Offshoring: what is it?

Table of contents:

• Typical offshore schemes
• Typical functions of "offshore zones"
• Classification of offshore jurisdictions

Typical offshore schemes

The offshore company is the founder/shareholder of another entity. Under the terms of dividend payments, the second legal entity can be located and do business in any country in the world.
Import/export trade. Although there is a surcharge on the goods sold, the organization does not pay taxes, as the main business is located outside the "registering state".
Investment area. Raised funds may be invested without restriction in any line of business (own or third party).

This can also include ship owners and owners of aircraft fleets. Offshoring makes it easier for such companies to enter the international market and obtain cheap loans for the purchase of new vessels and aircraft. When working in the service sector, there are horizons for a company to reduce taxes, even offshore, such as in Cyprus. Taxes on work done can be significantly reduced by taking into account the costs of a particular firm.

Speaking about company formation agents UK market is an advanced one, with plenty of players and high competition level.

Typical functions of "offshore zones"

• Investment. Investment channels into risky markets are established.
• International trade. Minimal taxation creates fertile ground for attracting large flows of money and cheap credit.
• Air/watercraft registration. Panama, Seychelles, Bermuda, Bahamas are particularly popular.
• Banking. Many "offshore areas" such as the Cayman Islands or the Bahamas provide banking licensing services.
• Insurance. In this area of activity the leader is Bermuda. Significant reduction of tax burden makes the transfer of insurance firms in "offshore" very popular.

Organizations are registered in the zone with more favourable conditions for running particular business, but one must bear in mind that partners are wary of this way of doing business. In some cases offshore can be detrimental to the joint business if, for example, a particular registrar is blacklisted.

Classification of offshore jurisdictions

Offshore jurisdictions are diverse. Options are available for almost any type of business. Sometimes the anonymity of a business is associated with the likelihood of illegal activities, which scares off potential partners. But a sound approach to selecting an "offshore company" avoids most of the pitfalls.

All "offshore zones" are commonly divided into the following categories:

• Classic. Provide complete tax exemption on income that is earned outside the 'registrar state'. Classic examples are Seychelles, Belize, Panama. Typically, when carrying out activities on the territory of your country in the "offshore" no reports are required.
• With reduced taxation. Popular for business registration of those countries where taxation is significantly higher than the rate of 10%. Such 'offshore' countries require bookkeeping, so the reputation of firms set up there is higher.

There is another category of states that are not formally "offshore", but providing tax benefits to legal entities. A typical example of such an area is Cyprus, UK. Due to the high reporting requirements of organisations registered there, the level of trust is high.