Offshore - what is it: a detailed description of the term offshore, the principle of operation (15 schemes of use) + a list of offshore zones

Hello dear readers of the Rich Pro financial magazine! In this article we will consider such a concept as “offshore”, namely what it is, what kind of offshore zones are, how to open an offshore account, how and where to register an offshore company and much more.

Indeed, the main task of business in modern conditions is organization profitability, as well as a decent level of capitalization. At the same time, imbalances in the global financial market motivate some states to create special preferential conditions for attracting foreign capital.

All these factors had a significant impact on the global market and created the prerequisites for the emergence of offshore zones.

So, from this article you will learn:

• What is offshore in simple words - a full description of the term + history of occurrence;
• What is: offshore account, onshore, deoffshorization + popular offshore zones;
• Why do offshore + companies use their schemes?
• How to register / buy an offshore company;

If you want answers to these and other questions, then read this article to the end.

In the article we will give a detailed description of the term “offshore”, an offshore company, as well as what for and how to register an offshore organization

1. What is an offshore, offshore account - definition and meaning of terms

Offshore- This is a company that conducts commercial activities in a certain territory, in which special, preferential conditions are created for the financial and economic management of assets of foreign legal entities.

The main attractive factors of such zones are:

• Low taxes or their absence;
• Ease of registration;
• Easy reporting and management.

Offshore or offshore - how to write?

The correct spelling of the word is “offshore” with two letters “f”, but even in the scientific literature you can find another spelling of the term “offshore” with one letter.

The concept of "offshore"comes from english"offshore“, which means“ outside the border. ”The first mention of offshore companies dates to the end of the 50s of the twentieth century in the United States, when one of the American companies moved its business to a zone with more attractive tax laws.

Since ancient times, merchants shied away from trade in large cities, where duties significantly limited their income.

Methods of attracting capital were used in Western Europe in the 15th century, when English merchants tried to trade their products in Flanders (the territory of modern Belgium, the Netherlands and parts of France), and thereby avoiding increased taxes. In the United States, the first offshore schemes began to be applied in the 18th century, when in an effort to avoid taxation, organizations used Latin American countries.

Onshore - an organization that conducts business in the same territory where it is registered. Onshore is the exact opposite of offshore.

Most experts are inclined to believe that one of the causes of the global economic crisis that happened in 2008 is a significant increase in the turnover of offshore companies.

1.1. What is an offshore account?

Offshore account - This is a bank account opened not in the country of the actual registration of the organization or primary place of residence of an individual.

Banks that accumulate offshore accounts are usually located in countries with low tax rates and are able to provide financial and legal benefits when doing business.

An open offshore account allows the depositor to protect his own funds from various unpredictable situations.

The main reasons for opening a deposit may be:

• Significant deterioration of the legal framework for taxation in the country, the actual activities of the entrepreneur.
• The ability to use financial resources at any time and in different countries of the world.
• Providing a guarantee of confidentiality of information and preservation of assets.

1.2. What is an offshore company?

Offshore company - a legal entity registered in a country where economic activity is insignificant or even absent.

The scheme of work of such a company is very simple. By importing products to the country where the business is carried out, the entrepreneur conducts a money transaction using an offshore company. At the same time, the price can be significantly lower than that of competitors, since there is preferential taxation in the country.

The financial resources accumulated during the transaction are credited to the offshore account.

The main schemes for using offshore we have discussed in detail below in the article.

Advantages and disadvantages of working with offshore companies

2. Pros and cons of registering an offshore company ➕➖

When considering the possibility of moving a business to offshore zones, organizations should evaluate expediency, economic effect, as well as advantages and limitations of this decision.

A more detailed consideration of the pros and cons of opening offshore companies will allow us to evaluate the rationality of using free economic zones.

