Offshore Company Formation

Offshore Company Formation

DOING BUSINESS OFFSHORE

To facilitate international business, Healy Consultants Group PLC assists our Clients with engineering global, legal corporate structures. There are three low tax offshore entity types including i) the traditional tax haven entities including the BVI, Isle of Man and Seychelles ii) legally tax exempt trading companies in reputable countries including Singapore, Hong Kong and UK and iii) low tax/tax exempt trading companies from reputable countries like Ireland, Hungary and Liechtenstein.

Healy Consultants believes traditional tax haven entities are unpopular with banks, customers and suppliers. Instead, Healy Consultants recommends our Clients to choose low tax jurisdictions to conduct substantial operations. Alternatively, our Clients may also conduct international business through legally tax exempt companies setup in reputable jurisdictions including Singapore, Hong Kong and Dubai.

  • What is an offshore company?

    • “Offshore” is a term used to describe entities setup by Clients in foreign jurisdictions. Generally, these entities are used to conduct transactions with customers who are not based in the country of incorporation. An offshore company is also referred to as “international business company” or IBC;
    • Common uses – Offshore companies are generally used to facilitate global trading, allowing Clients to close contracts and sales while minimizing international taxation, accounting and reporting obligations. These companies can also be used as holding vehicles to hold our Clients’ worldwide subsidiaries, raise capital and corporate finance with private equity Firms, banks and other investors;
    • Taxation considerations – Such a company is generally free of corporate income tax, import/export duties, withholding tax and other taxes which would otherwise apply to a tax-resident business. While the offshore company will be legally tax exempt in its country of incorporation, this does not mean that our Client’s income channelled through this business entity will also be tax exempt in the country of tax residency of our Clients. It is important that our Clients are aware of any personal or corporate tax obligation arising in their country of residency. Let us know if you need Healy Consultants’ assistance to clarify these obligations;
    • Other common names – Offshore companies can also be known as non-resident companies, international (business) companies and legally tax exempt companies.
  • Advantages of an offshore company

    Advantages of offshore business entities
    1. Many of our Clients use offshore companies to enjoy the associated tax benefits including:
      • An offshore business can legally minimize domestic and international tax. For example, a properly structured non-resident UK LLP is legally tax exempt on global income sourced from outside the UK. Consequently, entrepreneurs prefer to conduct EU business through this entity;
      • An offshore company allows international businesses to conduct trade in a more tax efficient manner. For example, our Client can efficiently conduct business throughout Asia by incorporating a Singapore offshore entity, rather than registering a business in Vietnam, India or China;
      • It is common to use an offshore entity as a holding company for a group of subsidiary companies. For example, a Singapore offshore company enjoys the benefits of 79 double tax treaties, minimizing withholding tax on cash flow from global subsidiaries to Singapore parent company;
      • Capital gains and inheritance tax can be legitimately minimized when international assets are owned by an offshore LLC. For example, a Luxembourg SPF i) can own international securities, real estate, and private equity and ii) can be transferred or sold to third parties without triggering local tax liabilities. Consequently, these structures are often used when setting up a family office;
      • Using a legitimate offshore tax planning strategy, a person working overseas is able to limit his tax burden by receiving, into the country in which he is working, a fixed level of remuneration and accumulate the balance in an offshore company.

    2. There are other miscellaneous benefits to setting up an offshore company including:
      • Offshore entities can improve cross border sales for their parent companies. For example, a low tax Irish company is a more effective vehicle to sell goods/services within the EU than its Asian or Middle Eastern parent company. Furthermore, an Irish offshore business will look more attractive to EU customers;
      • Offshore companies are often used by online businesses to reach customers across the globe. For instance, a Singapore based company may setup an Indian paper company with corporate bank account to receive funds from Indian Clients. Meanwhile, the services will be continued to be provided out of Singapore;
      • Offshore entities are frequently used to set up joint venture companies because i) both parties need a neutral jurisdiction and/or ii) because both parties need a jurisdiction with strong contract law (e.g., Singapore);
      • Healy Consultants’ offshore business services are also often used by individuals who live in politically unstable countries to hold family wealth to avoid expropriation or exchange control restrictions in their country of origin. This is a form of asset protection.

