The company formation process can be a difficult and long one with a lot of potential pitfalls with any of the popular jurisdictions. However, the age-old myth of these various countries being a lawless swamp of criminals and tax-evaders has been replaced by the more realistic image of offshore financial centers consisting of hedge funds and investment firms. That’s not to say that these offshore destinations are exclusively for large institutions with many smaller firms benefitting from the various advantages offered a growing number as the fees involved in the offshore company formation procedure have dropped substantially over the last decade.
The majority of companies incorporated in an offshore region are “non-resident” companies. This means that whilst they are required to have an address within the country, this is often a registered address where post sent to it is forwarded onto their real address elsewhere. These non-resident companies are afforded a very high level of privacy and flexibility in the way they work, but are unable to provide their services or products to residents of the country except in certain circumstances.
With 83% of the worlds largest companies having at least one subsidiary based in an offshore jurisdiction and recent developments in the legal requirements for incorporating a company in one of the leading so-called “tax havens”, more and more companies are looking to move offshore.