What is the point of offshore companies? What is offshore in simple words? Purposes of registering a company offshore

The term "offshore" (offshore, offshore) - literally translated as far (off) from the shore (shore) or “mainland”, which indicates the withdrawal of capital to the islands. This is not always true, because similar preferential zones are also present on the continents. On the other hand, in American slang the word “shore” itself is often interpreted as “to deprive of something” or “to rip off like a stick.” So a more accurate definition would be "outside the territory where you are being overcharged." There is another meaning of the word “shore” - region or region, which indicates the registration of a company outside the region of operation.

This term was first used in the middle of the last century, although the practice of moving businesses to zones with preferential taxation was used by the ancient Greeks. Today, offshore is a country, region or certain territory that provides foreign companies with reduced tax rates, as well as a simplified registration system and submission of reporting documentation. They are called offshore zones. There are more than fifty of the latter in the world. These include both island territories (Bahamas, Virgin Islands, Aruba, Cayman Islands, Cyprus) and mainland states (Costa Rica, UAE, Andorra, Monaco, Liechtenstein).

Thus, if we talk about what an offshore company is, then it is a company registered in an offshore zone, but operating outside it. The advantage of creating such conditions for the states and regions themselves is the easy attraction of foreign funds to the budget. Most often, by providing the opportunity to register companies, the country receives a fixed remuneration, and sometimes employment of the local population, while the company conducts its main activities in its own country.

For many, the concept of an offshore account is often associated with violation of laws, fraud or concealment of real income. And it should be admitted that this really happens. The main method of government combating such actions is to tighten the requirements for cooperation with such firms for resident companies, as well as the imposition of sanctions on the offshore zones themselves by various international organizations. This means that when choosing a suitable offshore zone for yourself, you need to first check whether it is included in the “black” or “grey” lists.

Schemes of work in an offshore zone and stages of company registration

In practice, to open a company in a preferential zone, you can register from scratch or buy an offshore company already registered in the country you need. To do this, it is not necessary to travel to the offshore zone itself, but simply order the service from an intermediary company. Since there is a cost associated with this, it is important to understand who and when it will really benefit from before choosing this route.

Purposes of registering a company offshore

On the practical side, the purposes for which offshore companies and accounts can be opened are not only tax reduction. In reality, they include quite broad business opportunities:

Carrying out export-import operations. This is the most popular scheme, which allows, when exporting, to reduce the price of a product as much as possible by sending it to an offshore company, with subsequent resale to the actual buyer at the real cost. The difference remains offshore. In turn, when importing, the maximum price reduction is carried out to reduce VAT and customs duties. Sometimes companies operating on the simplified tax system are involved in such a scheme.
Opening bank accounts. The main purpose of such accounts is to accumulate and save capital, as well as to perform various banking operations. Such accounts are not subject to audits by tax authorities (unlike standard accounts in foreign banks), and financial institutions themselves do not disseminate information about customer amounts. Such accounts can be opened not only by companies, but also by individuals.
Tax reduction and effective planning.
Elimination of double taxation. This option is used when doing business in the international market with a wide range of countries.
Liquidation of enterprises. Using an offshore in this case allows you to speed up the process, as well as solve the problem of the company’s existing debts to creditors or the budget. To do this, the founders of the company include a nominal offshore company, after which its main participants leave and the general director is replaced, which completely brings the company into the preferential zone.

Types of offshore companies

By type of activity, the most popular areas for offshore companies are:

Investments. Conducting investment activities through an offshore allows you to reduce taxation, as well as protect your capital from creditors in the event of bankruptcy or default. This is implemented through the creation of funds, trusts, investment portfolios, management companies and holdings.
Insurance. A common way to reduce taxes and increase profitability is to create a captive insurance company (a subsidiary that serves only the parent company). For example, this can be used in cases where the legislation of the state in which the activity is carried out does not allow self-insurance. This method also allows you to provide insurance for cases that are not included in the list of insurance in commercial insurance companies.
Banks. Such institutions can only cooperate with offshore or foreign companies and individuals. Cooperation is impossible with citizens of the country in which such a bank is registered (i.e. the offshore zone itself), as well as companies operating there. The creation of a personal offshore bank for banks and large companies provides an opportunity not only to receive tax benefits, but also to organize their own payment center without the involvement of foreign intermediary banks.
Ship owning companies and shipping lines. Registration of such companies in an offshore zone allows you to almost completely avoid taxes on the provision of cargo transportation services.
international trade. Here, import and export schemes are used through their own offshore companies. In this case, the goods are sent directly from the seller to the buyer, and the offshore intermediary participates in the scheme only on paper.
Property management and ownership. In practice, an offshore company can own residential and commercial real estate, and even production facilities. The territory of such objects remains under the jurisdiction of the country in which they are located, but tax obligations on them will be transferred to the preferential zone of the copyright holder. This means that by selling or renting such properties, you can minimize taxes. Moreover, in fact, information about who owns this property is completely hidden in reality. If we talk about production facilities, then moving them offshore also helps protect the company from raider attacks, since in this case the interception of assets is impossible.
Leasing. Creating an offshore leasing company allows you to purchase equipment, reducing tax deductions on it. Such a nominee company acquires the required property and leases it to the parent company. Regular lease payments paid are included in the cost price, reducing the final amount of income tax for the main company, while the offshore company has reduced rates on payments received.
Licensing. It is much easier to obtain a license offshore, which is actively used by financial organizations (online casinos, forex brokers, non-bank credit companies, tourism operators, providers).
Intellectual Property and Franchising. To reduce taxation when receiving income from the sale of a license or franchise, you can transfer the rights to your own offshore company. In this case, the parent company will no longer have official rights and will also need to obtain a license and pay royalties. Such payments may be subject to income repatriation tax unless treaties have been concluded between the countries (in which the activity is carried out and the offshore zone) to avoid double taxation.