    3. It is easy for our Clients to operate an offshore company because:
      • An offshore business helps minimize regulatory and administrative burdens. For example, many offshore jurisdictions have more relaxed regulatory regimes due to their smaller local markets;
      • Some offshore jurisdictions neither i) require annual accounting and tax returns nor ii) do they publish the register of shareholders and directors. For example, an entrepreneur bidding for a large oil and gas contract may appreciate the confidentiality provided by offshore companies. Also, when profits are low, entrepreneurs with an offshore company will appreciate the absence of many annual compliance costs that would apply in other jurisdictions;
      • It is common to form an offshore company to i) optimize confidentiality ii) mitigate financial risk and quarantine i) legal risk and ii) reputational risk. For example, a Hong Kong offshore setup or Singapore offshore entity is protected by strong local regulations, based on UK common law. These reputable jurisdictions give strong business law support, providing comfort to our Clients when signing contracts with international suppliers and customers;
      • Setting up an offshore entity can portray a familiar local presence to global customers. For example, entrepreneurs interested in incorporating an offshore entity can conduct business in the Middle East and pursue incorporation in Dubai to assist with offshore transactions, closing local sales, and signing new contracts.

    4. Our Clients can use their offshore companies to access several support services including:
      • Offshore corporate banking enables our Clients to receive and settle foreign currencies, eliminating exchange rate risk while minimizing transaction costs. For example, a HSBC Hong Kong multi-currency offshore corporate bank account enables our Clients to pay Chinese suppliers with Renminbi (RMB);
      • Many of our Clients opt for offshore companies to i) open merchant accounts to receive international customer credit card payments or ii) open brokerage accounts to efficiently trade securities on global stock exchanges. For example, a Hong Kong offshore setup and merchant account allows access to global markets and customers while being tax neutral. This increases the available revenue without increasing our client’s effective tax rate;
      • An offshore company can own global assets, trademarks, and patents, and receive royalties. Although this entity is itself tax neutral and optimizes confidentiality, withholding taxes may reduce some of the advantages of having no corporate income tax. For example, a Marshal Islands, which would be a flexible, functional solution. Alternatively, a Luxembourg IP holding company suffers a mere 6% annual tax on qualifying global royalty income while being able to access dozens of tax treaties that reduce withholding tax on royalties;
      • Yachts or ships may also be owned by a firm registered in an offshore jurisdiction, which can prove to be a cheaper and more tax-efficient method of ownership (e.g. using a Marshall Islands company).

  • Disadvantages of an offshore company

    1. Our Clients must be aware of the certain issues when dealing with offshore companies including:
      • Since 2010, there has been a global crackdown on the use of offshore companies which offer privacy to its customers. Therefore, many jurisdictions are changing their rules to make director/shareholder details publicly available;
      • Some offshore jurisdictions like Marshall Islands and Seychelles do not enjoy positive reputation in the business world. Therefore, it is possible global Clients and suppliers may refuse to deal with such companies altogether;
      • In the recent years, it has become increasingly difficult to open bank accounts for offshore companies setup in low reputation jurisdictions like Isle of Man and Guernsey. In such cases, banks will revert requesting additional proofs of business from our Clients;
      • Jurisdictions in Singapore and Hong Kong mandate every local company to submit annual returns and financial statements. Furthermore, Hong Kong even requires active companies to go through an annual audit;
      • While it is possible our Client may not have to pay taxes in these offshore jurisdictions, that does not exempt them from paying taxes in their home countries. Let us know if you need Healy Consultants’ assistance with fulfilling your annual accounting and tax obligations.

  • Most common types of offshore businesses

    There are four main types of business entities which can be used as trading or holding offshore companies. Kindly find below a brief description of each of them:

    • International business companies – These companies are mostly available in tax havens jurisdictions. They are usually cheap to setup up and benefit from special taxation regulations which allow them to trade with customers outside of their country.
      These companies are generally used for privacy purposes, as they are usually not required to disclose the names of their owners and directors to the public, although some Governments are currently implementing new rules for disclosure requirements;
    • Hybrid companies – These companies are usually considered tax-resident but benefit from reduced or no corporate income tax. Contrary to IBCs, they will have access to DTAAs after they meet some residency requirements, usually achieved through appointment of resident directors. Hybrid companies can be registered in Labuan, Mauritius (GBC1) or the Seychelles (CSL).
      As mentioned above, these companies are used when the proprietors wish to benefit from low corporate taxes and low withholding taxes (due to DTAA access);
    • Non-resident companies – In countries with a territorial tax system, companies controlled from overseas and not making sales within the country of incorporation benefit from a legal exemption from corporate income tax. Furthermore, such entities are usually an excellent for our Clients who do not want to damage their reputation using a tax haven business entity. Singapore and Hong Kong companies are amongst that type of companies.
      To summarize, such companies are setup when the Client i) needs entities in a high reputation jurisdiction and ii) does not wish to do business or pay in that jurisdiction;
    • Zero tax companies – These companies are LLCs incorporated in a country which does not implement corporate income tax. The UAE is the most famous example of a jurisdiction providing such type of business entity. However, forming such a company tends to be more challenging and costlier than the three other types of entities described above;
      As mentioned above, these companies are setup in a high reputation jurisdiction that does not levy any income tax.
  • Comparison of offshore companies