2.1. (+) The advantages of working with offshore

So, we list the main advantages of an offshore company:

1. Optimal taxation for the enterprise. Low taxes allow the company to get more net profit.
2. Increased business geography. Work in the foreign market contributes to the diversification of the company.
3. Simplified registration of a legal entity. Lack of bureaucratic delays, a small amount of time for registration.
4. Ease of controls. To organize the activities of the company, the owner does not need to manage independently. Responsibilities can be assigned to an authorized person.
5. Minimization of legal risks. An enterprise, as a subject of the international market, is initially subject to the laws of the country in which the organization is registered.
6. Bank secrecy. Protecting business information is one of the basic elements of offshore attractiveness.  
7. Liberal possibilities of choosing an organizational form of activity.
8. The possibility of capital accumulation.

These advantages provide optimal conditions for doing business, which is of interest to medium and large businesses.

Keeping money offshore is safe, legal and quite profitable (especially if you don’t know where to invest).

2.2. (-) Disadvantages of offshore

However, there are significant disadvantages of offshore zones.

Consider the most significant of them:

1. Ambiguous reputation. A large number of offshore companies finance terrorist organizations, drug trafficking, etc.
2. Possible image losses. A significant part of large organizations prefer not to risk their reputation and do not cooperate with offshore companies.
3. Changes in the laws of countries. Many states are trying to limit the outflow of capital and take legislative measures to regulate the interaction between the country's enterprises and offshore companies.
4. Difficulties in obtaining large loans. Companies that have accounts abroad often have difficulty attracting debt financing.
5. Significant interest in offshore companies from international regulatory authorities. Supranational legal organizations show increased attention to the activities of offshore companies.

Most of the disadvantages can be mitigated if you use the services solid, successful companies involved in registration and registration of offshore organizations.

Definition of the term + 3 types of offshore zones

3. What is an offshore zone - 3 main categories

Offshore zone - This is a separate territory in which the necessary conditions for entrepreneurial activity and the management of monetary assets abroad are created.

Offshore zones were classified into 3 main categories by members of the Council of Representatives of the Organization for Economic Cooperation and Development.

The main principles of gradation are the implementation of tax standards and the ability to provide confidential information upon request.

Category 1. Countries, Islands

These are small states, usually island ones, which are free economic zones.

Distinctive features are: underdeveloped economy and political stability.

Financial and economic reporting in these countries not necessary.

There is no income tax payment, and an obligatory annual fee is paid, which does not depend on the proceeds from the sale and the turnover indicators.

In this category of countries, registers of business owners and managers are not maintained, and the confidentiality of activities is also ensured.

This group includes:

• Seychelles
• The Bahamas
• British Isles;
• and others.

Category 2. Binary Business Countries

In such areas the opportunity is provided for activities such as offshoreand onshore company.

If the organization is not a resident, then it partially or completely withdraws tax and duty exemptions, and reporting is also required.

In these countries, there is significant control by regulatory authorities, which does not prevent these offshore zones from having a good reputation among businessmen and investors.

This category of countries includes:

• Luxembourg;
• Switzerland;
• Cyprus;
• etc.

Category 3. States with a legal form of entrepreneurship

In these states, activity is possible only if all laws and requirements are met.

Is present significant control over reporting and taxation, registers of businessmen and investors are kept.

With proper asset management, countries in this category are provided reliable.

These states include:

• USA;
• Canada;
• United Kingdom
• and etc.

List of the most popular offshore zones

4. The main offshore zones in the world + comparison table 🗺

Geographically, offshore zones are located in different parts of the globe.

According to the regional principle, we can distinguish the following groups:

• Asian countries
• Caribbean;
• Small island countries of Europe - Maine, Jersey, etc .;
• Gibraltar and Cyprus:
• Luxembourg and Switzerland.

Each regional group has its own advantages and individual characteristics.

In the Caribbean There are no reporting obligations, and companies and their owners are guaranteed confidentiality.

Offshore zones in Gibraltar and Cyprus. establish a fixed income tax rate, and an audit of the organization’s activities is also required. This allows offshore companies to have a good reputation in these countries, but increases the costs of operating activities.

In Luxembourg and Switzerland There is also a mandatory tax rate, subject to certain conditions. In Asian countries, registration is required and an “offshore tax” is paid.

Offshore Zone Comparison Chart

Consider the distinctive characteristics of offshore zones in more detail using the table:

From the table you can see that each offshore zone has its pros and cons, there are no ideal options for the company.