The process of registering a company offshore

If you decide that registering an offshore company is a profitable option for you, you need to know what stages this procedure consists of. First of all, make sure that the zone you choose is suitable for achieving your goals. Next, select the name of the company being created that suits the activity. Please note that it must meet the following requirements:

The name should not coincide or be consonant with existing companies registered in the corresponding offshore. You can check the company name in special web registries.
Lack of associations with government bodies.
If the name contains the words - bank, trust, fund, insurance, it can only be registered if there is a license to conduct such activities.
The name should not contain obscene language, as well as words indicating terrorism, racism, violence, belittlement, insult to personality or religion.

If the name is approved by the registrar, the next thing you need to register an offshore company is to draw up constituent documents. It is prepared in printed form and defines the types of business activities of the company, as well as the basic rules. The articles of association or memorandum of association must be drawn up in the official language of the country in which registration is carried out. Signatures of all directors (founders, shareholders) and certification by a notary are required. When preparing documents through an intermediary, the services of nominee directors or shareholders are often provided, which speeds up the procedure and allows you to hide the name of the true owner.

The next stage is the formation of the authorized capital. Here you need to know whether the minimum amount is established by local legislation and how it affects the tax rate received offshore. Also, registration requires a legal address to which requests from the tax service will be sent.

A ready-made offshore company or registration through intermediaries will save you from these difficulties, but will require financial investments. Depending on the zone, the cost of a full range of services can vary from 2,000 to 20,000 US dollars per year. Similarly, opening an account in an offshore bank will be a paid service starting from $500. On the other hand, it is easier and sometimes cheaper than doing everything yourself. To create a company through an intermediary, you will only need documents confirming your identity and place of registration, as well as a description of the type of activity.

Pros and cons of using an offshore company

Creating a company in an offshore zone seems to be very beneficial for an entrepreneur. After all, this provides a number of advantages:

Quick registration;
Concealing information about the real beneficiary;
Low taxes and minimal reporting;
Possibility of opening a bank account in any country in the world;
Safe accumulation of capital abroad;
Management through a proxy.

On the other hand, this option may not solve your problems and may even create new ones. So, in practice you may encounter the following disadvantages:

Close attention from international and state law control bodies.
Differences in legislation. Before opening a company, you need to thoroughly study which zone is best to open your type of business. It may turn out that the territory with the most attractive benefits has problems licensing your activities.
Risk of losing business. Since you are working through representatives and are not familiar with the law, you may become the target of scammers, especially if you buy a ready-made company.
Problems with obtaining loans. Offshore companies are not trustworthy, and the chance of getting a loan is minimal.
Negative reputation. Registration in an offshore zone is associated with fraudulent activity, since there is a legal concealment of data about the real owners.
High cost of maintenance. This disadvantage is typical for small enterprises and manufacturing companies operating exclusively within one country. In this case, it would only be rational to use offshore accounts to accumulate capital.

Understanding the meaning of the term offshore - what it is in simple words and what possible patterns of its use, you will be able to apply new opportunities in the practice of running your own business, gaining advantages for its development.

An offshore (sometimes written with one “F”), an offshore zone, an offshore center is the territory of another state or autonomous region in which foreign businesses (non-resident companies) are provided with tax benefits and a simplified registration and business regime. The term comes from the English word offshore - “outside the shore”.

Our dictionary

Resident - a legal or natural person permanently registered or residing in a given country, complying with its laws.
Non-resident is a legal or natural person operating in one country, but registered or permanently residing in another. Special tax rules are often established for non-residents.

History of the expression "offshore zone"

It comes from ancient times, when, as Wikipedia tells us, ancient Greek and Phoenician merchants, in order to avoid paying high taxes when trading in Athens, used small islands around it. In the late Middle Ages, it was more profitable for English merchants to sell wool in Flanders than in England, where duties were high. However, the very appearance of the term dates back to the 50s of the twentieth century, when one of the US newspapers so designated an organization that, in order to be able to escape the control of fiscal departments, moved its activities to another country.

Most often, offshore zones are mainly the islands and archipelagos of the West Indies, Pacific and Indian Oceans, which have a high degree of political and social stability. Lacking natural resources and the ability to replenish the state treasury themselves, they attract foreign companies with low taxes, lack of exchange control, the ability to conduct transactions with residents in any foreign currency, anonymity of financial transactions, loyalty in accounting, and undemanding attitude to the personality of entrepreneurs and their affairs. But at the same time, they provide high-quality services in registering a business, its legal support, and receive income from fees for registration and re-registration of companies, tax revenues, and expenses of offshore companies for maintaining their permanent representative offices (secretary offices) in the zone.

