It has been a relatively long time since the offshore zones occur. They have been known since the days of the Ancient Greece. Just then the Greeks mentioned the “burden of expenses” when they transported various goods not directly, but in the certain areas.
Offshore zones nowadays
In the middle of the last century, the modern mechanism of operation of the offshore zones has arisen and from this time businessmen from all over the world use it to pay fewer taxes and to increase the safety level of their business. In addition, the offshore zones are in great demand to create the more profitable structure, if the businessman’s residence is in the country with the under-developed laws in the financial sphere.
Despite the fact that everybody or most everybody has been heard about the offshore zones, some people do not know exactly how they work till now. Consequently, only few of them have been using the unique capabilities of the offshore zones.
There is no need to be a guru in the field of finance in order to understand everything. It is enough to create the scheme, to choose the company type, jurisdiction, as well as the holding structure, and to find a person, who is well-versed in some narrow-focused issues.
Moreover, this specialist will help to organize the effective operation of the business. If the scheme is chosen correctly, the company will operate without violations of the laws and the level of profit will be much higher than before. Advantages of the offshore companies:
- Ability to remain anonymous, while conducting business;
- Decrease in the amount of taxes to be paid, as well as optimization of import-export;
- Ability not to prepare comprehensive reports for inspection bodies, as well as simplification of daily work;
- Protection of all monetary assets from infringement by the third persons;
- Ability to conduct business on the international market jointly with the partners;
- Minimum commission for registration of the company, as well as for the account service
Despite all the advantages, it is not easy to select an offshore company for a particular business. They have no specific classification, so it is necessary to give preference to an offshore company that corresponds to the targets that the businessman faces to the maximum extent.
The most profitable activities for the offshore companies
The offshore companies are not profitable for everyone since each offshore zone has its own features. They are suitable for persons engaged in the following business activities:
- Internet company;
- Export-import company;
- Investment or holding entity;
- Entity operating on the international securities market;
- Company working with the intellectual property, as well as royalty;
- Reinsurance company
Also, offshore companies can be very useful for the shareholders. Since each activity has its own features, then at selection of the most favorable jurisdiction it is necessary to consider the following:
- Field of activity. Some types of services must be licensed in a number of jurisdictions;
- Convenience for a businessman. In some cases, you have to arrive personally in the territory of the offshore zone for opening an account;
- Zone’s reputation. It happens that local authorities are not loyal to the foreign investors. For example, in the Republic of Cyprus after the financial-economic crisis the local authorities “robbed” in fact the foreign investors by pocketing the cash assets from their bank accounts. It is clear that to open a company in the territory of the state, part of which is occupied by another country, is not the best idea
To give preference to a particular offshore zone is reasonable only after consulting a specialist, who will consider all features typical for the selected offshore zone.
While selecting, it is necessary to take into account the popularity ratings of the offshore zones, which are prepared every year.
- Among the most popular zones there are Panama, Belize and the British Virgin Islands. The legislation of these small states is the most favorable for foreigners. In particular, no currency control is present in these regions, but the states guarantee protection of investments;
- Such prestigious jurisdictions as Singapore, Gibraltar, Hong Kong, Ireland and Portugal have a good potential as well. These states provide the preferential tax regime. It concerns both low and zero rates;
- The most prestigious offshore zones are the United Kingdom and the State of Delaware located in the United States. Here you can conduct quite profitable financial-economic activities as well;
- A really functioning “mechanism” depends to a large extent on how the offshore companies, as well as the business owner’s companies operate
One more important factor is the type of business activities, to which the company is referred. This is a reason why prior to work in an offshore zone it is necessary to:
- Describe the scheme of payment of taxes, as well as the structure of conduct of business, that is, indicate which of trusts, holdings and intermediate companies will be involved?
- The next stage is to work out issues concerning licensing, as well as registration of companies. Then it is relevant to recruit staff and to decide issues with apostillation of documents.
- After that, you have to open an account in the bank and to select a nominal service.
- And the last, but not least is to connect the site necessary for work to the payment systems. It is worth not to forget development of documentation forms.
Which of schemes are deemed the most popular in the modern offshore companies?
- For export or import it is resale of goods at the reduced or increased price under contracts. It is required for reduction of taxes from customs payments, as well as the profit tax in the countries, where it is legal.
- For companies that conduct their activities in the Internet, it is profitable to create joint structures and companies from prestigious jurisdictions. This is the way to avoid prohibitions in the developed states and to end unfair suspicions from the local tax departments.
- The leasing scheme is used to transfer monetary assets abroad and in the reverse reinvestment. Consequently, it is possible to reduce the tax, while purchasing technical equipment and various products (in this case, the offshore organization will transfer the loan for the needs of the offshore company, which acquires the certain goods and transfers them (in the form of leasing) to the real company). It is worth to bear in mind the national laws; otherwise you can become a criminal from the point of view of local authorities.
- If direct contacts with the offshore companies shall be excluded, it is able to use companies from top-class jurisdictions that will conduct business activities on behalf of the real owner of the company. In this case, only commissions intended for intermediaries are subject to taxation. Here the local laws shall be born in mind as well so as not to become an offender.
- Also one can create a trust to protect values in both material and non-material forms.
- Persons dealing with intellectual property can transfer assets to the most beneficial jurisdiction through a transit company.
- To preserve personal funds, you can open an account for a controlled offshore company. Thus, you can avoid currency regulation.
- If it concerns a construction company, a contractor agreement can be concluded on behalf of an offshore company. Thus, one can save a large sum since transfer of funds to the budget (in some circumstances) is not required.
- To minimize costs at sale of your own business it is reasonable to use non-resident offshore companies. In such situation taxes can be avoided.
In some cases, business activities cannot be referred to any of these fields of activity. Then it is necessary to develop an individual scheme. Each specific case shall be studied by specialists since it is extremely difficult to construct a profitable scheme yourself.
Example of work of offshore companies
If anyone is in need to create an offshore company for foreign trade operations, it is important what the customer deals with – export or import. If it is export, then it is feasible to use an intermediate offshore company. When it concerns import, then products are purchased, as a rule, at market prices, after which they are sold at the most favorable price.
For example, one of the Russian companies wants to export funds on legal grounds. In this case, it has the right to insure any property for an extra-large amount in one of the local companies, after which the local company can reinsure the property in the offshore zone, but for a much larger amount. Thus, it is possible to pull funds unless it is prohibited by the local laws.
It is important to realize that the external special structures make possible to increase the efficiency of business only in case of their competent implementation. That’s why, to do it without qualified support is impossible and prior to registration of an offshore company it is worth to contact The «Private Financial Services» company’s experts for assistance.