Modern purposes of offshore company
The term ‘offshore’ was first used in 1950s. Then one American company moved its business outside the United States by which it managed to avoid taxes and tightening of control. Today offshore companies are not only used for this purpose. Four basic purposes for which entrepreneurs set up their own offshore companies can be named. It is not a lot but enough for offshore companies to be in demand all the time.
Purpose 1: Secure safe in offshore jurisdiction
Using offshore companies as a safe with a constant personal access is useful and quite profitable. If you have assets you want to protect, for instance, against instability in your country, bankruptcy of local banks or against corporate raids and unfair taxes, you can put them in a stable foreign bank. But in this case there is a problem: it can become known that you own and use a foreign account. Not everyone likes it. One can use offshore company formation, register an account and card in the name of the company and pay by it. This is lawful and maintains privacy. There is another option that is more expensive: anonymous card that contains no personal information and also allows you to pay in any part of the world without parading your name.
Purpose 2: Integration of offshore company into your business
This is practically the basic purpose of modern offshore companies. By integrating an offshore company into your business you can ensure tax optimization, simplify foreign economic activities, and protect yourself against arbitrariness of authorities and racket of criminals. Countries with which double taxation treaties are entered into are used most often. But today’s reality makes some corrections: large countries, especially those from which a lot of money is transferred, adopt new rules complicating work with offshore companies. Taxes grow, and a lot of reports are required, which means an entrepreneur has to seek options in order to take advantages and avoid restrictions.
Purpose 3: Import of assets
This approach is used in cases where something expensive has to be purchased for a local company, for instance, equipment from abroad. An offshore company may contribute the equipment as an authorized fund to your enterprise, and you will not have to pay customs and VAT. Another option is to provide equipment leasing which will enable withdrawal of part of the profit as payment of interest. In this case one needs to be careful as this scheme is virtually well-known and not liked by taxmen.
Purpose 4: Person with no residency
Mobile and active people who constantly move from one country to another may have such a purpose. For example, an employee who earns a salary has the opportunity not to pay taxes on it. How? At first he leaves his first country and over time he ceases to be its resident. He stays in the new country until it is time to become its resident. Before it happens he moves to third country and so on. In general, the period and place of stay have to be determined precisely. This method enables full or partial tax exemption of income but is quite tiresome when used all the time. Unless you are inclined to such a lifestyle, you’d better not try it.