List of main offshore zones

Bermuda
Marshall Islands
Monaco
Gibraltar
Jersey Island
Isle Of Man
New Zealand
Singapore
Andorra
Panama
Hong Kong

The cost of opening an offshore company ranges from 320 to 18,000 US dollars, depending on the timing, place of registration and the number of related services

Scheme of capital export through offshore using the example of oil trading

Produced oil is often sold by oil companies to their subsidiaries at a reduced price; subsidiaries sell oil through offshore companies at world prices. As a result, profits remain in offshore zones; the state budget does not receive taxes from these types of activities.

Tax paradise and oasis - these are the words offshore companies may hear about themselves. What are they like in practice? What is the mechanism of their functioning? How can you open an offshore company? Do they exist in the vastness of the Russian Federation? These questions, as well as many others, will be discussed by us in this article.

What is called offshore?

This is the name given to economic zones in which currency and tax legislation is very flexible or practically non-existent at all. In them, taxation can reach the level of a complete absence of direct payments. Most often, small states or their individual territories act as offshore companies, where local and foreign entrepreneurs can register, falling under a preferential tax regime. Almost any country in a certain area can act as a kind of refuge for those who want to pay less. To designate such enterprises, the name “offshore company” is used.

Legislation

Offshore jurisdiction is based on the principle of residence of the company. It is based on a geographical feature. Companies with this status conduct their business activities outside the territory where they are registered. An important advantage that these economic entities receive is the lightness of the tax burden. But this is not the only advantage. Thus, they have currency autonomy, as well as a number of benefits in the customs, registration and administrative control spheres. This is all done to ensure the real owner as well as the scope of the company.

The importance of offshore companies

We have figured out what these subjects are. What role do they play? To help you understand the scale of this phenomenon, let’s give some numbers. There are over 100 offshore centers in total. The largest of them:

Panama. At the moment, more than 340 thousand companies are registered.
Virgin Islands. At the moment, over 200 thousand companies are registered.
Ireland. At the moment, more than 150 thousand companies are registered.

Approximately half of the world's capital turnover occurs through the use of the services of offshore centers. One level exceeds 500 billion dollars! Each cent has its own specialization. Thus, for banks they choose Luxembourg, Switzerland or Hong Kong, while for holding companies they choose the Netherlands or Liechtenstein. Centers are selected based on cost optimization parameters for business activities.

Are offshore companies useful for the Russian Federation?

It should be noted that such zones generate income only for the state in which they are created. Thus, losses due to the withdrawal of untaxed profits amount to hundreds of billions of rubles. Now they speak with confidence about tens of thousands of offshore companies that were founded by immigrants from the Russian Federation. According to some reports, the number of these subjects can be expressed as ten times higher than official statistics.

Is it legal to use this mechanism?

The legislation of the Russian Federation grants foreign legal entities the right to carry out business activities on an equal basis with local companies. Therefore, in the Russian Federation, offshore activities are completely legal. If we rely on data from the state statistics service, this is confirmed by the constant increase in the number and volume of transactions with them. The activities of offshore centers are directly regulated by international law. Of course, they must also comply with national acts, but in the event of a conflict, the former have the advantage. In addition, the use of an offshore mechanism not only allows you to protect the company’s assets and minimize taxes, but also helps with access to international markets.

Why register an offshore company?

Growing economic and political instability, globalization processes and rising taxes are the main reasons for businessmen choosing such places to protect their assets and investments. And given that this is also a legal way to reduce taxes, it also allows you to receive benefits and advantages that are not available in your home countries. Besides this, there are other positive aspects:

Lack of bureaucracy.
Confidentiality.
Management of risks.

Therefore, many entrepreneurs are interested in how to register an offshore company.

Legal basis

A special feature is the limited liability of investors. Legislation that provides for the limitation of an enterprise as a legal entity in the area of responsibility as an individual representative was first introduced back in the 19th century. To this day, the separation of the company from the owners and directors makes it possible to reduce the losses that people suffer when economic activity fails. This principle is also used in minimizing taxes. Therefore, residents of countries with a high level of taxes use offshore companies to get more income, because they will be taxed according to the laws of the registrar country.

Which jurisdiction is best to choose?

There are over 100 financial centers in total. And choosing the appropriate jurisdiction requires a careful approach to this issue. First of all, it is necessary to give preference to countries that have a stable political situation and economic stability. If it is important, it is necessary to ensure that the legislation ensures the confidentiality of the owner. Other factors include requirements for reporting and auditing, the presence of exchange controls, and a developed banking system. It is also very important to have existing agreements on avoiding offshore with the country where business activities are planned. An auxiliary group of factors includes the cost of registering a company, as well as obtaining the necessary professional services.

How is an offshore company registered?

Initially, the title is checked. It is considered a good rule of thumb to ensure that it does not resemble any of the popular brands. In this case, the registrar may simply refuse. There are also prohibitions on the use of certain words: royal, government, and so on. Some others require a license: banking, insurance, finance, etc. There may also be restrictions on the paid-up share capital: in the Isle of Man you will need an amount of one hundred thousand British pounds. You can deposit a larger amount. But there are often annual duties that are removed from the capital, so it is advisable not to expose yourself too much. Management is carried out through shares. They come in two types: registered and bearer. In the first case, the certificate indicates who the owner is. Bearer documents allow for greater confidentiality, but if the document is lost, it will be difficult to prove that you are the owner of the company. That's what offshore companies are. We have already looked at what these subjects are. This was general information. Now let's look at offshore in Russia.

