DOING BUSINESS IN OFFSHORE IN 2021
Since 2003, Healy Consultants Group PLC assists multi-national Clients with offshore company registration. There are three types of offshore company locations including i) traditional tax havens and ii) reputable zero tax jurisdictions and iii) low tax countries.
Tax haven entities (click link) have limited use and are red flags to governments, banks, customers and investors. Their future is uncertain and they are a short-term strategy. We do not recommend tax havens to our multi-national Clients. Examples of tax haven jurisdictions include the BVI, Isle of Man and the Seychelles.
If properly structured, reputable zero tax entities are attractive to some multi-national Clients, especially for international trading and as holding companies. Examples of jurisdictions in this category include Singapore, Dubai, the UK and the USA.
Low tax countries are attractive for manufacturing and as holding companies. These entities enjoy access to double tax treaties and usually require a local presence of employees and physical office premises. Examples include Ireland, Poland and Hungary.
A comparison of offshore company strategies
To help multi-national Clients choose the optimum long term corporate structure, we prepared this simple summary:
No Question Reputable zero tax countries Low tax countries Tax haven entities 1. Common use of these entities? International trading Manufacturing and distribution Confidentiality 2. Positively perceived by international banks? Yes Yes No 3. A red flag to governments? No No Yes 4. Looks good to customers? Yes Yes No 5. Looks good to customers? Yes No No 6. Physical office premises required? Yes No No 7. Usually a public register of shareholders and directors? Yes Yes No 8. Perceived as a tax avoidance vehicle? No No Yes 9. Annual economic substance reporting requirements? No No Yes 10. A long term strategy for multi-national Clients? Yes Yes No 11. Difficulty to secure a multi-currency corporate bank account? Some None Difficult 12. Can do business in the country of incorporation? No Yes No 13. Withholding tax on dividends paid overseas? No Yes No 14. Transfer pricing rules apply? No Yes No 15. Usually on the EU blacklist or grey list? No No Yes 16. Average cost to register a company? US$6,000 US$10,000 US$3,000 17. Resident director often required? Yes Yes No
Offshore business registration summary
Occasionally, multi-national Clients need a tax haven entity. The company registration process is:
- Signature of our engagement letter;
- Collection of Know Your Customer due diligence documents;
- Settlement of Healy Consultants Group PLC fees;
- Agree the optimum corporate structure with our Client;
- Preparation of a detailed project plan;
- Company incorporation;
- Multi-currency corporate bank account opening (if required);
- Engagement completion.
What is an offshore company?
Offshore companies are limited liability entities registered in a country where there are i) neither taxes nor ii) a public register of shareholders and directors nor iii) annual reporting requirements. The details of the company are confidential and not known to the public. In most tax havens, economic substance requirements are obligatory.
Healy Consultants Group PLC encourages our multi-national Clients to choose an entity in a country with i) a public register of shareholders and directors ii) annual reporting, including financial statements and iii) annual corporation tax returns. We encourage our multi-national Clients to create a permanent establishment in a country including employing staff and leasing physical office premises. This is a long-term solution that will be positively perceived by governments, investors, banks and customers.
Offshore companies are used for a variety of commercial and private purposes, some legitimate and economically beneficial, whilst others may be harmful or even criminal. Examples of legitimate uses of offshore companies include:
- Listing an offshore company on a stock exchange. For example, Michael Kors Holdings Limited is incorporated in the British Virgin Islands, but is listed on the New York Stock Exchange, where it is subject both US taxation and to financial regulation by the US Securities and Exchange Commission;
- Occasionally, wealthy businessman in unstable countries wish to house their after-tax wealth in an overseas country. For example, some wealthy Venezuelan citizens may house their investments and funds in the USA;
- Crypto-currency trading is often done through offshore companies, because most countries do not have regulations to govern this business;
- To support borderless trading, e-commerce business is also done through offshore companies.
The international banking landscape keeps changing, especially when interest rates are so low. Consequently:
- Over the coming years, only digital banks will offer offshore banking solutions. During a financial or economic crisis, there is a risk digital banks will go bankrupt;
- Island banks continue to offer offshore banking solutions, e g Mauritius. During a financial or economic crisis, there is a risk island banks will go bankrupt;
- Traditional retail banks prefer medium and large companies, especially customers who need trade finance and treasury management. For example, HSBC or Standard Chartered Bank;
- Small companies are neither attractive nor profitable to international banks. Small companies are an administrative burden and a reputation risk to international banks. Hence the growth of digital banks;
- Quality international banks are closing multi-currency corporate bank accounts owned by offshore companies;
- In our opinion, offshore banking solutions are a short-term, high risk strategy;
- We encourage our multi-national Clients to use entities from reputable jurisdictions, and choose a quality bank from a major financial centre in the USA, within the EU or in Singapore;
- The majority of international banks welcome multi-currency corporate bank account applications from companies planning to have a physical presence in the same country as the bank including i) local customers and suppliers and ii) local employees and iii) physical office premises;
- CRS reporting obligations reduce the attractiveness of offshore banking.
- It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile. Let us know if you need Healy Consultants Group PLC help to clarify your local and international annual tax reporting obligations.
- The Corporate Tax Haven Index is useful reading.
If properly structured, an international company can be legally tax exempt. It is not necessary to choose a tax haven entity. Let us know if you require Healy Consultants Group PLC’s assistance to determine the optimum structure for your offshore company formation.
Frequently asked questions
Are there any business restrictions for foreigners when opening a company in an offshore jurisdiction?Certain jurisdictions including Singapore and Ireland will require companies to hire at least one local director. Healy Consultants will be pleased to offer this service to our Clients. However, the costs for this service will vary from one jurisdiction to another.
Will details of my offshore company incorporation be available for public viewing?No. Offshore jurisdictions will not require businesses to register the names of their directors and shareholders publicly.
How to establish an offshore company without causing scrutiny from tax authorities in my home countryIt is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfil those obligations annually. Let us know if you need Healy Consultants help to clarify your local and international annual tax reporting obligations.
Why form an offshore company?Offshore business setup offers several incentives for entrepreneurs including i) lower corporate tax rates ii) permission to defer annual taxes iii) elimination of exchange rate risks when dealing with foreign Clients iv) no requirement to submit tax returns and v) privacy for the shareholders and directors.
How do tax havens work?Tax haven business formation allows entrepreneurs to take advantage of the low tax policies as compared to the other global jurisdictions. Jurisdictions such as BVI and Cayman Islands even allow companies to hold their money without any tax obligations.
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Useful links for Offshore
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Disclaimer: Healy Consultants Group PLC neither has an office nor staff in Mauritius nor is it licenced as a management company under Section 77(1) of the Financial Services Act of 2007 or in any other way by the Financial Services Commission.