Further it is necessary to consider in detail the advantages of the most popular (used) offshore zones.

1. Cyprus

Cyprus is an international financial center and a fairly popular offshore zone.

At the same time, it is worth noting that since 2012 it does not fully comply with the concept of a “free economic zone”. After the country joined the European Union, the leadership had to amend laws and limit preferential taxation with the interaction of Cypriot and European enterprises.

In other cases, the benefits remained the same, and therefore Cyprus, although nominally, remains an offshore zone.

Benefits from the registration and activities of an offshore company:

• Income tax - 12,5 %;
• Registration cost $ 2,500;
• VAT rate - 0% and 15% (when selling goods and services to EU countries, including Cyprus);
• Ease of registration and maintenance of a bank account;
• High degree of confidentiality;
• There is no limit to the minimum number of shareholders;
• The list of agreements to eliminate double taxation;
• Company assets can be used as a source of credit;
• Cyprus is a member of the EU, due to which there are no restrictions when interacting with European partners;
• The authorized capital of the company should be minimum 1,000 euros;
• Lack of taxation on income received outside the offshore zone;
• No customs duties are levied on purchased equipment for own use;
• Permission to use nominee shareholders and authorized directors.

2. British Virgin Islands

Offshore zone British Virgin Islands (BVI)- One of the most popular offshore zones. The territory includes 36 islandsof which the population lives on only 16.

Politically, BVIs relate to the overseas territory of Britain, which is granted self-government.

Advantages from the activities of an offshore company in this territory:

• Insignificant registration fee;
• Preferential taxation (paid only once a year, duty and license, if necessary);
• Minimum registration time;
• Good reputation;
• Significant level of confidentiality;
• Stable political and economic situation;
• Lack of currency control;
• There is no obligation to use a resident secretary;
• Upon obtaining a license, it is possible to engage in insurance and banking activities;
• Modern infrastructure.

3. Hong Kong

Hong Kong is located on the Kowloon Peninsula, as well as consists of over 260 islands.

Using its advantageous geographical position, Hong Kong has become one of the most important financial centers of Asia. This offshore zone provides many benefits and preferences for organizations engaged in the fields of trade, of services, industry, Sciences etc.

The main feature of the activities in the Hong Kong offshore zone is lack of division into residents and non-residents, and the amount of taxes depends on the source of income and economic activity. Offshore activities do not charge taxes on income.

Advantages of an offshore company:

• Reliable jurisdiction;
• High degree of confidentiality;
• Lack of currency control;
• Access to the Chinese market;
• No tax on dividends from abroad;
• The ability to use the services of nominee directors and shareholders;
• High level of professional staff;
• The rule of law.

4. Switzerland

Switzerland is one of the most famous offshore zones. This country has a high level of banking services: reliable protection of customer bank accounts and the highest level of service.

The main advantages of the offshore zone in Switzerland are:

• Favorable regulatory framework;
• Business-friendly legislation;
• Simple and efficient company registration system;
• Developed infrastructure;
• Moderate taxation;
• High-tech level of industrial development;
• Convenient geographical location.

From the diversity of these zones, you should carefully select a "safe haven" for your money.

List of the most popular offshore schemes

5. Use of offshore companies - TOP-15 popular business organization schemes 📚

The main issue of activity in free economic zones is the withdrawal of money offshore. Initially, it is necessary to evaluate the economic effect of such a decision.

It is advisable to transfer the assets of the enterprise to the offshore zone in the presence of large accounts payable and the desire of the entrepreneur to liquidate the enterprise in the country of which he is a resident.

We already wrote step-by-step instructions on how to close an LLC in our country in our previous issues.

15 schemes for using offshore

The main trends in global economic policy is movement towards transparency of financial flows and tightening control over foreign exchange operations.

Despite this, offshore companies retain the attractiveness of business owners and allow you to simply withdraw money to countries with low taxes.

So, consider the most popular offshore business organization schemes.

Scheme number 1. Export-import activities of an offshore company

By registering offshore, the organization continues to operate in its country and imports and exports goods.

