Globalization has made conduct of business in complete privacy almost impossible; businessmen are facing innumerable problems of excessive taxation, undue governmental control and growing rate of law suits, all these factors lead the business at brink of failure. Due to increasing business vulnerability businessmen are resorting to offshore business which is considered to be one of the best methods of tax reduction. The term “Offshore Business” is about benefiting from the asset protection services offered by various countries (known as ‘Jurisdiction’ or ‘Haven’) the legislation of these countries allows for certain important protection advantages i.e. strong asset protection feature, tax relaxation and business confidentiality. An offshore nation allows the registration of the business entity or trust also offer this entity or trust certain considerable tax reduction in lieu of an annual license fee.

An Offshore Company may be defined as, a company which is registered in any foreign country; it does not conduct most of its business in the country where it is officially based, mainly for the reason of tax reduction and freedom from government control.

Origin of Offshore Business
Tax havens and the offshore company are not new phenomena, and their use expanded in the last 20 years to encompass a range of new offshore company jurisdictions. Consequently, approximately two thirds of total global financial assets are housed offshore in ‘tax haven’ countries, often through an offshore company. The success of the offshore corporation means almost all leading companies bank, borrow and invest offshore. The following information provides an overview of the history and future evolution of the offshore company, as well as key aspects of offshore tax planning.

The concept of an offshore tax haven was originally the brainchild of the US and UK, who were trying to reduce foreign aid to certain developing nations. The idea was that, as an alternative to providing foreign aid, multinationals would be encouraged to invest in these offshore jurisdictions by setting up an offshore corporation. Offshore jurisdictions generally have simple offshore company laws. The offshore industry is worth approximately US$5 trillion. Most experts agree that an offshore corporation is a long-term solution, provided it is structured as part of a comprehensive offshore tax planning strategy. Major international organisations actively derive profits from an offshore company, including aircraft maker Boeing, oil giant Exxon Mobil, American Express and Chase Manhattan Bank.

The term “Offshore Company” is ambiguous. It may refer to either:

A company which isincorporated outside the jurisdiction of its primary operations regardless of whether that jurisdiction is an offshore financial centre (sometimes known as a non-resident company) i.e. a Canadian company may be ‘offshore’ for the purposes of a USA citizen ; or,

Any company (resident or otherwise) incorporated in an offshore financial centre.

Types of Offshore Companies
Examples of offshore companies include the International Business Company (IBC). More recently new legislation has been enacted in a number of Jurisdictions, such as the British Virgin Islands, to replace the IBC type of company with the Business Company (BC).

The following types of company are common in both onshore and offshore jurisdictions:

Company having a share capital- These companies issue shares. Once the initial cost of a share (capital and premium) has been paid, the shareholders have no further obligation to the company. The shares may, subject to the rules of the company, be sold or transferred, and the shareholders have the right to enjoy the profits of the company or any proceeds of liquidation. The liability of the shareholder is therefore limited to the amount invested. Shares are assets.

Company limited by guarantee – The members of the company agree to pay up to a maximum limit in the event that the company becomes insolvent. They may acquire certain rights against the company, such as the rights to a dividend and the specific rights will be set out in the rules of the company. Membership may terminate on death, and guarantee companies have been used for not for profit organizations. There are also sophisticated estates planning schemes which make use of guarantee companies. Membership is a liability.

Hybrid – a combination of the above two classes – i.e. a company have bother liability class shares and asset class shares.

Protected cell companies – some jurisdictions permit cellular companies, where particular assets and liabilities are segregated into “cells”, in such a way that the assets of one cell cannot be used to satisfy the liabilities of another. Cell companies are particularly used for umbrella mutual funds or unit linked insurance bonds. In this instance the separate cells are effectively distinct legal entities.

It is important to note though that the above is a gross oversimplification of the near infinite variety of types of company most sophisticated jurisdictions permit. Shares themselves come in many different types with the rights in respect of dividend, preference, voting etc being determined by the constitution of the company to which they relate. Also, it is by no means uncommon for companies to utilise many different classes in particular when they are soliciting for investment from third-parties.

However, many offshore jurisdictions offer increasingly specialised forms of companies (as well as specialised trusts and partnership) seeking to increase their share of the market. Examples include limited duration companies, unlimited liability companies, companies limited by guarantee and with a share capital, restricted purpose companies and hybrid entities such as limited liability partnerships, which are more akin to companies to actual partnerships, and foundations, which are nominally trusts but are more akin to companies than trusts.

Offshore companies are meant to provide the corporate business infrastructures to aid in opening any company in the specified jurisdiction. With increasing demand for such companies’ world over, the registration has been simplified in many offshore countries for the purpose of efficiency and time saving. The important factors to consider even before starting the process of offshore company registration are as follows:

Identify the jurisdiction
From which you want the company registered. In doing this, you need to:

Know the level of security that the jurisdiction identified is able to give to the company;

Know the taxation rate per every income received, the level of capitalization should be of concern (the reason being that some jurisdiction imposes rules that only need little amount of capital to start) get to know the financial benefits that is offered by the jurisdiction countries to offshore companies; and

Know the cost of operating an offshore company in any offshore jurisdiction.

II. Ability to pay Annual Registration Fee
The company must be able to meet the nominal levy requirement that the jurisdiction charge on offshore company’s trade.

III. Explanation of Objects of company
The legitimate reasons for opening the offshore company in question must always be provided in details. This is because some individuals or group of persons tend to open the offshore companies with ill-motives. Some do it to finance terror gangs and other criminal activities, to evade tax, creditors’ evasion and fraud.

Procedure for Registration
With all these given important considerations, the process of offshore company registration may therefore continue.

Obtaining the required license
To begin the procedure, try and get the required license for the company you need to register. The methods of dealing with such offshore bank account are the most difficult process. This requires careful and selective decisions that will enable you get the best services.

For an offshore to be registered, the following legal documentation and charges must be provided:

a. The government filing fees
That is payable at the beginning of the first year. This is a renewal fee that must be paid at the end of the specified period. The fee varies with the jurisdiction of choice. An example of offshore jurisdiction where this fee is paid annually is Seychelles.

b. The Incorporation Certificate
Must be produced. This must adhere to the set rules and regulations of membership.

c. In Seychelles the letter of appointment of first directors is produced
This letter shows the names of directors and managers that will be involved in running the offshore company.

d. A special declaration of trust
Must be passed by all the stakeholders, who have been nominated to operate the company.

e. The Memorandum and Article of Union must be provided to show the agreement and role played by every member.
This documentation acts as a proof of legality of the offshore company to be opened. In both Belize, BVI, Seychelles and many other offshore jurisdictions, the procedures for registering an offshore company is the same. However, in some jurisdictions such as US, the procedures are a little bit different.

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