The situation in the Russian Federation

The advantages of working in our offshore companies are that it does not matter where the activity is carried out - taxes are paid at the place of registration. If only everything were so simple, but, alas, it is not so. In reality, we have to face a number of difficulties and problems:

When creating a Russian offshore, do not think that everything will be as simple as with foreign analogues. There is no hope for any significant reduction in the tax burden or confidentiality. In general, if we compare with the classical understanding of offshore, the designation is their strongest relationship.
Problems with local tax authorities. If the company does not operate at the place of registration, then it will be necessary to provide explanations regarding the work scheme to local officials. Moreover, given the dislike for the transfer of funds from the local budget to distant regions of the federation, it is necessary to prepare for their significant resistance to this process.
Due to the fact that the company is considered a Russian legal entity, quarterly reporting is required. All this will need to be done, and at the place of registration!
Despite the positive aspects, such as lower tax rates, quarterly fixed payments will need to be made. Their size varies depending on the economic zone.
You can often hear complaints that opening a normal business to run a full-fledged business is just as difficult as for an ordinary Russian legal entity.

From all this we can conclude that opening a company in a special economic zone within the country does not have the same advantages as abroad. Therefore, you can often hear that an offshore company in the Russian Federation is being liquidated, and in its place an enterprise is being opened abroad.

What financial centers exist?

Finally, we suggest finding out what offshore countries exist. You may someday have to open your own company there. So, the list of offshore companies:

Classic offshores. Panama, Dominica, Seychelles, Belize, Mauritius, Saint Kitts and Nevis.
European jurisdictions. Czech Republic, Slovakia, Holland, Bulgaria, Switzerland, Great Britain, Poland, Estonia, Latvia.
Asian jurisdictions. Hong Kong, Singapore.
Specific jurisdictions. USA, Canada, New Zealand, South Africa.

In general, everything is clear, but let’s talk a little about specific offshore companies. What is a regular financial center? This is a low tax area. In the fourth group they are quite high. But it is possible to reduce taxes through the use of various mechanisms. The end result will be that tax legislation will not differ much from what exists in classic offshore companies, although it will not be possible to reach their level.

Hello, dear readers of the financial magazine “site”! In this material we will look at the concept of “offshore”, namely what it is, what offshore zones are, how to open an offshore account, how and where to register an offshore company and much more.

After all, the main task of business in modern conditions is ensuring the profitability of the organization , 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 preconditions for 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 its origin;
What is: offshore account, onshore, deoffshorization + popular offshore zones;
Why offshore companies are needed + schemes for their use;
How to register/buy an offshore company;

If you want to get 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 they are needed for and how to register an offshore organization

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

"Offshore" is a company conducting commercial activities in a certain territory, in which special, preferential conditions have been created for the financial and economic management of assets of foreign legal entities.

Main attractive factors of such zones are:

Low or no taxes;
Ease of registration;
Easy reporting and management.

Offshore or offshore - how to write correctly?

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 " offshore" comes from English " offshore", which means "out of bounds". The first mention of offshore companies dates back to the late 50s of the 20th century in the USA, when one of the American companies moved its business activities to an area with more attractive tax legislation.

Since ancient times, merchants have avoided trading in large cities, where tariffs 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 part of France), and thereby avoid increased taxes. In the USA, the first offshore schemes began to be used in the 18th century, when, trying to avoid taxation, organizations used Latin American countries.

Onshore — an organization that conducts business activities 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 reasons for the global economic crisis that occurred in 2008 is a significant increase in turnover of offshore companies.

1.1. What is an offshore account

Offshore account - this is a bank account opened in a country other than the country of actual registration of the organization or the main place of residence of the individual.

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

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

The main reasons for opening a deposit may be:

Significant deterioration of the legislative framework for taxation in the country and 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 safety of assets.

1.2. What is an offshore company

Offshore company – a legal entity registered in a country where there is little or no economic activity.

The operating system of such a company is very simple. By importing products into the country where the business is carried out, the entrepreneur conducts a monetary transaction using an offshore company. Moreover, the price can be significantly lower than that of competitors, since the country has preferential taxation.

The funds accumulated during the transaction are credited to an offshore account.

We discussed in detail the main schemes for using offshore companies 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 offshore, an organization should evaluate expediency, economic effect, and advantages And flaws this decision.

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

2.1. (+) Advantages of working with offshore companies

So, let’s list the main advantages of offshore companies:

Optimal taxation for the enterprise. Low taxes allow the company to earn more net profit.
Expanding the geography of business. Working in the foreign market contributes to the diversification of the company's activities.
Simplified registration of a legal entity. No bureaucratic delays, little time for registration.
Ease of Management. To organize the company's activities, the owner does not have to manage it independently. Responsibilities can be assigned to an authorized person.
Minimizing 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.
Banking secrecy. Protection of information about commercial activities is one of the basic elements of the attractiveness of offshore companies.
Liberal possibilities for choosing an organizational form of activity.
Possibility of capital accumulation.

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

Storing funds offshore is safe, legal and quite profitable (especially if you don’t know).

2.2. (−) Disadvantages of offshore companies

However, there are also significant disadvantages of offshore zones.