This scheme allows the organization to save on costs, which in turn affects pricing. This method is the most popular among residents of offshore zones.

Most states restrict at the legislative level the influence of offshore zones on the export-import market within the country.

Scheme number 2. Use of offshore by real estate market participants

The global real estate market is a source of great profitability combined with significant costs. The use of offshore zones allows the investor to maintain confidentiality along with preferential taxation.

Scheme number 3. The use of offshore financial market participants

To ensure the optimal share of liquidity and sustainable growth of financial assets, banks, insurance companies and trust organizations are significantly interested in tax benefits.

Scheme number 4. Support for the activities of holding companies

The management of the holding involves the management of various assets: financial, industrial, labor and other assets.

Confidentiality together with tax relief allow optimizing the company's expense item.

Scheme number 5. Opening an offshore account for businessmen who decide to "go on vacation"

Capital protection, banking secrecy, as well as optimal tax legislation allows the entrepreneur not to worry about the safety of his own financial resources.

Scheme number 6. Offshore investment

This scheme allows you to invest financial resources in various assets of your own company without significant tax fees.

Scheme number 7. Opening of an offshore company by a large shipowner

This option is optimal for owners of yachts and ships - it can significantly increase personal income, profitability of the entire organization, and also provides political advantages.

Scheme number 8. Use of offshore by securities market participants

Very often in these markets there are significant fluctuations in exchange rates and, accordingly, the risks are significant. To minimize tax deductions, market participants use offshore companies.

Scheme number 9. An offshore company as the owner of intellectual or copyright property

An offshore company can freely dispose of its property - sell, transfer for use, and also offer it by franchising - in accordance with the laws and tax burden of the offshore zone.

Scheme number 10. Offshore organization registered and managed through a worldwide network

With this scheme, objective difficulties arise in determining the location of the enterprise, and it is also difficult to recover taxes. This is the most relevant option at present.

Scheme number 11. Resource management

In this case, the company can switch to self-financing using offshore instruments. As a rule, it is realized through centralized capital management of several companies that belong to one beneficiary. (We have already written about who the beneficiary is in previous articles)

Scheme number 12. Rental on favorable terms

When concluding a lease agreement for a company in the Russian Federation for a foreign (offshore) organization, this organization is exempt from tax payments.

Important! The organization must first obtain accreditation in the territory of the Russian Federation for conducting commercial activities.

Scheme number 13. Reputation and Image

The level of trust in companies that are registered abroad is much higher than in Russian companies. Foreign “registration” in the eyes of partners from abroad looks much more convincing.

Scheme number 14. Employment Abroad

In this scheme, it is possible to reduce the costs of the enterprise for the maintenance of company employees (social packages, fees, travel expenses, etc.).

Scheme number 15. The provision of insurance services

Company registration in a popular (reliable) offshore zone significantly reduces insurance risks and allows you to get tools to increase (increase) capital in large investment funds by minimizing and optimizing the tax base.

The presented schemes should be used based on the goals pursued and objectively assessing legal possibilities or individual.

Before registering an offshore company and applying one of the above schemes, you should study the offer.

Offer - a proposal to conclude an agreement from an organization that is interested in registering an offshore from a foreign party. Given the client’s unwillingness to independently register an offshore company, there are many companies on the market that provide relevant intermediary services.

Features and nuances when working with offshore companies

6. Obstacles when working with offshore companies (control and management)

Despite significant business benefits, most states and international legal institutions limit the credit and financial activities of offshore zones.

Free economic zones, as subjects of the global financial market, designate the goal of their activity as raising capital.

However, when working in offshore zones, a number of pitfalls should be taken into account:

1. Blacklists of offshore zones. The legislative power of states creates and constantly replenishes the lists of controlled areas of capital outflow.
2. Limitation of tax breaks in free economic zones. Offshore countries are under pressure from other subjects of international law, which leads to the restriction of benefits and other exemptions.
3. Management of an offshore company. Both an owner and an authorized nominee director can manage a foreign company. In the second case, it is worth evaluating the reputation and professional qualities of the person.

