By definition, an offshore corporation is outside the legal jurisdiction of the country where its primary operations are located. Therefore, if you’re looking for a method to protect your finances from a volatile market, going global and incorporating your company in an offshore jurisdiction could be a viable solution. Take note that in order to be considered an offshore, your business needs to satisfy several criteria, such as:
- It must not conduct trade with the country it incorporates.
- It must incorporate itself outside the jurisdiction in which it conducts operations.
- It must pay the tax expenses/fees required by the country it incorporated.
You need to have everything covered
Not only do numerous developing countries welcome this form of business, but some of them also offer tempting incentives to companies willing to form an offshore within their jurisdiction. Perhaps the biggest advantage of going offshore consists of the reduced taxation rate at the new location. Moreover, because an offshore is not subject to capitalization, it means a company can be set up with minimal investments. However, before you can enjoy the tax haven provided, you need to make sure everything is covered. Let’s summarize the things you should be aware of before going offshore.
- Good banking is a must – before you decide on your new jurisdiction, research and determine whether the new country has reputable banking; worldwide known banks are usually a guarantee of a decent jurisdiction.
- Professional services to look for – in addition to reputable banking, find out whether the potential jurisdiction has insurance companies, fund managers, accountancy firms and legal practitioners who are known for their professionalism and experience.
- Set up your invoicing – if your company offers specialized services, then you could obtain superior tax advantages by acting like a company.
- Investment holding – gathering all your investments in one place could simplify your job, especially if need to move frequently with your work.
- Property holding – it is overall cheaper to keep buildings and cars under a company’s name; in addition, it will simplify the probation and executive administration.
- Protect your investment – in the event that you’re buying through an intermediary, then it’s imperative to verify that the investments as well as the mediator are regulated.
- Communication services – in case your offshore is located halfway across the globe, then you will need to have good communications to keep in touch easily; make sure the phone lines and internet in the new jurisdiction are well developed.
- The political stability in the region – while it is true that riots and coups are always possible in developing countries, they are very unlikely to happen. At the very worst, the ‘riots’ are peaceful protests. Nonetheless, to avoid personal and financial risks, it is best to look for jurisdictions that have been making efforts to change their ways and are known for political stability.
- The economic stability – closely linked to the political stability of a jurisdiction is the economic stability of the country. It is highly advisable to stay away from jurisdictions rumored with unfair tax practices.
