Advantages and Reasons for an Offshore Company

Here are some practical and generic examples of the wide-ranging applications for which offshore companies in low tax jurisdictions may be used to produce considerable financial benefits.

INVESTMENT AND PROPERTY COMPANIES

Take the position of an international investor who transfers some of his personal assets or an investment portfolio to an offshore company. As he may own the company through corporate nominee shareholders, financial privacy can be assured, and the transfer of assets reflected in the books of the investment company as a loan account due to the international investor.

Tax-free income generated from the holding companies assets can increase the investment performance and long-term tax deferrals may be obtained. In practice equity portfolios tend to be orientated to capital growth securities to minimize with holding taxes in the countries of location of the underlying investments.

Assets may, of course include bank fixed deposits, commercial or residential property, precious metals, tangibles, etc. Additionally, property holding companies can be advantageous vehicles owning foreign villas or apartments in countries where land duties are payable upon transfer of registered property owners. When the client requires the property to be sold, it is the ownership of the shares in the property holding company, which are sold to the purchaser for market value.

Accordingly no change in the registered property owners occurs and potential land duties are eliminated.

ADVANTAGES AND REASONS FOR AN OFFSHORE COMPANY.

There are many views and misconceptions regarding the advantages of Offshore Companies. In this short report I set out to evaluate this method of efficient tax planning.

LEGAL IMPLICATIONS

Firstly, let us consider the legal aspect and the view taken by world tax offices. A company set up in one of the 200+ tax havens is only subject to the rules, laws and taxes of that haven. If it makes profits from assets, liquids or otherwise, then these profits would be free from tax (assuming that the tax haven had the arrangement, if it didn’t then it wouldn’t be a very popular tax haven). Some tax havens only allow tax-free overseas investments, some tax residents, so careful choice of the tax haven is essential.

Since the offshore company is not a resident in any other country then it is not subject to tax laws of any other country. Not surprising then these offshore companies are not the flavor of the month with tax authorities.

All authorities have however to accept the sovereignty of these offshore companies furthermore, there is little authorities can do about them. Offshore companies hold enormous amounts of the worlds assets, in turn these assets are invested throughout the various countries economics. Multi- national companies, essential to the prosperity of markets, trade from such offshore companies.

When you report your share holding you will be expected to state income/dividend or benefits on the tax return NO INCOME means NO TAX LIABILITY. It could own properties, charge rents, buy/sell any investments, own your own company shares, buy or own houses and so on. Only when you take a benefit or income will you be assessed for tax and only then on that amount of income/benefit.

Few people ever spend or dispose of all their assets, particularly, if they are approaching
retirement they sensibly take income, thereby preserving their capital usually leaving it to their children.

Misconception 1 - My assets will be taxed when I die!

Not necessarily, the inheritance tax benefits of owning an offshore company I will point out to you later.

Misconception 2 - Offshore Companies are only for the very rich! This very telling statement, if it’s good enough for the rich then maybe it’s worth considering.

Offshore companies are NOT expensive to set up and are reasonable to maintain.

When considering the family home as part of the assets, this broad brush valuation means many more people could benefit from offshore companies than do at present. Many offshore tax havens do not insist on formal accounts and administration is kept to a minimum.

Misconception 3 - Tax Havens are not safe! Well some are, one is undoubtedly the safest place in the world to invest money.

SAFETY

Since there are over 200 tax havens the choice is vital. Firstly where to set up the offshore
company and secondly, in which tax haven should the investments be housed.

RIO have established 78 offshore companies over the years for members.