Offshore
“…anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the Treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister is so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more that the law demands...”
Judge Learned Hand (US Court of Appeal) in Helvering v. Gregory
An offshore company is a very flexible instrument and as such it can be integrated into a wide variety of business arrangements. Reduced tax and increased confidentiality are just two main benefits which can be achieved by proper application of an offshore company. The practical implementation of an offshore strategy will of course depend on the tax laws in force in the country where the beneficial owner resides and/or does business.
The common characteristics of an offshore company are low or no taxes afforded by the jurisdictions with different compliance requirements than their “onshore” counterparts but every country is offshore to the rest of the world and having a "tax free" regime is not always the primary consideration as there may be other fiscal, legal and administrative reasons for going "offshore". Surprisingly the United Kingdom which has some of the lowest tax rates in the European Community and the highest number of double taxation treaties in the world and some States in the USA are among the largest offshore financial centres in the world.
Profits received by an offshore company will generally be taxed at the rate of the jurisdiction (typically zero), in which it is registered, not the rates applicable to shareholders in their countries of residence. Shareholders in high tax countries may therefore establish companies in low or zero rated tax jurisdictions. Profits made by the offshore company will be subject to low or no tax and there are particular benefits where profits are allowed to roll up, so that there are tax advantages not only on the original profits, but also on any investment income generated on those profits.
Motivation for Offshore Services
The principal motivation behind the demand for offshore services for both individuals and corporations are:
- Tax Minimization
- Asset Protection
- Risk Management
- Cost Reduction
- Confidentiality
Corporate Characteristics
Many offshore and tax planning jurisdictions have made efforts to ensure that their company law provides the following features:
- Limited Liability
- Minimization of directors liability
- Minimal or optional statutory filing obligations
- Nominee shareholders allowed
- Disclosure of beneficial ownership either not required or limited to special bodies, such as offshore authorities or central banks
- Broad range or permitted company names and suffixes to denote limited liability
- Low capital requirements
- The ability to hold directors and/or shareholders meetings anywhere in the world
- The absence of or the optional requirement for the audit of accounting records
- Confidentiality as in most common law tax jurisdictions beneficial ownership, director and shareholder details are a matter of public record.
There are many territories to consider and we at GSL will be pleased to assist our clients in making the correct choice.
OFFSHORE COMPANIES
Have you ever felt lack of practical information on how to actually use an offshore corporation or foreign trust? Clients will form an offshore corporation with various purposes in mind but once the corporation is formed, they are not sure how it can be used for their benefit. We have outlined various uses of offshore corporations which we hope will help to apply the principles to yourself or your company so then you will appreciate how we can help you.
Today's offshore industry has developed in to a major global business, spanning all quarters of the world, involving, in one way or another, approximately half of the world's financial transactions by value. However this aspect of financial