Offshore Regulatory Organizations

A large number of offshore companies have been seen in financing various illegal activitiesdue to lighter registration conditions, as well as the lack of proper control in free economic zones. This has led these organizations to pose a significant threat to the global community.

Based on this, prerequisites arose for the creation of specialized international organizationsthat implement a package of measures to prevent illegal business activities.

1. Anti-Money Laundering Financial Action Task Force (FATF) - An international organization that was created to prepare and implement comprehensive measures to combat the “legalization” of proceeds of crime and the financing of terrorism. The organization also monitors the compliance of national AML / CFT legal systems with the developed standards. The organization was formed in 1989 and currently includes more than 30 countries.
2. Organization for Economic Development and Cooperation (OECD) - An international organization engaged in the discussion, development and coordination of economic policies between member countries. One of the activities of this interstate association is control over the system of preferential taxation of different countries and non-transparent financial and economic laws. If the financial laws of the state do not comply with OECD principles, the offshore zone is included in the black list of countries that use unfair tax competition methods.

Countries that use the recommendations of these regulatory bodies pay more attention to firms that interact with organizations from generally recognized offshore zones in their activities.

Also, the international organizations of the FATF and the OECD are taking measures to limit the number of transactions, identify the real owners of enterprises, control the pricing of goods in order to avoid dumping.

Offshore registration - how to open an offshore company yourself

7. Buy an offshore company or register yourself - 8 stages of offshore registration

Each company makes an independent decision. about purchase or registration followed by independent management of an offshore company.

The purchase of an offshore will save time needed to study the regulatory and legal framework of a free economic zone.

How to open an offshore company yourself

In the case of self-registration of a foreign company, you should proceed in stages.

Stage 1. Decide on the country of registration

It functions in the world more 60 offshore zones, and the optimal choice depends on the planned scheme of work, the conditions for registration should be taken into account, the nominal amount of taxes and fees, as well as the cost of maintenance.

At the same time in different jurisdictions there are limitations by the number of owners, the minimum authorized capital and the procedure for disclosing confidential information about the owners of assets varies.

Step 2. Choosing a Name

Next, the company is determined with the name and organizational form of the enterprise.

The registration authority may not complete all the necessary documents if the name coincides or significantly resembles an already registered legal entity.

There are restrictions on the names, misleading and having the words “bank”, “trust” and other phrases in their form that cause association with financial institutions.

Stage 3. List of documents

The next step when opening a foreign (offshore) company is to collect all the necessary documents necessary for registering an offshore company in the selected country.

Stage 4. Payment

After the final check of documents for compliance with all requirements, a state fee, various registration fees and fees are paid.

Stage 5. Incorporation

The company is registered in the registry and receives the status of a legal entity with the right to conduct financial activities.

Stage 6. Constituent documents (memorandum)

To conduct proper registration of an offshore company, it is necessary to prepare charter and memorandum of association.

The charter includes a list of basic rules by which the company should be guided, and also contains all aspects of economic activity.

The memorandum of association shall specify the internal rules for organizing the activities of the company, as well as the individual characteristics of the functioning of the board of directors, issues of shares issue and a number of other management aspects.

At this stage, all documents pass the resolution, the company receives a certificate of incorporation, and all documents are notarized.

Stage 7. Starting a company

After completing all the necessary documentation, the company can begin commercial activities using the offshore zone.

Stage 8. Opening a bank account

The final step is to open a bank account for an offshore company. This procedure can be done by the business owner on his own when visiting the bank, or use the services of an authorized representative.

List of documents for opening a bank account in an offshore company

To open an account with a bank, an appropriate list of documents is required:

• Articles of association;
• Certificate of state registration;
• Order on the appointment of the director;
• Power of attorney to carry out activities on behalf of the director;
• An offshore certificate confirming the full value of the company in relation to state law. (Certificate of Good Standing is issued immediately if the company is more than one year old)

Registering a company in offshore and receiving tax preferences will require you to go through all the above steps and fulfill the conditions of the offshore zone.