Let's look at the most significant of them:

Mixed reputation. A large number of offshore companies finance terrorist organizations, drug trafficking, etc.
Possible image losses. A significant part of large organizations prefer not to risk their reputation and do not cooperate with offshore companies.
Changes in the laws of countries. Many states are trying to limit the outflow of capital and are taking measures at the legislative level to regulate the interaction between domestic enterprises and offshore companies.
Difficulties in obtaining large loans. Companies that have accounts abroad often have difficulty raising debt financing.
Significant interest in offshore companies from international regulatory authorities. Supranational legal organizations are paying increased attention to the activities of offshore companies.

Most of the shortcomings can be leveled out if you use the services solid, successful companies involved in the design 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 is a separate territory in which the necessary conditions have been created for entrepreneurial activity and management of monetary assets abroad.

Members of the Council of Representatives of the Organization for Economic Cooperation and Development offshore zones were classified into 3 main categories.

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

Category 1. Countries, islands

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

Distinctive features are : underdeveloped economy and political stability.

Providing financial and economic reporting in these countries not necessary.

There is no payment of income tax, but a mandatory annual fee is paid, which does not depend on sales proceeds and capital turnover indicators.

This group includes:

Seychelles;
Bahamas;
British Isles;
and others.

Category 2. Countries with a binary form of entrepreneurship

In such zones there is an opportunity for activities such as offshore, so onshore company.

If the organization is not a resident, then tax and duty benefits are partially or completely removed from it, and reporting is also required.

These countries have significant regulatory control, which does not prevent these offshore zones from having a good reputation among businessmen and investors.

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.

Present significant control over reporting and taxation, registers of businessmen and investors are maintained.

In case of proper asset management, countries in this category are considered reliable.

These states include:

Canada;
Great Britain
and etc.

List of the most popular offshore zones

4. Main offshore zones in the world + comparison table 🗺

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

According to regional principle, groups can be distinguished:

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

In Luxembourg and Switzerland There is also a mandatory tax rate if certain conditions are met. In Asian countries, registration is required and “offshore tax” is paid.

Comparative table of characteristics of offshore zones 📊

Let us consider the distinctive characteristics of offshore zones in more detail using the table:

No.	State	Location countries	Income tax, %	Registration, USD USA	Features
1	Switzerland	Western Europe	12	18 900
2	British Virgin Islands (BVI)	Northeast Caribbean	—	1 900	Audit and reports are optional, confidentiality guaranteed
3	Canada	North America	4,5	2 600	No reporting required
4	UAE	Southwest Asia	—	18 900	Reporting is not required
5	Malta	Island in the Mediterranean Sea	5	5 000	Mandatory audit
6	Cyprus	Island in the Mediterranean Sea	12,5	2 500	Mandatory audit
7	Luxembourg	Western Europe	29	23 200	Mandatory reporting, confidentiality guarantee
8	Scotland	Northern part of the island of Great Britain	20	2 200	Mandatory checks
9	Cayman islands	Caribbean Sea	—	7 500	Reporting is not required, confidentiality is guaranteed
10	Hong Kong	Kowloon Peninsula, Asia	16	2 500	Financial report required

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

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 meet the concept of “ free economic zone" After the country joined the European Union, the leadership had to amend laws and limit preferential taxation in the interaction of Cypriot and European enterprises.

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

Benefits from registering and operating an offshore company:

Income tax - 12,5 % ;
Registration fee US$2,500;
VAT rate - 0% and 15%(when selling goods and services to EU countries, including Cyprus);
Easy to register and maintain a bank account;
There is no limit on the minimum number of shareholders;
List of agreements to eliminate double taxation;
The company's assets can be used as a source of lending;
Cyprus is a member of the EU, which means there are no restrictions when interacting with European partners;
The authorized capital of the company must be minimum 1,000 euros;
No taxation on income received outside the offshore zone;
No customs duties are charged on equipment purchased for your 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 islands, of which population lives only on 16.

Politically, the BVI is a British overseas territory, which is granted self-government.

Advantages of operating an offshore company in this territory:

Minor registration fee;
Preferential taxation (fee and license are paid only once a year, if necessary);
Minimum registration deadlines;
Good reputation;
Significant level of confidentiality;
Stable political and economic situation;
There is no obligation to use a resident secretary;
Upon receipt of a license, it is possible to engage in insurance and banking activities;
Modern infrastructure.

3. Hong Kong

The territory of Hong Kong is located on the Kowloon Peninsula, as well as consists of more than 260 islands.

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

The main feature of activities in the Hong Kong offshore zone is no division into residents and non-residents, and the amount of taxes depends on the source of income and economic activity. When operating offshore, taxes are not levied on income.

Advantages of operating an offshore company:

Reliable jurisdiction;
High degree of confidentiality;
Lack of exchange controls;
Access to the Chinese market;
No tax on dividends from abroad;
Possibility of using the services of nominee directors and shareholders;
High level of professional personnel;
The rule of law.

4. Switzerland

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

The main advantages of an offshore zone in Switzerland are:

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

From all the variety of these zones, you should carefully select a “safe haven” for your money.

List of the most popular offshore schemes

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

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

It is advisable to transfer the assets of an enterprise to an offshore zone if there are large accounts payable and the entrepreneur desires to live in the country of which he is a resident.

We have already written step-by-step instructions on the territory of our country in our previous issues.

