An offshore is a special economic zone where a specific type of business may operate. In this area, companies are completely exempt from taxation. An offshore company is an organization registered in offshore and having its own characteristics for doing business.
What is an “offshore”?
An offshore is the name of an economic zone where foreign organizations can register and work using a special tax regime (preferential). But these companies, nevertheless, must work according to specially created rules of the state under whose jurisdiction they are.
The idea of doing business in offshore areas originated in the 19th century, borrowing judicial precedents from Britain. These cases raised questions on taxation of non-residents of the country. The first step in offshore implementation is Campione, located between Italy and Switzerland. This was due to the fact that both countries did not want to establish tax jurisdiction in the specified city.
Offshore companies
An offshore company is the best option for owners in whose countries taxes eat up most of their profits. Registration in offshore companies also allows you to vary the cost of imported products. There are many options for doing business for offshore organizations: some of them are publicly available, others are known only to a small circle of people.
Opening an offshore company allows its owner to appear on the international stage. The choice of zone will depend on the type of activity. Offshore companies do not have currency restrictions, there is no need to contribute authorized capital.
Opening rules
Registration of offshore companies varies based on territory. Registration rules are established by the leaders (governments) of those countries where the offshore zone is located.
But we can distinguish the basic procedure for registering an offshore company. Almost all governments have established the requirement to open an organization through a registration agent that is licensed to carry out such activities. This can be both an individual and a legal entity. Companies wishing to register in an offshore are required to use certain words in their name (Incorporated, Limited, etc.). And they must receive special permissions to include some words in the name (Bank, Trust, etc.).
The minimum amount of the authorized capital is limited by the requirements for the authorized capital.
The company will be registered if there is at least one member (he may be an individual or legal entity). All names (names) of shareholders are entered in a special register maintained by the state.
Some countries establish requirements for citizenship of the management team of an offshore company: at least one of them must be a citizen of the country in which the organization is registered in the offshore zone.
Opening an offshore company is relatively easy. Standard offshore requirements are as follows:
- indicate information about the beneficiary, shareholders;
- provide financial statements, tax returns;
- keep accounting documentation, but there is no requirement for its provision;
- conduct an audit and provide an opinion on it.
An offshore company is the use of the principles of classification of offshore jurisdictions:
- by level of confidentiality;
- by level of taxation;
- the presence of an agreement on the absence of double taxation;
- If necessary, submit annual reports.
Advantages and disadvantages of offshore activities
The activities of offshore companies carry a large number of advantages:
- the work of an offshore company is a simple way to transfer finances abroad;
- large businessmen, having registered an offshore company, save significant amounts on tax deductions;
- Offshore companies are either exempted from submitting financial statements, or have the opportunity to keep it in a simplified form;
- there are no duties on imported equipment to open an office of an offshore company;
- registration of a company in an offshore zone automatically implies the confidentiality of data on its founders.
Despite all the advantages, there are also disadvantages of working in the offshore. Despite the fact that an offshore company is the conduct of its activities legally established by the country under whose jurisdiction it is located, its verification is carried out with great care. Because of this, an offshore company whose reviews are positive will not work for those who plan to conduct their business in a black way.
Also, even when conducting business in accordance with all the rules and laws, officials can accuse the organization of dishonesty in doing business. Here it is necessary to pay attention to the limitations of the work of offshore companies.
For the Russian Federation, the optimal offshore zone can be called Cyprus. Terms of organization of accounting for such enterprises:
- all organizations opened in this zone undertake to conduct accounting, by which it will be possible to study economic activity;
- Based on this accounting, various types of reporting are being formed.
Documents submitted annually:
- the financial report on the company’s activities, the conclusion of the audit company, tax return are provided to the tax;
- a financial report, an auditor's opinion, and an annual report are submitted to the Registration Chamber.
Limitations
There are several factors that put the work of offshore organizations in a certain framework:
- the main limitation is the impossibility of carrying out activities in the state where such an organization is registered;
- very often, regulatory authorities force owners of organizations to sign agreements under which offshore companies can operate with virtually no restrictions, but at the same time lose all the advantages of creating this company - confidentiality of information regarding owners.
In some jurisdictions, there are restrictions regarding certain licenses and activities under them, for example, for the sale of tobacco and tobacco-containing products, the sale of alcoholic beverages, etc. In some areas, there are restrictions on certain financial transactions, in violation of which the company is imposed heavy fines.