    Healy Consultants’ preferred jurisdictions for offshore companiesHealy Consultants’ preferred jurisdictions for offshore companies
    Global tax exempt companiesGlobal tax exempt companies
    Traditional tax haven companies for offshore businessesGlobal tax exempt companies
    Tax exempt trading companies from reputable countriesGlobal tax exempt companies
    Trading companies from reputable low tax countriesTrading companies from reputable low tax countries
    Asian offshore companiesAsian offshore companies
    Legally tax exempt offshore companiesLegally tax exempt offshore companies

  • Offshore banking

    Offshore corporate banking options
    1. Healy Consultants also assists our Clients with opening a corporate bank account in the country. Our bank account opening team will prepare all the requisite documents to assist our Clients in the process. Thereafter, our representative will present these documents at the bank. Please note that all document authentication costs (notarization, apostilles, etc.) will be borne by our Client;
    2. Where possible, our firm will liaise with the banks to prevent our Client from having to travel for corporate account opening interview. There is a 50% probability the banks will request a bank signatory to travel for a one-hour interview. There will be a fee discount of US$500 if you have to travel;
    3. Following bank account approval, the preferred bank will directly and independently email our Client the corporate bank account number. If required, Healy Consultants will assist our Client activate internet banking for their company;
    4. Healy Consultants assists our Clients with opening corporate bank accounts with several reputable global banks including HSBC and SCB Singapore, Hong Kong, London, Sydney, USA, Germany, UK and Dubai. Sometimes, for offshore solutions, Healy Consultants also recommends smaller banks with higher levels of service;
    5. That said, it is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and that they fulfil those obligations annually. Let us know if you need Healy Consultants’ help to clarify your local and international tax reporting obligations;
    6. The following table presents Healy Consultants’ suggested options for setting up offshore banking accounts.

  • Offshore asset protection

    1. It is common for individuals to structure entities in offshore jurisdictions and transfer their assets to these entities in order to ensure protection of their wealth from potential political and economic instability, thereby mitigating financial and legal risk;
    2. If properly structured, offshore companies can protect family wealth including international securities, real estate, and private equity from expropriation or exchange control restrictions;
    3. While traditional tax havens have been widely used in the past for offshore asset protection, capital gains and inheritance tax can also be legitimately minimized when international assets are owned by an offshore LLC in a reputable jurisdiction. For example, Hong Kong and Singapore entities are protected by strong regulations, based on UK common law;
    4. Trusts are excellent alternatives to a complex structure of limited liability companies and corporations commonly used for estate planning. The Liechtenstein Trust or Foundation are commonly used options in the EU
  • Offshore jurisdictions – latest updates

    Offshore business registration guides and success tips
    1. Panama Papers – millions of files regarding ownership of companies set up by the Panamanian Law Firm Fonseca were leaked to the press in 2016. This event showed that offshore companies are still commonly used by businessmen, politicians and high net worth individuals. In response to the leak, the public all across the globe is exerting pressure on their Governments to implement efficient policies against tax evasion;
    2. Common Reporting Standards – In 2014, the OECD countries agreed to adopt new standards for automatic exchanges of fiscal information (AEOI) between their tax administrations. Most countries will implement these rules by 2018, thereby allowing Governments to crack down on their tax resident citizens, using offshore companies to evade their obligations;
    3. A 2012 study by the Tax Justice Network gave an indication of the amount of money that is sheltered by wealthy individuals in tax havens. Conservatively, it estimated that a fortune of $21 trillion is stashed away in off-shore accounts. Tax Justice Network, an anti-tax haven pressure group, suggests that global tax revenue lost to tax havens exceeds US$255 billion per year;
    4. In 2010, Google confirmed it uses techniques called the “Double Irish” and “Dutch Sandwich” to reduce its corporate income tax to 2.4%, by funnelling its corporate income through Ireland, Netherlands and finally, Bermuda, which has no corporate income tax. Although this route is now being closed by the Irish government, the search engine is using Ireland as a conduit for revenues that end up being charged to another country where its intellectual property is registered. In Google’s case, this jurisdiction is Bermuda. In the year 2009, the internet giant made a gross profit of $5.5 billion, but reported an operating profit of $45 million after “administrative expenses” of $5.467 billion were stripped out, allowing the company to only pay 2.4% tax on operations outside the US;
    5. Subscribe to Healy Consultants blog to view more topics regarding offshore jurisdictions such as i) choosing the perfect offshore jurisdictions ii) offshore banking.

Healy Consultants’ video on Offshore business registration

Frequently asked questions

Contact us

For additional information on our offshore company registration services, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Ms. Karen Lee, directly:
client relationship officer - Karen
joint research centre for EU offshore authorities group RAK offshore - a complete offshore business and financial center OECD better policies for better lives