What is an Offshore Company?

An offshore company is a company that is incorporated outside the jurisdiction of its primary stakeholders/directors or its place of main business operations, typically in a jurisdiction with favourable tax laws. There are a number of offshore zones around the world that allow for incorporation and ownership by non-residents with 0% taxation. The most popular offshore jurisdictions include BVI, Belize and Seychelles. Other countries may levy comparatively low taxes, while offering a number of other benefits including existence of double taxation agreements, favourable corporate laws and others. These jurisdictions include Hong Kong, United Kingdom, Netherlands, Cyprus and Delaware State in U.S. For the purposes of this article, we will concentrate on the classical offshore companies, i.e. those incorporated in the offshore zones with 0% taxation.

There are four main features that a company must possess to be considered an offshore company. These include: 1) Incorporation under relevant Offshore Legislature such as International Business Company Act 2) Must be managed and/or owned by non-residents 3) Must not do business in the place of its incorporation 4) Must meet all legal and governmental requirements on recurring bases, such as payment of annual government licence fees.

A typical offshore company is effectively a corporation, managed by director(s) and owned by shareholder(s). These may be individuals and/or corporate entities. Directors are responsible for day-to-day operations of the company while stakeholders receive dividends and vote on key decisions, such as appointment of new directors and officers. Another important stakeholder to be mentioned is a beneficial owner. Beneficial owner is the real owner of the company, which may or may not be different from the shareholder on record.

Offshore companies are usually obliged to have a Registered Office and a Registered Agent. The registered office is the official office of the company in the place of its incorporation. The registered agent is the agent responsible for maintaining the connection between the offshore jurisdiction's government and the principal owners of the offshore company. A registered agent is usually situated in and provides company's registered office.

Offshore companies usually pay no taxes in the jurisdiction of incorporation and are not obliged to submit annual returns or financial records. However, an annual licence fee, usually between $100 - $500, is charged by the local government. The provision of the registered office and agent may be anywhere from $100 - $1000 per year, depending on the type of relationship with the client and the number of intermediaries involved.

View why incorporate offshore page for more information on the uses and benefits of offshore companies.

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