Offshore companies may bring a number of
benefits
to individuals or companies.
Taxation - business may be structured so that profits are realized in ways
that minimize their overall tax liability.
Simplicity - except for regulated businesses, such as banks or other financial
institutions, some jurisdictions make it relatively simple to set up and
maintain companies.
Reporting - the level of information required by the registrar of companies
varies from jurisdiction to jurisdiction.
Asset protection - it is possible to organize assets and transactions in such
a way that assets are shielded from future liabilities.
Anonymity - by carrying out transactions in the name of a private company, the
name of the underlying principal may be kept out of documentation. Having said
that, current anti-money laundering regulations often require banks and other
professionals to look through structures.
Thin
capitalization - offshore jurisdictions tend not to impose "thin
capitalisation" rules on companies (except for regulated entities such as banks
and insurance companies), allowing them to be formed with a purely nominal
equity investment.
Financial assistance - offshore companies are usually not prohibited from
providing "financial assistance" for the acquisition of their own shares, which
avoids the needs for "whitewash" procedure in certain financial transactions.
Usually
disadvantages
of offshore companies
Offshore companies are usually prohibited from conducting business or
retaining employees in their jurisdiction of incorporation.
For regulatory reasons, there are often certain restrictions on the type of
business which an offshore company can engage in. For example, it is quite
common for there to be general prohibitions against offshore companies engaging
in banking business, insurance business or operating as a trust company.
Because of the limited amount of publicly available information in connection
with offshore companies, there is usually a high level of hidden costs at the
administrative level. For example, to open a bank account in the name of an
offshore company, to comply with relevant anti-money laundering regulations, the
bank will normally require large quantities of corporate documentation to be notarised and apostilled in the jurisdiction of incorporation, and may require
opinions from local lawyers in that jurisdiction as to the capacity and power of
the company to open and operate a bank account.
Certain countries have "anti-tax haven" legislation which makes it difficult
to conduct business in those countries using an offshore company. For example,
capital markets regulations in France prohibit using offshore companies as bond
issuing vehicles.
Where a shareholder of an offshore company dies, it is usually necessary to
have the will admitted to probate in the offshore jurisdiction as well (or, if
intestate, to have the letters of administration re-sealed in that
jurisdiction), which can add to cost, delay and inconvenience in administering
the deceased's estate.
Confidentiality Critics of
offshore jurisdictions point to excessive secrecy in those jurisdictions,
particularly in relation to the beneficial ownership of offshore companies, and
in relation to offshore bank accounts.
The criticisms are slightly difficult to assess. In most jurisdictions banks
will preserve the confidentiality of their customers, and all of the major
offshore jurisdictions have appropriate procedures for either law enforcement
agencies to obtain information regarding suspicious bank accounts. Most
jurisdictions also have remedies which private citizens can avail themselves of,
such as Anton Piller orders, if they can satisfy the court in that jurisdiction
that a bank account has been used as part of a legal wrong.
Similarly, although most offshore jurisdictions only make a limited amount of
information with respect to companies publicly available, this is also true of
most states in the U.S.A., where it is uncommon for share registers or company
accounts to be available for public inspection.
In relation to trusts and unlimited liability partnerships, there are very few
jurisdictions in the world that require these to be registered, let alone
publicly file details of the people involved with those structures.
However, there are certainly well documented cases of parties using offshore
structure to facilitate wrongdoing, and the strong confidentiality laws in
offshore jurisdictions have clearly played a part in the selection of an
offshore vehicle for those purposes.
Banks Traditionally, a number of offshore
jurisdictions offered banking licences to institutions with relatively little
scrutiny. International initiatives have largely stopped this practice, and very
few offshore financial centres will now issue licences to offshore banks that do
not already hold a banking licence in a major onshore jurisdiction.
(adapted from wikypedia)
Contents of this page:
offshore Banks , disadvantages
of offshore companies, Offshore number benefits, Offshore financial centre (or OFC),
offshore tax.
