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1. What is offshore?

The word “offshore” has no precise legal dictionary definition, it simply means “situated or operating in a foreign country or at some distance from the shore” and reflects the fact that most low tax jurisdictions are islands.

Each offshore territory has its own characteristics and many so called offshore areas are in fact land locked. Basically all countries fall into two groups: the first group – countries with low tax regimes; and the second group – countries with zero tax regimes for offshore companies (normally in this case the company pays a fixed annual license fee of no more than USD 300-400 in its country of incorporation).

The first group includes a number of European countries known as “tax shelters” such as Switzerland, Luxembourg, Liechtenstein, Republic of Ireland, Malta, Cyprus etc. The second group is made up of smaller countries with no corporate profits tax include countries such as Panama, the Bahamas, the British Virgin Islands, Belize, Turks and Caicos Islands, Cayman Islands, Guernsey, Jersey, the Isle of Man etc.

Offshore incorporation, therefore, offers an efficient tool for international tax planning based on low or zero rate tax regimes provided for non-residents by the legislation of certain countries.

It should be noted, however, that tax authorities of several high tax countries do not disregard the schemes used by their residents for the purpose of reducing or avoiding taxes through offshore vehicles. Each country has its own methods developed to deal with such issues as transfer pricing, treaty shopping or tax evasion. For more information on these issues, please contact our lawyers.

2. Where can I form an offshore company?

Currently more than 60 countries offer tax exemption for offshore companies and non-resident companies. These include Panama, Gibraltar, the BVI, the Bahamas, Seychelles, Belize, low tax cantons in Switzerland, Liechtenstein and many others.

3. How does an offshore company work?

According to international law, any company is a separate legal entity governed by the legislation of its country of incorporation. For example, a Panamanian company shall be subject to taxes only in Panama. However, if the owners of the company are non-residents and the company does not trade in Panama, it will be treated as an “offshore” company and can be officially exempted from taxation. In this manner, this company is not subject to taxation in its country of incorporation.

4. Who can be owners and directors of an offshore company?

Any individual or body corporate not resident in the country of incorporation can own the offshore company. The minimum number of owners (or shareholders) can vary from country to country. The same applies to the directors of offshore companies, though it should be noted that in some countries bodies corporate cannot be appointed directors of the company.

5. What documents are required for incorporation?

It depends. A few years ago no documents whatsoever were required for incorporation in most offshore areas, irrespective of whether the prospective owners or directors of the company were legal entities or not.

Now the situation in the world is different. There is a noticeable and ongoing trend to follow the “Know Your Customer” (KYC) principle operating in most jurisdictions. Formation agents and secretarial companies servicing your offshore company have their own understanding of this principle and set forth their own due diligence rules.

Thus the requirements to disclose certain information or provide certain documents might vary from country to country and from agent to agent. Sometimes you will have to disclose the details of directors and shareholders, sometimes provide a copy of the beneficial owner’s passport, reveal the source of your income and provide a description of your business activities accompanied by a reference letter from your partners. On other occasions the requirements are less severe. Please read relevant information on our Jurisdictions page.

6. Are there any limitations with respect to the share capital?
Should it be paid-up in full?

Each country has its own rules regarding minimum and maximum share capital contributions and provisions governing when such amounts should be paid. Please read relevant information on our Jurisdictions page.

7. What will be the company’s registered office address?

The law firm or formation agent offering incorporation services can provide a registered office for your company in the country of its incorporation.

8. How shall I maintain accounting records?

Books of account are normally maintained in the manner provided for by the laws of the country of incorporation. Regular offshore companies are not usually required to file accounts with state authorities and thus can often keep accounting records in any manner chosen, save for certain countries where offshore companies are required to file an annual auditor’s reports.

If necessary, the law firm or formation agent offering incorporation services for you will also provide a qualified accountant or auditor services in the country of incorporation.

9. Where can the company open a bank account?

Your company is free to open as many accounts with any bank in the world as you wish.

10. How about confidentiality?

In the majority of offshore jurisdictions, details of the owners and directors are protected by the relevant laws on confidentiality, sometimes providing for criminal prosecution for an unauthorised disclosure of the company’s owners or other information. If your company is incorporated in a country where the company owners’ details are open to the public, full confidentiality might be provided through nominee shareholders and directors.

11. How long does it take to incorporate a company?

The time needed for the registration procedure depends on the country where you choose to incorporate. Normally, it is from one week to a month. In case you buy a “ready-made” company, the corporate documents might become available to you within one hour.

12. Who are the nominee director and shareholder?

In certain countries where it is difficult for the real beneficial owner to be present on a regular basis it is often possible to hire the services of a nominee director on his behalf. Such an individual does not have the authority

13. How much does it cost to incorporate a company?

Registration fees in most offshore countries are generally low and can range from 750 GBP to 8000 GBP (inclusive of incorporation and stamp duties and professional legal fees of drafting and registering corporate documents). In countries where they are required, provision of a registered office and registered agent may cost from 300 GBP to 1000 GBP per year.

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