15 schemes for using offshore companies

The main trends in global economic policy are movement towards transparency of financial flows and tightening controls over foreign exchange transactions.

Despite this Offshores remain attractive to business owners and allow you to simply withdraw money to countries with low taxes.

So, let's look at the most popular offshore business organization schemes.

Scheme No. 1. Export-import activities of an offshore company

By registering an offshore company, the organization continues its economic activities 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 most popular among residents of offshore zones.

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

Scheme No. 2. Use of offshore companies by real estate market participants

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

Scheme No. 3. The use of offshore companies by financial market participants

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

Scheme No. 4. Ensuring the activities of holding companies

Managing a holding involves managing various assets: financial, production, labor and other assets.

Confidentiality, together with tax relief, allows you to optimize the company’s expense item.

Scheme No. 5. Opening an offshore account for businessmen who decide to “go on vacation”

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

Scheme No. 6. Investments using offshore instruments

This scheme allows you to invest funds in various assets of your own company without significant tax charges.

Scheme No. 7. Opening an offshore company by a large shipowner

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

Scheme No. 8. Use of offshore companies by securities market participants

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

Scheme No. 9. Offshore company as 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 No. 10. Offshore organization registered and managed via the World Wide Web

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

Scheme No. 11. Resource management

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

Scheme No. 12. Rent on favorable terms

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

Important! The organization must first obtain accreditation on the territory of the Russian Federation to conduct commercial activities.

Scheme No. 13. Reputation and image

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

Scheme No. 14. Employment abroad

In this scheme, it is possible to reduce the company’s costs for maintaining company employees (social packages, fees, travel allowances, etc.).

Scheme No. 15. Provision of insurance services

Registering a company in a popular (reliable) offshore zone significantly reduces insurance risks and allows you to obtain tools for increasing (increasing) 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 opportunities or individual.

Before registering an offshore company and applying one of the above-described 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. Provided that the client does not want to register an offshore company on his own, there are many companies on the market that provide appropriate intermediary services.

Features and nuances when working with offshore companies

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

Despite the significant benefits for business, 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 purpose of their activities to attract capital.

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

"Blacklists" of offshore zones. The legislative power of states creates and constantly expands lists of controlled areas of capital outflow.
Limitation of tax breaks in free economic zones. Offshore countries are under pressure from other subjects of international law, which leads to restrictions on benefits and other concessions.
Managing the activities of an offshore company. A foreign company can be managed by either the owner or an authorized nominee director. In the second case, it is worth assessing the reputation and professional qualities of the person.

Organizations regulating the activities of offshore zones

A large number of offshore companies have been spotted in financing of various illegal activities, which is due to simplified registration conditions, as well as the lack of proper control in free economic zones. This led to the fact that these organizations pose a significant threat to the global community.

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

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

Also, the international organizations FATF and OECD are taking measures to limit the number of transactions, identify the real owners of enterprises, and control the pricing of goods 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 its own decision about the purchase or registration followed by independent management of an offshore company.

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

How to open an offshore company yourself

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

Stage 1. Decide on the country of registration

Operates in the world more 60 offshore zones, and the optimal choice depends on the planned operation scheme; the conditions imposed upon registration, the nominal amount of taxes and fees, as well as the cost of maintenance should be taken into account.

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

Stage 2. Choosing a name

The registration authority may not issue all the necessary documents if the name coincides or is significantly similar to an already registered legal entity.

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

Stage 3. List of documents

The next step when opening a foreign (offshore) company is collecting all the appropriate documents necessary to register an offshore company in the selected country.

Stage 4. Payment

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

Stage 5. Incorporation

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

Stage 6. Constituent documents (memorandum)

To carry out proper registration of an offshore company, it is necessary to prepare charter And memorandum of association.

The charter includes a list of basic rules that the company must follow and also contains all aspects of business activities.

The constituent agreement specifies the internal rules for organizing the company’s activities, as well as the individual characteristics of the functioning of the board of directors, issues of issuing shares and a number of other aspects of management.

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

Stage 7. Start of the company's activities

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

Step 8. Opening a bank account

The final stage is opening a bank account for the offshore company. This procedure can be completed by the business owner himself 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 a bank account, you need the following list of documents:

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

To register a company offshore and receive tax preferences, you will need to go through all the steps listed above and fulfill the conditions of the offshore zone.

8. Answers to frequently asked questions about offshore companies (FAQ)

When starting a business in an offshore zone, aspiring entrepreneurs and company directors often encounter a number of difficulties. Below are answers to the most pressing questions.

Question No. 1. How to open (register) an offshore company?

The majority 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 enters into a legally valid agreement, observing the laws of the country. This intermediary service is paid.

Upon self-registration, the interested party receives information from the jurisdiction about the entire list of required documents and the terms of the offer.

Question 2. Where and how to buy a “ready offshore”?

When purchasing a “ready-made offshore”, you must use the services of reliable intermediaries. The further effectiveness of the offshore company’s activities depends on the quality of their work and professionalism.

