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Classic offshore company – “tax haven”

Originally the term «offshore company» applied to any company registered overseas. Now this word is more often used for the companies registered in the countries with favorable tax conditions. That is convenient for composing tax schemes in order to reduce tax payments in the country of the company home residence.

Such territories are states, provinces, or administrative areas with an easy process of company registration where income tax rate is either very low or even zero. These countries are usually called “classic” offshores.

Registration of non-resident companies is one of the pillars of economics in such countries.  Instead of getting taxes the countries receive profit collecting low fees. The dimension of such low fee is fixed and does not depend on company’s turnover or profit. The fees collected are so called   “company's annual support fee”. As companies are not situated in the country physically it is possible to register an infinite number of them. The countries are interested to attract as many non-resident companies as possible.      

Advantages of a classic offshore company

The advantages of offshore companies are based on the countries’ law systems that offer tax exemption for businesses owned by foreigners (either natural persons or legal entities) if they satisfy certain requirements.

Beside tax exemption offshore countries provide the anonymity of real business owners, confidentiality of offshore bank accounts and also deliver from financial and tax reports.

Classic offshore countries:

  • The Commonwealth of the Bahamas
  • Belize
  • The British Virgin Islands
  • The Turks and Caicos Islands
  • The Cayman Islands
  • The Commonwealth of Dominica
  • Republic of Maldives
  • Republic of Panama
  • Republic of Seychelles
  • Federation of Saint Kitts and Nevis
  • Saint Lucia
  • Saint Vincent and the Grenadines
  • Republic of the Marshall Islands

Main features of a classic offshore company:

  • companies are owned by non-residents;
  • company does not have a real office in the country of registration and is managed from overseas; 
  • IBC (International Business Company) is most often used type of companies. Depending on the country, the process of a new company registration takes from several hours to 5 days. In practice to buy a ready made company is a good choice as it gives a possibility to start your business in 5 minutes;
  • residence of the owner does not influence the process of company registration;
  • authorized capital is usually declared and is not needed to be paid in;
  • company is tax exempted if it does not run any onshore business;
  • company does not give any account or perfom annual audit;
  • company pays only some fixed annual low fees: government registration fee, company's legal address fee, and fee for secretary / agent service, that presents a company to all state departments;
  • most registers of directors and shareholders are closed; to provide maximum confidenciality of the real owners and beneficiaries offshore countries offer additional nominal service;
  • offshore company can be a director or/and a shareholder, and sometimes even a secretary of another offshore company, also can open representative offices in other countries;
  • company can sign contracts, invest funds, speculate on the Stock Exchange, open bank accounts;
  • in most countries companies are allowed to issue ordinary shares and in some countries  bearer shares are also possible; 
  • any activity of offshore company is free of state currency control.

Classic offshore companies are often used in tax planning for running business in third countries associated with countries offering low taxation.