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OFFSHORE & ONSHORE INCORPORATIONS
Hilda Loe Associates through its panel of natural persons residing in Singapore and body corporates offers nominee services for Singapore, Hong Kong and offshore companies.
Many of us are familiar with using corporate entities for business or holding personal assets. From a legal perspective an offshore company is very similar to an onshore company with which we are familiar. However, often times they can be formed and managed without many of the bureaucratic requirements or legal obstacles that characterize ordinary onshore companies. With the correct planning, offshore companies may be used for various purposes and can afford many significant and legal tax savings throughout the world which may not be available onshore, all the while reducing the administrative overhead burdens and/or costs.
There are many different ways to effectively utilize an offshore company in order to legally establish an efficient structure for tax purposes, international businesses and investment purposes, or to provide an additional layer of privacy for your business operations. The benefits of offshore companies depend on a variety of factors, including the owner's objectives, owners' country of residence as well as citizenship, and the countries in which the offshore company will do business.
The list below sets out examples for the uses of an offshore company. In practice the modern day use of the corporate entity is endless.
Offshore Trading Companies
An importing or exporting company might establish itself in an offshore jurisdiction. If a business in one country buys goods in a second country for sale to a third country, there is no particular need for the business to be established in the home country. By using an offshore company, it may be possible to legitimately defer taxation, or accumulate profits in a low tax or tax-free area, which are then available for funding further international expansion. This is commonly practiced by many of the largest multinationals but is available to anyone doing business internationally.
Investment and Holding Companies
Investment & Holdings companies set up in offshore jurisdictions may invest in securities such as shares and other certificates of participation, bonds etc. throughout the world without capital gains, dividend or other income being subject to tax. However, domestic tax legislation in the shareholder's country of residence or domicile is important and appropriate advice should be sought.
Real Estate Investment Companies
There are often great advantages in using an offshore property holding company for the purpose of holding an overseas property. Advantages include the avoidance of inheritance tax, avoidance of capital gains tax, ease of sale that can be achieved by transferring shares in the company rather than transferring the property owned by the company and reduction of property purchase costs to the onward purchasers. A further advantage includes the ability of several individuals to each own a portion of the interest in the property, without any problems involved in having them each recorded as an owner of the property.
An offshore finance company can fund the operation of subsidiaries in a myriad of countries. The subsidiaries would obtain the benefit of tax deductions on any interest paid. If the finance company is situated in an offshore area where there is no income or corporation taxes and no requirement that dividends be paid, then the profits can be accumulated in a tax-free climate. These funds can then be used to further finance the requirements of subsidiaries or reinvested, as business convenience suggests.
Confidentiality and Privacy
An individual of high net-worth with properties or other assets in a multitude of countries may wish to hold these assets with a personal holding company. This approach could possibly save legal fees and avoids publicity. It may also be a more efficient and cost effective route as compared to onshore probate procedures in the event of death.
Individuals who receive fees in respect of their professional services in such capacities as designers, consultants, authors or entertainers, may assign or contract with an offshore company for the right to receive those fees. The offshore employment company may not have to pay tax on its income that can be reinvested in a tax-free climate to generate further income from the offshore company. As in other cases the specifics of the professionals’ citizenship and residence, the circumstances of the purchaser of the services and the professional’s particular tax situation will affect the decision.
Patent, Copyright and Royalty Companies
An offshore company can purchase or be assigned with the right to use a copyright, patent, trademark or know-how by its original holders with a power to sub-license. Upon acquisition of the intellectual property right, the offshore company can enter into agreements 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 valuable, so that the capital payment for acquisition of the patent can be set at a lower amount. Often times, royalties paid out of a high tax area attracts withholding taxes at the source. In certain cases an interposing holding company may allow a reduction in the rate of such tax, depending on the available tax treaty relief.
Captive Insurance Companies
There are a number of offshore jurisdictions that encourage the establishment of insurance companies. In a number of offshore areas it is possible to incorporate insurance companies that pay no tax in respect of their premium or investment income. Similarly, captive insurance companies have been created by many multinational companies to insure and re-insure the risks of subsidiaries and affiliated companies. Captive insurance companies are particularly suitable for industries that might be insurable only at prohibitive premiums, or risks that would otherwise be uninsurable.
Offshore Banking Companies
Many offshore banking institutions have been established in tax havens in recent years. Many of these institutions are subsidiaries of major international banks. Such institutions pay interest free of withholding tax and engage in international financing from offshore bases, which are free from exchange controls. Such banking institutions and their associated trust companies are able to provide a wide range of financial services for their international clientele. For smaller businesses and individuals, bank licenses are generally unavailable unless they have an established banking operation in good standing with another jurisdiction.
The above examples are just a few uses and benefits that can be achieved by utilizing an offshore company as part of a well-advised plan. No legal, tax or other professional advice may be rendered.
(Any liability or loss incurred as a consequence, directly or indirectly from the use or application of the information contained herein, is specifically disclaimed.)
Interested? Our firm offers offshore company formation services in six primary offshore business locations: the British Virgin Islands (Caribbean), Samoa (South Pacific), Marshall Islands (Pacific), Seychelles (Indian Ocean), Delaware (USA) and Hong Kong (Asia) as well as other jurisdictions such as Cook Islands, Bahamas, Anguilla, Belize and Panama.