When choosing an intermediary, you should use some recommendations:

Experience in the market and reputation. Reputable, experienced companies, as a rule, perform their work professionally and maintain their reputation.
The intermediary has options for offers in various offshore zones.
Receiving detailed advice. When choosing an offshore zone, it is very important to obtain complete and accessible advice on the economic and political aspects of activities in the country and its legislative features.
Trust and confidentiality. The intermediary must have a special approach to each customer, keeping information about the company’s financial activities secret.
Additional guarantees about the reliability of the intermediary when opening a bank account. As a rule, qualified intermediaries provide simultaneously services for registering a company offshore and opening a bank account.
Control over changes to the “black list” of offshore companies. To provide quality services, the intermediary company must be aware of periodic changes to the “black list” of offshore zones.
Intermediary guarantees. The client must obtain guarantees from the intermediary that the proposed offshore company has not been used previously and has an impeccable history.
Optimal market price for intermediary services. The cost of services among the leaders of the intermediary market differs slightly and is determined by market conditions.

Evaluating intermediaries according to these criteria will allow you to choose the best option for cooperation and thereby buy a suitable “ready offshore”.

Question No. 3. What does deoffshorization mean - what is it in simple words?

Deoffshorization – this is a list of measures at the legislative, information and law enforcement level to reduce or eliminate the influence of state residents conducting business activities in the country in the status of foreign companies.

Currently significant share of average And big business applies in economic activities foreign assets.

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

Question No. 4. Is it necessary to visit a free economic zone to register an offshore company?

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

Using the services of authorized organizations that register offshore companies, the owner Not must be 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 prepare and register all the required documents.

Question No. 5. What is Offshore money?

Question: I came across the company Offshore Money LLC online, 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 companies; the deceived users were not even able to find and verify the registration of this company. This is another deception scheme, i.e. “scam”, where you are offered to transfer funds to your account, but before that you need to pay a commission.

9. Conclusion + video on the topic 🎥

Offshores are a complex issue in the theoretical and practical field of entrepreneurship. This topic causes heated discussions 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 receive are obvious. At the same time, the states in whose territory offshore companies conduct their business activities are not interested in a significant outflow of capital.

Organizing an offshore company helps a company 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 you watch the video from Finam.FM about offshore schemes— opportunities and subtleties of doing business abroad.

In legal terminology, the definition of offshore began to be used in the 50s of the 20th century in the United States from the publication of an article about a well-known company at that time, which moved its head office to another country and thereby avoided increased attention from the US government.

In this article we will talk about what it is and the principles of working with it.

Basic terms and definitions

Literally, the term offshore is translated from English as “offshore”, that is, outside a given country, therefore it is of an economic and geographical nature.

An offshore zone is a state or part of it - a region, a state, on the territory of which there are special conditions for registering and doing business by non-residents, that is, citizens of other countries.

The emergence of these zones is due to different approaches to the tax policies of states and the lack of unified international laws. An offshore zone for conducting business activities of a non-resident can essentially be any state whose tax policy compares favorably with the policy of the home country.

As an economic phenomenon, such schemes dates back to ancient Rome, when merchants, in an attempt to reduce their tax costs, bypassed or bypassed areas with high duties, trading on neighboring islands.

Today, an offshore company is considered to be one that does not conduct its business activities in the country of actual registration, and its owner is a non-resident, that is, a citizen of another state. For example, an American who has registered his company in Cyprus, but conducts his main activities in the USA, becomes the owner of an offshore company.

Offshore business includes companies that are engaged in a variety of activities - trading, financial, construction, manufacturing. We can highlight the main characteristics that classify an enterprise into this category:

non-resident of the owner in relation to the country of registration;
commercial activity is conducted outside the country of registration;
simplified registration procedure;
confidentiality and anonymity in relation to the owner of the company;
absence or significant simplification of currency and financial control of activities, accounting and auditing;
low taxation or replacing it with a single fixed fee.

Offshore zones

Offshore zones or, as they are more correctly called, jurisdictions, are a state or territory in which tax benefits apply to non-residents and simplified registration of a legal entity. They are conventionally divided into three categories:

island territories - usually small islands in the Caribbean Sea, Indian and Pacific oceans;
European states;
administrative-territorial entities in the USA, Malaysia and some other countries. Some experts include Russian territories here - Kalmykia and Altai Territory.

The emergence of offshore zones was historically and geographically determined. In the 1970s, Britain's island colonies gained independence and became independent states. But at the same time they were faced with the problem of insufficient budget funding.

Since all these states are islands and often have a small territory, their economy and industry are poorly developed, and the extraction of natural resources is very limited. As a colony, they received subsidized aid. Having lost it, governments had to think about alternative sources of filling the state treasury, and registering companies offshore became an acceptable solution.

Many European countries also have similar budget financing problems and, in order to attract foreign capital, are simplifying the tax system and registering enterprises.

These include Switzerland, Austria, Liechtenstein. Companies registered in these states have a positive reputation and a high level of customer trust. However, these countries have more stringent tax systems, mandatory accounting and auditing compared to island countries.

Island zones include Seychelles, Bahamas, Virgin Islands, Bermuda, Cayman Islands, Cyprus, Panama, Trinidad and Tobago, Dominican Republic and others. The peculiarity of the island zones is the complete absence of income and dividend taxes, a cheap and simple registration procedure, complete confidentiality of the owners, but at the same time the dubious reputation of the company.

Registration of a company offshore

As noted above, opening companies in free economic zones is very simple; you don’t even need to be in the country. Nowadays, these issues are dealt with by specialized firms that analyze such zones, draw up comparative characteristics to simplify the choice of country, deal with legal and financial issues - as a result, the client receives a ready-made enterprise in just a week. In such companies you can purchase an already existing offshore company with a history and “experience” of work.