8. Answers to frequently asked questions on offshore (FAQ)

When starting a business in the offshore zone, it is very common for beginning entrepreneurs and company directors to have a number of difficulties. Below are answers to the most relevant questions.

Question number 1. How to open (register) an offshore company?

The bulk of Russian organizations that want to optimize their business with the help of offshore companies use the services of intermediaries.

In this case, the legal entity saves time and concludes a legally valid contract, observing the laws of the country. This intermediary service is paid.

When self-registering, the interested person receives information from the jurisdiction about the entire list of required documents and the conditions of the offer.

Question 2. Where and how to buy a "ready-made offshore"?

When buying a "ready-made offshore" you must use the services of reliable intermediaries. The further effectiveness of an offshore company depends on the quality of their work and professionalism.

When choosing an intermediary, you should use some recommendations:

1. Market experience and reputation. Solid experienced companies, as a rule, carry out their work professionally and maintain their reputation.
2. The presence of the intermediary options for offers in various offshore zones.
3. Getting detailed advice. When choosing an offshore zone, it is very important to get a full and affordable consultation on the economic and political aspects of activities in the country and its legislative features.
4. Trust and Confidentiality. The intermediary should have a special approach to each customer, keeping secret information about the financial activities of the company.
5. Additional guarantees on the reliability of the intermediary when opening a bank account. As a rule, qualified intermediaries simultaneously provide services for registering a company in offshore companies and opening a bank account.
6. Control over changes to the black list of offshore companies. To provide quality services, the intermediary company should be aware of periodically introduced changes to the "black list" of offshore zones.
7. Guarantees of the intermediary. The client must receive guarantees from the intermediary that the proposed offshore company has not been used before and has an impeccable history.
8. Optimal market price for intermediary services. The cost of services from the leaders of the intermediary market differs slightly and is determined by the market environment.

Evaluation of intermediaries according to these criteria will allow you to choose the best option for cooperation and thereby buy a suitable "offshore".

Question number 3. What does deoffshorization mean - what is it in simple words?

Deoffshorization - This is a list of measures at the legislative, informational and enforcement level to reduce or eliminate the influence of state residents doing business in the country in the status of foreign companies.

Currently, a significant proportion of medium and large businesses is used in economic activities. foreign assets.

The Russian leadership is interested in increasing the budget revenues therefore, pursuing a policy of deoffshorization, reduces the number of offshore enterprises in domestic business.

Question number 4. Is it necessary to visit a free economic zone to register an offshore company?

In modern conditions, the registration of the company, with the proper implementation of all procedures, takes 3 days to 3 weeks.

Using the services of authorized organizations that register offshore companies, the owner not necessarily present in person.

All procedures are carried out in such a way that intermediaries in the offshore zone are delegated the right to sign, which allows them to independently draw up and register all the required documents.

Question number 5. What is Offshore money?

Question: On the network I met the company LLC “Offshore Money”, which offers to pay 17 thousand rubles to my account. Is this a scam? And how does this company come into contact with the term offshore?

Answer: This organization has nothing to do with offshore, deceived users could not even find and verify the registration of this company. This is another deception scheme, i.e. “Scam”, where you are offered to transfer funds to the account, but before that you need to pay a commission.

9. Conclusion + video on the topic

Offshore - is a complex issue in the theoretical and practical field of entrepreneurship. This topic causes heated discussion in the international community related to the ambiguity of this phenomenon in the global economy.

The significant advantages that the owner of an offshore company and the country where it is registered are obvious. At the same time, the states in whose territory offshore companies conduct their entrepreneurial activities are not interested in a significant outflow of capital.

The organization of an offshore company helps the company to optimize the costs of its activities and increase financial income. This is an objective process for businessmen whose goal is the safety and subsequent investment of earned funds.

In conclusion, we suggest that you familiarize yourself with the video from Finam.FM about offshore schemes - Opportunities and subtleties of doing business abroad.

Dear readers of the magazine Rich Pro, if you have your thoughts, thoughts or personal experience on the topic, please share them in the comments below.

Watch the video: Mod-01 Lec-05 New Generation offshore and Coastal structures (November 2024).