History of the Offshore Company

Tax havens and the offshore company are not new phenomena, and their use expanded in the last 20 years to encompass a range of new offshore company jurisdictions. Consequently, approximately two thirds of total global financial assets are housed offshore in ‘tax haven’ countries, often through an offshore company. The success of the offshore corporation means almost all leading companies bank, borrow and invest offshore. The following information provides an overview of the history and future evolution of the offshore company, as well as key aspects of offshore tax planning.
1.	The concept of an offshore tax haven was originally the brainchild of the US and UK, who were trying to reduce foreign aid to certain developing nations. The idea was that, as an alternative to providing foreign aid, multinationals would be encouraged to invest in these offshore jurisdictions by setting up an offshore corporation. Offshore jurisdictions generally have simple offshore company laws.
2.	The offshore industry is worth approximately US$5 trillion. Most experts agree that an offshore corporation is a long-term solution, provided it is structured as part of a comprehensive offshore tax planning strategy. Major international organisations actively derive profits from an offshore company, including aircraft maker Boeing, oil giant ExxonMobil, American Express and Chase Manhattan Bank.
3.	Despite the obvious advantages of an offshore company, the term ‘tax haven’ has negative connotations, particularly for an offshore company's customers, suppliers or potential venture capitalists. Consequently, the dynamics of the offshore industry is changing in two key ways: i) Asia’s booming economies, strong banking confidentiality laws and pro-business incentives are driving capital flows eastwards, away from the more traditional banking centres such as Switzerland; and ii) many tax haven jurisdictions are complying with OECD guidelines and are either part of the OECD’s grey or white list.
4.	An offshore company set up in a jurisdiction which cooperates with organisations such as the Organisation for Economic Cooperation and Development (OECD) is considered a short-term offshore solution. While the British Virgin Islands (BVI) and Cayman Islands were once attractive offshore company jurisdictions around which to base an offshore tax planning strategy, Asian jurisdictions are increasingly favoured for international entrepreneurs seeking a secure offshore corporation.
5.	In addition to its advantages for offshore tax planning, Hong Kong is one of the easiest places in the world to do business, including setting up an offshore company, according to a World Bank survey (see the survey here).
6.	In addition to its advantages for offshore tax planning, Singapore is also the easiest place in the world to do business, including setting up an offshore company, according to a World Bank survey (see the survey here).
7.	Other factors affecting the offshore industry and offshore tax planning include:
	Wealth creation - governments in developed and developing nations continue need to levy high taxes to fund infrastructure projects. Many organisations will continue to be attracted by the advantages of the offshore corporation and many will continue to seek effective offshore tax planning strategies; Industry analysts believe the idea of tax competition between nations will continue. In a report, one analyst said: ‘Countries with a small domestic tax base favour tax competition, while countries with a large tax base prefer tax co-operation.’ This is likely to maintain demand for offshore tax planning and the offshore company.
8.	Coherent offshore tax planning is critical to taking advantage of offshore corporate structures. Seeking the advice and experience of a top corporate consulting company is the most effective way to conduct effective offshore tax planning. Healy Consultants has helped countless Clients to set up an offshore company as part of a wider offshore tax planning project. Successful offshore tax planning addresses key tax, legal and financial aspects of company incorporation and banking, including:
	Can the offshore corporation receive foreign-sourced income without being subject to local corporation tax? A successful offshore tax planning strategy will identify legal, tax-efficient jurisdictions in which to incorporate; If the jurisdiction imposes taxes on the offshore company, what are the rates and are there any exemptions? What is the best place to locate the offshore bank account to ensure that the offshore corporation is as tax-efficient as possible? Successful offshore tax planning will identify a corporate bank account which facilitates international trade via the Internet for the offshore company; Many jurisdictions make available to the public the register of directors and shareholders of an offshore company; The offshore corporation's accounting and reporting obligations. Points to consider would be: what is the turnover threshold above which an annual audit is required for the offshore company? Successful offshore tax planning will identify jurisdictions with minimal reporting requirements, or will advise an efficient plan of action should reporting be required; What is the minimum number of directors and shareholders an offshore corporation can have? Does the jurisdiction require at least one of the directors to be a resident? Resourceful offshore tax planning will identify the best jurisdiction to meet your corporate structuring needs; What are the minimum capital requirements to set up an offshore company? Is the offshore corporation required to register for value added tax (VAT) or goods and sales tax (GST)? Healy Consultants' offshore tax planning strategists will assist with registration if required.
9.	For more information on the evolution of the offshore industry, please follow this link.
Contact Us
For more information on the offshore industry and the offshore corporation, or any aspect of an offshore company, email email@healyconsultants.com or telephone us at (+65) 6735 0120.
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