Thrifty owners can also easily register a company on their own, for this you need:

First, analyze the countries and determine the most favorable tax conditions for your type of activity.
Secondly, organize a secretarial bureau that will perform a representative role and rent premises for it, thereby obtaining the legal address of the enterprise. If the owner wants to remain completely in the shadows, he can attract local residents as shareholders of the company, who willingly agree for a small fee.
Thirdly, it is necessary to pay the state registration fee, the amount of which in island zones varies from 50 to 800 US dollars, and in European countries can reach several thousand.

A ready-made company can be purchased for $300, but the price maximum can exceed $10,000. Registration fees must be paid annually, and some countries use a single flat tax system. Therefore, there is no economic benefit for a mid-level entrepreneur to maintain an offshore company.

There are also certain restrictions on activities, including a ban on conducting business activities within the country of registration. This provides some financial stability to the state and eliminates the risk of economic takeover by international companies.

Advantages and disadvantages of working offshore

Offshore companies are created to achieve certain goals:

minimizing the amount of taxes and fees;
concealment of a financial transaction;
concealment of company owners;
removal of “criminal” capital from the country;
concealment of the owner's real income;
lack of currency and financial controls.

The scheme for minimizing the amount of taxes paid is simple - assume that in country X the income tax rate is 20%. An enterprise in country X, carrying out trading activities, receives 1 million US dollars of net profit, of which it pays 200 thousand dollars to the state treasury.

The same enterprise can sell goods to an offshore company at a lower price, receiving a profit of 200 thousand dollars, and the offshore company, having resold the same products, receives the remaining profit - 800 thousand dollars. Income tax in country X is paid in the amount of 40 thousand dollars, in offshore zones it is zero. The result is that the company saves 160 thousand dollars, which it can receive in the form of a loan from a foreign company.

The same schemes are used to evade value added tax, personal income tax, various duties and excise taxes.

The insurance scheme can be considered using a real example of the well-known transnational corporation Phillips. An insurance company, Kingstone Captive Insurance, was registered in Bermuda, whose main activity was insuring Phillips operations.

The manufacturer of well-known equipment transferred to this company most of its profits as an insurance payment, thereby reducing its taxes, and Kingstone Captive Insurance annually credited Phillips for the same amount. It is reliably known that Phillips saved more than $18 million under this scheme.

The big advantage of offshore companies is secrecy of transactions and confidentiality of information about owners. In many countries, government officials are prohibited from engaging in business activities in order to avoid lobbying for dubious and unprofitable legislative projects for the country.

By registering a company in the Seychelles, a deputy or official receives guarantees of complete anonymity and can safely promote their commercial activities, while evading taxes and declaring their income as an individual.

According to approximate estimates of experts, more than $12 trillion is stored in offshore bank accounts, which is approximately one third of the total wealth of all millionaires in the world.

Lack of exchange controls allows for profitable transactions on the securities market and currency exchanges; approximately 80% of such transactions are carried out in offshore zones. Lack of accounting and mandatory audits leads to complete misinformation about the nature of the company’s activities and prepares fertile ground for criminal operations and transactions. The disadvantages of doing business in offshore zones for companies boil down to restrictions on such activities by the state.

Impact on onshores

The activities of offshore companies have a negative impact on onshore states. Onshore is a company that is registered in the territory where the main part of its activities is concentrated. Here open accounting is maintained according to the full tax scheme. This is the direct opposite of offshore. Such states suffer mainly from under-receipt of taxes and, accordingly, under-formation of the budget.

Many experts are inclined to argue that the global economic crisis arose precisely because of the spread of the activities of offshore companies. Approximately 90% of Russian large businesses have been transferred to free economic zones.

With increasing financial instability in the United States and the national budget deficit, the government took anti-crisis measures that led to increased taxes. Large companies, responding to these measures, moved their business to offshore zones, mainly to the British Virgin Islands, where more than 800 thousand enterprises are registered.

Legality of working offshore

From the point of view of the company’s activities within the offshore zone, one can say about the legality of its economic and financial transactions. But from the point of view of the state from which this business left, the complete opposite is observed.

As described above, the state is losing huge amounts of unpaid taxes, in addition, there is a significant outflow of capital and real investment to other countries, which does not support or develop the national economy.

Many offshore companies carry out illegal activities to finance terrorism, due to the fact that in free jurisdictions there is no financial control over transactions and there is no mechanism for open contractual relations; all activities are completely secret.

From this point of view, offshore companies pose a great threat to the entire society, therefore special organizations have been created that are developing measures to prevent the development of such businesses:

One of these global organizations is FATF. Its recommendations on preventing the financing of terrorism and laundering of illegal proceeds have been accepted by the governments of most countries.
OECD– Organization for Economic Development and Cooperation – also maintains lists of countries and territories with simplified tax systems and opaque financial and economic laws.

States that support the recommendations of these organizations more closely monitor firms that cooperate in their economic activities with companies from generally recognized offshore zones, limit the amounts of their transactions, carry out full identification of enterprises and their owners, and exercise control over the pricing of products to avoid unreasonable understatement prices

A story about how to choose an offshore company

The video shows the process of choosing an economic zone for doing business: