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Offshore Companies

Offshore companies are companies that are characterized by being registered in another country, typically a legal paradise, in which no economic or commercial activity is performed. For this reason they are also called nonresident companies.

These companies are controlled by foreign companies or citizens who conduct their business in other parts of the world and use this tax paradise only as legal domicile of the company.

Offshore companies benefit from very favorable tax laws and regulations. Undoubtedly the best known are the tax advantages. Except for a small annual registration fee (which is not to exceed $200) offshore companies are not only exempt from income tax but also other taxes common in most countries, such as the value added tax (IVA), the business tax or social contributions payment.

They are often also used by their owners to optimize the payment of taxes on individuals. Among the most important we can mention the inheritance tax, transfer tax, property tax, the tax on the income of individuals or sometimes even vehicle taxes.

The tax advantages of offshore companies are many and there are number additional benefits that make them very attractive. For example:

  • Fast, simple and accessible incorporation.

In most jurisdictions a company can be incorporated within 48 hours and with minimal documentation. A copy of your passport and proof of residence are usually enough. The cost of incorporation usually does not exceed $1,000.

  • Normally there are no restrictions as to the nationality of shareholders and directors.

Often it is possible to form a partnership with one person performing all functions.

  • Simple and economical administration.

Tax exemption means that the company does not have to make tax payment procedures (such as IVA). In most tax paradises presentation of annual accounts is not required, avoiding costly accounting and auditing processes. In this way the company can run it’s own accounting or record its activities as it deems appropriate.

  • Strict confidentiality. In offshore jurisdictions personal data of shareholders and owners of companies are not included in any public record.

The use of representatives as the nominee director or the nominee shareholder and bearer shares, are allowed in many places. With this, a higher level of privacy protection can be obtained.

  • Absence of thin capitalization rules which makes it possible to start a company without their subscribed capital.
  • Favorable rules for certain business transactions related to capital as financial assistance to third parties or merger.
  • Investment Freedom.

Many countries have strict financial regulations for the protection of investors, that impedes participation in certain businesses, assets and funds. Offshore companies are not subject to such regulations, so a whole world of global investment opportunities opens up, which otherwise would not be available.

  • Possibility of re settlement of the company to another jurisdiction, without stopping the activities of the company.

Types of offshore companies

The most common form of offshore companies is called of IBC (International Business Company). This type of society exists in virtually all offshore jurisdictions, although some under other names. From the legal point of view, usually takes the form of Limited Liability Company or joint stock company (corporation).

Another form of organization, existing only in certain jurisdictions, is the LLC (Limited Liability Company) a kind of limited partnership, which is fiscally transparent, which means its members must declare the company profits in their individual tax returns.

By its great advantages, whether fiscal or otherwise, its enormous flexibility and range of potential uses offered, it is no wonder that offshore companies have grown in popularity and are used profusely by individuals and businesses from the various sectors of the economy.

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