How to Incorporate Offshore? A 3 Step Process to Set Up an Offshore Company
Questions to Ask When Creating an Offshore Corporation
Far from the media’s perception that the offshore industry is in decline. Establishing oneself offshore has never been more popular, as many people are seeking alternative resources and ways to save money, protect their privacy and assets in times of uncertainty.
The offshore company formation process is simple, straightforward and can be completed in a matter of days with just a few basic personal details.
This article is to take you through the offshore company selection, registration, and formation process in order to break the commonly held idea that a company formation process is complicated and burdensome.
Below we’ve outlined a few questions that are important to ask, whenever you are thinking of going offshore.
Step 1) Offshore Company Selection
The first task it too chose what jurisdiction and offshore vehicle structure is right for you. While not all jurisdictions and offshore structures are created equally, there are many similarities and overlaps, without as much difference and variances as one would expect.
However, it is important to ask yourself:
What Is The Main Function Of The Entity?
There are many functions including Asset Protection, Charity, Estate Planning, Charity, Business, Investment, Holding Company, etc.
Depending on your needs there are different offshore structures, whether that is a Trust, Foundation or IBC, or LLC.
Due to the continually changing nature of the offshore industry, especially when it comes to offshore tax laws, it is important to have up-to-date information, as local tax laws are increasingly changing due to global corporate pressures.
Where In The World Would You Like To Incorporate?
While there are formation vehicles all over the world, it is important to consider:
Do you want to visit the destination and have easy access to it? Do you want to live in close geographical proximity? While these are more practical questions. They are equally important to consider as many individuals like to keep things close to home.
Tax and Transparency Laws
The next set of questions is likely going to take some research as tax laws are different for each country. To make sure you are tax compliant it’s important to speak to a qualified accountant or lawyer to make sure you are not missing anything.
Firstly, certain countries have reciprocal tax agreements such as DTTs that are can help reduce the amount of taxes an individual must pay. While DTTs can help you save on taxes, CRS and TIEA do not.
Tax transparency agreements like the TIEA and CRS are a form of reciprocal tax information sharing that are signed between member countries. While there are still many offshore jurisdictions that are members of neither, the number is quickly dwindling as more and more countries are being co-opted by the OCED to sign onto greater transparency measures.
The Common Reporting Standard (CRS) has been signed by over a hundred countries effectively sharing tax information of non-residents amongst member countries.
Controlled Foreign Corporation or CFC laws govern how corporations are treated as a tax entity. Every country has its own specific CFC laws which may or may not affect your company structuring. Some countries have very strict CFC laws that essentially treat foreign corporations as local entities for tax purposes.
Depending on where you live, your preferences and whether banking privacy or discreet ownership is of importance there will be any number of paired options that will be suitable.
All of the above considerations are important as they will influence the company structure, location and corporate vehicle that would be used. Though to a large extent, wherever your primary residence will largely determine your tax structuring, and whether or not certain privacy services can be used as a means to remove the person from the corporate entity.
That is why it is so important to speak with an offshore specialist. Without such specialized knowledge, there is the risk of forming the wrong entity in the wrong jurisdiction.
Forming a complete holistic offshore legal plan helps to ensure that all of the pieces are organised and that the offshore strategy fits with you the goals of the company.
Offshore Company with a Bank Account
If you are starting an offshore company merely as a holding company for intellectual copyright for instance, then the following questions would not need to be asked. However, if you are entering into any type of financial transactions with clients or customers then the following are relevant.
Do You Need An Associated Offshore Bank Account With Your Company?
To open an offshore bank account in many places requires no in-person interviews and can be done virtually.
However, the offshore banking industry has changed dramatically in the last few years and in many places, it is required to have a local company formed in the jurisdiction. While that is not always the case, it is becoming more common in places like Singapore, Panama, and Hong Kong.
Still, there are offshore jurisdictions like St Vincent, Nevis, or Andorra, do not require a local company and can be opened virtually without any in-person requirements.
Are You An Internet-Based Company? And If So, Do You Require Payment Processing?
If you are an online e-commerce site or are a company that needs to take online credit payments then setting up a merchant account or a similar payment process application maybe another piece of the offshore puzzle to fit.
Will You Require Any Corporate Or Management Services For Your Company?
There are a number of associated corporate services that can be coupled with your offshore structure, such as: professional management, nominee services, secretarial services, mail forwarding, re-invoicing, virtual offices etc…
Step 2) Registration of your Offshore Company
Once you have picked your offshore jurisdiction and company formation drawing up the Articles of Association creates a legal document for formation of the company.
The company-by-laws will layout the responsibilities of the Directors/Shareholders and create an internal structure for which the business operates.
The importance of a properly structured company is obvious. Though often carelessly done, a company’s structure is especially important to properly secure assets and protect the privacy of the individuals in case of legal or financial duress.
This becomes essential if there is a complex series of companies, trusts, of foundations existing in a multi-jurisdictional arrangement with many directors, and owners.
Offshore Company Structuring
If a beneficial owner wishes to remain anonymous, in some jurisdictions its is possible to use nominee shareholders or nominee directors that act as third party actors whose name and details will be recorded on the legal documents and accounts, however, they will remain fully under the purview of the beneficial owner who still maintains direct control of the company, yet remains unaffiliated.
For individuals looking to maintain privacy, the use of a second LLC or IBC as a corporate director and shareholder can be used so that no individual’s identity remains on the corporate registry.
While most offshore jurisdictions still have very strict privacy and banking secrecy laws, like Panama, and Nevis, there are many countries like the US and many parts of Europe that require individuals to declare and foreign ownership of a corporation.
If you are lucky enough to live in a country that does not have CRS or any overly restrictive CFC laws, then you may be able to have a purely tax free entity that for all intents and purposes can remain anonymous.
Due to the change in many countries’ transparency laws foreign governments have greater access to individuals’ foreign corporation information. These records would only be available to YOUR home government, and would not be apart of the local corporate registry in the jurisdiction where the company was incorporated.
Offshore Company Filing Documents
Generally, all that is required are the Name of Director(s) or Beneficial Owner, copy of Passport, proof of Physical Address, Processing and Governmental Fee.
However, depending on the company and jurisdiction there might be a few more minor pieces of documentation such as Due Diligence Know Your Customer forms that will need to be completed before the registration process can be finalized.
In some jurisdictions requirements for opening an offshore bank account have become tighter and can require banking or professional reference letters, or a copy of a business plan.
This process usually takes a matter of days upwards of 1-2 weeks depending upon the jurisdiction and if there are longer background or due diligence checks from the bank account or jurisdiction involved.
Step 3) Offshore Company Incorporation
Upon receipt of payment that covers the government incorporation and registration fee the completed documents and application is sent to the relevant authorities. Hard copies of the incorporation documents, or scanned versions detailing the specifics of your newly formed company along with a notice documenting any future annual fees that might be required by the jurisdiction.
Corporate documents are usually received 6-8 weeks following company registration although the company registry number will already have been issued after the successful application usually within days to a week or two upon successful completion of the application.