WHY CHOOSE A OFFSHORE COMPANY By utilising an offshore company,
it may be possible to secure a number of advantages. In the following
notes, we outline some of the structures which are available and
give examples of uses which may be made of offshore companies. This
is not intended as an exhaustive demonstration of offshore possibilities
and we would always remind clients that the tax and other benefits
which can be obtained by use of offshore entities usually depend
upon the country of residence of the beneficial owner and its anti-avoidance
legislation and regard has to be had, too, for the requirements
of any other country with which the offshore entity might carry
on its business.
Our professionally qualified staff will be pleased to advise you
on all aspects and an initial consultation is always free of charge.
Typical uses to which an offshore company might be put :
Trading Companies
An importing or exporting company might establish itself in an offshore
area. The offshore company would take orders directly from the customer,
but have the goods delivered directly to that customer from the
manufacturer or place of purchase. The profits arising out of the
difference between purchase price and sales price would then be
accumulated in either a tax free or low tax area. With such trading
companies, it is important to choose an offshore area which has
good communications as shipping and other documentation may be critical
to the scheme.
Investment Companies
Funds accumulated through investment companies set up in offshore
areas can be invested or deposited throughout the world and whilst
generally returns or interest payable in respect of these funds
will be subject to local taxation, there are a number of offshore
areas in which funds may be placed either in tax free bonds or as
bank deposits where interest is paid gross. Similarly, in many offshore
areas no capital gains taxes are applicable. Use of an offshore
company incorporated in a suitable country allows the possibility
of investing tax efficiently in a high tax country where there is
a concessionary tax treaty in respect of investments made by companies
incorporated in the offshore country.
Holding Companies
Use may be made of an offshore holding company which would fund
the operation of subsidiaries in various countries so that the subsidiaries
obtain the benefit of tax deductions on interest paid. If the holding
company is situated in an offshore area where there are no income
or corporation taxes and no requirement that dividends must be paid,
then the profits which are accumulated in the tax free climate can
be used to fund the requirement of subsidiaries or reinvested as
business convenience suggests.
Probate and Privacy
A high net worth individual with properties or other assets in a
number of countries may wish to hold these through the medium of
a personal holding company so that upon his demise probate would
be applied for in the country in which his company was incorporated
rather than in each of the countries in which he might hold assets.
This saves legal fees and avoids publicity. Again, not everybody
wishes to advertise wealth and an individual may wish to hold property
through an offshore entity simply because of the privacy which the
offshore arrangement gives.
Property Owning Companies
There are often great advantages in using an offshore property holding
company for the purpose of holding an overseas property. Advantages
of offshore property ownership include avoidance of inheritance
tax, avoidance of capital gains tax, ease of sale which is achieved
by transferring the shares in the company rather than transferring
the property owned by the company and reduction of property purchase
costs to the onward purchasers.
Taking the example of investment in property in the United Kingdom
by an offshore company, use of an appropriate offshore vehicle can
offer relief from income tax, capital gains tax and inheritance
tax. It should be remembered, in particular, that when a nonresident
company disposes of a property investment, no capital gains tax
is charged and holding through an offshore company removes the application
of inheritance tax which would apply if a non-domiciled investor
held a UK property in his personal name.
Professional Services
Individuals who receive substantial fees in respect of their professional
services in capacities such as designers, consultants, authors or
entertainers, may assign or contract with an offshore company the
right to receive those fees. The offshore employment company may
not have to pay tax on its profits which can be reinvested in a
tax free climate to generate further income from the offshore company.
Payments to the individuals concerned can be structured in such
a way as to minimise their tax liabilities. One example in this
regard in respect of an overseas employment is to increase subsistence
expenses as against fees as such which would be paid to the individual.
Shipping Companies
The use of offshore shipping companies can eliminate direct or indirect
taxation on shipping. Shipping companies may own or charter ships,
the profits from which activities can be accumulated tax free. Tax
and legal requirements generally dictate that the offshore company
owning a shipping vessel should be incorporated in the jurisdiction
whose flag the ship flies. The historic havens for these purposes
have been Panama and Liberia. Latterly, the registries of other
nations have expanded and consideration might be given to registrations
at British Ports of Registry such as those in the Isle of Man and
Gibraltar. A certain prestige attaches to the registration of a
ship or indeed a yacht at a British port of registry and the vessel
can be surveyed at most ports throughout the world by a surveyor
recognised by the UK Department of Trade and Industry. The British
flag has always been regarded as one of the world's most dependable.
Patent, Copyright and Royalty Companies
An offshore company can purchase or be assigned the right to use
a copyright, patent, trademark or know-how by its original holders
with a power to sublicence. Upon acquisition of the intellectual
property right the offshore company can then enter into agreement
with licensees around the world who would be able to exploit the
intellectual property right in various countries. It is thought
preferable to acquire, for example, a patent at the patent pending
stage before it becomes very valuable so that the capital payment
for the acquisition of the patent can be set at a lower amount.
Often royalties paid out of a high tax area attract withholding
taxes at source. In many cases an interposing holding company may
allow a reduction in the rate of tax withheld at source. |