The offshore industry is a sector filled with contradictory notions fueling the publics' perception that is prone to exaggerate and scandalize. In today's world of disinformation, it is difficult to discern fact from fiction.
Far from the media's perception that the offshore industry is in decline. Establishing oneself offshore has never been more popular, as many people are seeking alternative resources and ways to save money, protect their privacy and assets in times of uncertainty.
The offshore company formation process is simple, straightforward and can be completed in a matter of days with just a few basic personal details.
This article is to take you through the offshore company selection, registration, and formation process in order to break the commonly held idea that a company formation process is complicated and burdensome.
Below we've outlined a few questions that are important to ask, whenever you are thinking of moving offshore.
Step 1) Offshore Company Selection
The first task it too chose what jurisdiction and offshore vehicle structure is right for you. While not all jurisdictions and offshore structures are created equally, there are many similarities and overlaps, without as much difference and variances as one would expect.
However, it is important to ask yourself:
What is the main function of the entity?
There are many functions including Asset Protection, Charity, Estate Planning, Trust, Charity, Business, Estate, Investment, Holding Company, etc.
Depending on your needs there are different offshore structures, whether that is a Trust, Foundation or International Business Company.
Due to the continually changing nature of the offshore industry, especially when it comes to offshore tax laws, it is important to have up-to-date information, as local tax laws are increasingly changing due to global corporate pressures.
Where in the world would you like to incorporate?
While there are formation vehicles all over the world, it is important to consider:
Do you want to visit the destination and have easy access to it? Do you want to live in close geographical proximity? While these are more practical questions. They are equally important to consider as many individuals like to keep things close to home.
Tax and Transparency Laws
The next set of questions is likely going to take some research as tax laws are different for each country. To make sure you are tax compliant it's important to speak to a qualified accountant or lawyer to make sure you are not missing anything.
Does your potential offshore jurisdiction have Tax Information Exchange Agreements (TIEAs) or Double Taxation Agreements (DTTs) with your country of residence?
Does my country of residence have Controlled Foreign Corporation CFC laws
Is my country of residency a signatory of the Common Reporting Standard CRS?
Firstly, certain countries have reciprocal tax agreements such as DTT that are can help reduce the amount of taxes an individual must pay. While DTTs can help you save on taxes, CRS and TIEA do not.
Tax transparency agreements like the TIEA and CRS are a form of reciprocal tax information sharing that are signed between member countries. While there are still many offshore jurisdictions that have neither, the number is quickly dwindling as more and more countries are being co-opted by the OCED to sign onto greater transaprency measures.
Similarly, a new transparency law enacted several years ago called the Common Reporting Standard (CRS) has been signed by over a hundred countries effectively sharing tax information of non-residents amongst member countries.
Controlled Foreign Corporation or CFC laws govern how corporations are treated as a tax entity. Every country has its own specific CFC laws which may or may not affect your company structuring. Some countries have very strict CFC laws that essentially treat foreign corporations as local entities for tax purposes.
Depending on where you live, your preferences and whether banking privacy or ownership is of importance there will be any number of paired options that will be suitable.
All of the above considerations are important to consider. Though to a large extent, where your primary residence will determine a large portion of your tax structuring, and whether or not certain privacy services can be used as a means to remove the person from the corporate entity.
That is why it is so important to speak with an offshore specialist. Without such specialized knowledge, there is the risk of forming the wrong entity in the wrong jurisdiction.
Forming a complete holistic offshore legal plan helps to ensure that all of the pieces are organised and that the offshore strategy fits with you the goals of the company.
Offshore Company with a Bank Account
If you are starting an offshore company merely as a holding company for intellectual copyright for instance, then the following questions would not need to be asked. However, if you are entering into any type of financial transactions with clients or customers then the following questions are important.
Do you need an associated offshore bank account with your company?
To open an offshore bank account in many places requires no in-person interviews and can be done virtually.
However, the offshore banking industry has changed dramatically the last few years and in many places, it is required to have a local company formed in the jurisdiction, while that is not always the case, it is becoming more mandatory in places like Singapore, Panama, and Hong Kong.
Still, there are offshore jurisdictions like St Vincent, Nevis, or Andorra, do not require a local company and can be opened virtually without any in-person requirements.
Are you an internet-based Company? And if So, do you require any payment processing?
If you are online eCommerce site or are a company that needs to take online credit payments then setting up a merchant account or a similar payment process application maybe another piece of the offshore puzzle to fit.
Will you require any corporate or management services for your company?
There are a number of associated corporate services that can be coupled with your offshore structure, such as: professional management, nominee services, secretarial services, mail forwarding, re-invoicing, virtual offices etc...
Step 2) Registration of your Compay Offshore
Once you have picked your offshore jurisdiction and company formation. Drawing up the Articles of Association which will be the legal document of the formation of the company.
The company-by-laws will layout the responsibilities of the Directors/Shareholders and create an internal structure for which the business operates.
The importance of a properly structured company is obvious. Though often carelessly done, a company's structure is especially important to properly secure assets and protect the privacy of the individuals in case of legal or financial duress.
This becomes essential if there is a complex series of companies, trusts, of foundations existing in a multi-jurisdictional arrangement with many directors, and owners.
Offshore Company Structuring
If a beneficial owner wishes to remain anonymous, in some jurisdictions its is possible to use nominee shareholders or nominee directors that act as third party actors whose name and details will be recorded on the legal documents and accounts, however, they will remain fully under the purview of the beneficial owner who still maintains direct control of the company, yet remains unaffiliated.
For individuals looking to maintain privacy, the use of a second LLC or IBC as a corporate director and shareholder can be used so that no individual's identity remains on the corporate registry.
While most offshore jurisdictions still have very strict privacy and banking secrecy laws, like Panama, and Nevis, there are many countries like the US and many parts of Europe that require individuals to declare it to the tax department.
If you are lucky enough to live in a country that does not have CRS, or overly restrictive CFC laws, then you may be able to have a purely tax free entity that for all intents and purposes can remain anonymous.
Due to the change in many countries' transparency laws like CRS and FATCA have given foreign governments access to individuals' foreign corporation information, these records would only be available to YOUR home government, and would not be apart of the corporate registry where the company was incorporated.
Offshore Company Filing Documents
Generally, all that is required are the Name of Director(s) or Beneficial Owner, copy of Passport, proof of Physical Address, Processing and Governmental Fee.
However, depending on the company and jurisdiction there might be a few more minor pieces of documentation such as Due Diligenceor Know Your Customer forms that will need to be completed before the registration process can be finalized.
In some jurisdictions requirements for opening an offshore bank account have become tighter and can require banking or professional reference letters, or a copy of a business plan.
Step 3) Offshore Company Incorporation
Upon receipt of payment that covers the government incorporation fee and registration fee you will receive official hard copies of incorporation documents, or scanned versions detailing the specifics of your newly formed company along with a notice documenting any future annual fees that might be required by the jurisdiction.