Opening an offshore company continues to be a popular topic. In 2023, understanding how to establish a company abroad has become even more crucial for thousands of people who seek to relocate their business or family or obtain alternative citizenship. Digital nomads, creative professionals, and global citizens also contribute to the growing demand for offshore company formation.
Reasons for Offshore Company Formation
Company owners seek offshore business registration in jurisdictions where investments are welcomed, the incorporation process is straightforward, and their assets are effectively protected. Some entrepreneurs opt for remote operation, which allows them to open a company online and have a contingency plan in case of adverse events.
Common offshore incentives include:
- Favorable or zero taxation;
- Minimal or no reporting requirements;
- Enhanced protection of business owners’ private data;
- Asset protection;
- Benefits specific to the terms for company registration at each offshore jurisdiction.
In 2022, over 100 countries featured on the list of offshore jurisdictions, including the Seychelles, Nauru, British Virgin Islands, Belize, Nevis, Marshall Islands, China, Hong Kong, Singapore, Canada, New Zealand, Turkey, Georgia, Hungary, Cyprus, Ireland, the United Arab Emirates, Great Britain, Malta, Austria, the Netherlands, Liechtenstein, Switzerland, and more. Notably, the USA is now recognized as the largest tax haven in the world, providing favorable tax benefits to foreign investors. Non-resident high-net-worth individuals can place their assets in Delaware, Nevada, Wyoming, and Florida, enjoying a high degree of owners’ data security.
Despite this, the most advanced economies may not be the optimal choice for opening an offshore firm or a Ltd with a bank account. Nations with strong brands that enjoy a good international reputation easily attract investments, great minds, and high-skilled talents.
Conversely, nations with weaker or blacklisted brands seek ways to secure financial, human, and other resources for their development. In the 1950s, some island nations with historic ties to major economies (for example, the Bermudas, the Channel Islands, the Isle of Man, and Hong Kong) established themselves as tax havens. They provided local businesses shielded from foreign taxes and regulations with zero or low-rate taxation, and full confidentiality.
In the 1990s, as they upgraded their legislation and infrastructure, these small offshore destinations became attractive to international corporations and trusts. They have evolved into legitimate magnets for offshore company formation and transformed into International Financial Centers (IFCs).
However, in the 2020s, the international landscape for such offshore jurisdictions has become more challenging. Their competitiveness is curbed by OECD and FATF requirements for better transparency, public beneficial ownership registers, Automatic Exchange of Information (AEOI), and other restrictions. The US, EU, and IMF maintain black and grey lists of “high-risk countries.” It is crucial to check these lists before applying for offshore company formation. Nevertheless, the business world is adaptable to changes, and the number of applications for offshore company registration is growing in all jurisdictions with offshore incentives.
Is it Legal to Set Up a Company Offshore?
Just as with other business entities, starting an offshore company includes registration and incorporation. Registration involves entering the company’s business name in the Register of Business Entities, allowing it to operate under this name and be licensed, promoted, and identified. The certificate of incorporation gives the company the status of a separate legal entity, enhances credibility, and protects its business name.
An essential aspect of offshore company formation is that the registered office address is in the country of incorporation/registration. However, the company is entitled to reduced tax rates and other perks only if it conducts its business abroad, outside the jurisdiction of its incorporation.
Before applying for offshore company registration, one must study the local regulations and legal acts on offshore company formation. Additionally, it is crucial to check what the law in one’s home country says about owning a company abroad, as there may be requirements to declare the event of offshore company formation.
The necessary steps for an offshore company setup
The offshore company formation process typically takes no less than a couple of weeks, considering several steps in the process. Each step involves its own set of tasks, contributing to the overall time frame of offshore company formation.
Step 1 – Doing your homework
Choosing a suitable jurisdiction for offshore company formation is a critical first step. It involves comparing favorable terms and possible risks, analyzing the purpose and trends in the business field, defining the target market, estimating access to core resources, choosing the bank, assessing legislative norms, and other important details. The bank selection is crucial, as a poorly thought-out and pre-approved application could be rejected.
Step 2 – Performing registration
Once the country is chosen, practical arrangements for offshore company formation need to be made, and these can be part of customized turnkey packages. This includes selecting a company name that meets the norms of the country of incorporation, obtaining corporate documents (Certificate of Incorporation, Memorandum and Articles of Association, etc.), renting office space or a registered address, contracting a Registered Agent, compiling the required set of documents, submitting the portfolio for registration at the Public Register (via the agent), setting up the management team, and opening a bank account.
Step 3 – Transferring the payments
Fees for offshore company registration can vary significantly between jurisdictions. Some jurisdictions have reasonably cheap fees, while registration in others can be costly. Certain fees are charged annually, and the total cost depends on the jurisdiction and the scope of services required. It includes the fixed state duty (a filing fee), the fee for the registered agent’s services, the value of authorized capital, licensing fees, substance requirements, fees for the agent’s annual report, and courier services.
In conclusion, offshore company formation is emblematic of our time, with many business owners venturing to set up offshore companies to access numerous advantages and incentives. The process involves time, effort, and potential costs, making it essential to rely on professional help and hire a Registered Agent. Our services offer a range of packages tailored to individual needs, providing support throughout the offshore company formation journey.