BR How To: Complete steps to open an offshore company. Costs and benefits

Anca Alexe 23/05/2018 | 07:00

Creating an offshore company is generally relatively easy, due to lax legislation and business-friendly regulation. In most offshore jurisdictions, incorporation can be done online and it only takes a few days and the costs can range from a few hundred euros to a few thousand, depending on various factors. 

The most popular countries for offshore companies are Belize, Seychelles, the British Virgin Islands, Panama, Hong Kong, Singapore and others. Opening or moving a business overseas is legal, and huge companies like Google, Microsoft and Apple have done it as well, but owners of offshore companies need to make sure they follow the law in their country and that the company doesn’t engage in any criminal activity. However, the European Union is trying to limit the amount of tax avoidance its citizens can engage in, which may make it harder to operate an offshore business or to truly see the benefits of doing so.

You must seek advice from a qualified attorney in your home country, so you can make sure you understand how you can operate your offshore business, because the law is different in every country and the choices you make will also depend on the activity of your offshore company. After your company is registered, you will have to open a bank account for it.

For the company’s fiscal residence to be established in the offshore jurisdiction, the management needs to be done from that place (invoices, contract signing, etc.). If fiscal inspectors see that the management is actually in your home country, penalties can be applied. This is why companies that specialize in opening companies in offshore jurisdictions may also hire managers and associates for your firm who are citizens of that particular country.

You’ll need to consider several aspects when you want to open an offshore company. First of all, you may still have to pay tax in your country of residence even if your company doesn’t pay taxes on its revenues offshore. Second, you’ll need to think of your customers and business partners. If your business is not location-dependent, it may not matter where your business is incorporated, but they may still not like having to send money into a bank account in a faraway land.

It also depends where your company’s employees work, if there are any – if the work is being done in your home country or anywhere other than the offshore country in which you’ve opened your business, you’ll probably have to pay tax for the work being performed in that jurisdiction.

Bank accounts

Although incorporating a business offshore is pretty easy, you may have difficulties when trying to open a bank account. Due to legislative changes or increased scrutiny, many international banks have become stricter in recent years and not everyone will be able to open an account with them.

Companies with an advanced structure such as offshore trusts can open a managed investment account with USD 500,000 to 2.5 million minimum balances. This would require an investment manager in the country where you will open the bank account. These types of business accounts are relatively easy to open. A personal visit may also be required, but it depends on the country and the bank.

Another option is opening an offshore bank account at a small offshore bank. Most banks will allow you to open an account via email or by sending documents by post, and few will require a personal visit. It will take about two weeks. Most small offshore banks require minimum account sizes between USD 5,000 and 20,000. Some even offer debit cards. If you’re just starting out offshore, this may be the best option.

These banks will accept business accounts, but the costs of wire transfers can be quite high and so they are not recommended for companies with more than 5-7 transactions per month.

The third option is to open a business bank account at a larger commercial banks in places like Hong Kong or Panama, but it is extremely difficult to get approval for them. This is because the bank is exposed to risks of money laundering, tax evasion or involvement in a dispute with other countries. You will have to work hard to convince them to open an account for your business and you will need to provide a lot of documents if you’re going to be successful.

Types of companies you can choose from

1. IBC – International Business Company

An IBC is similar to a private limited company and the most common form of offshore business: it has a board of directors, shares and a share capital, but the shares can’t be publicly traded. They also have complete confidentiality, as no company details go on public records.

2. Private Limited Company

Confidentiality is not as strict in PLCs, as names of directors and sometimes shareholders can appear on the public record. This can be avoided by using nominees or corporate directors and shareholders where the corporate entity is an IBC.

PLCs are required to perform bookkeeping and accounting, and may be subject to audits.

3. Limited Liability Company – not very common for offshore business, but LLCs can be formed in locations like Anguilla, Belize, Costa Rica, Marshall Islands, Panama, Saint Kitts and Nevis, and Delaware (USA).

 

 

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