Offshore companies offer several tax advantages to business owners, which is one of the main reasons why so many business owners consider going offshore. However, many new business owners are often left wondering what kind of tax advantages offshore companies can receive.
Unlike offshore bank accounts that earn interest, the owner of an offshore company does not have to report the profits of the business to their home country, but they must report any money they have earned from the business.
One of the greatest tax advantages1 for an offshore company is being tax exempt, but not all countries will offer this. Countries like Brunei and Belize are known as tax havens. These countries do not charge their corporations taxes, but even better, in most cases the corporation does not have to pay taxes in their home country, as long as things were done correctly.
In order to not have to pay taxes on the corporation’s profits the company must be an International Business Company. For example, if a company operates in the U.K. or the U.S. but was incorporated in Belize no taxes have to be paid, as long as the company is considered an International Business Company.
Saving On Labour Costs
Labour costs are one of the biggest expenses that a business faces, but without labourers, there’s no way the business could survive. Even going offshore,2 you are not going to be able to avoid labour costs, but how much you spend will depend on the country you have chosen. No matter where your business ends up you are going to spend less on labour costs than you would in your home country because of the lower labour costs. Opening an offshore company also saves on employee taxes because in many cases they do not exist.
Benefits Of A LLC And LLP
A limited liability company (LLC) or a limited liability partnership (LLP) formed offshore offer a great tax advantage to the owners. Both of these business formations require profits to be split among the owners, how they are split depends on how much ownership each person has. With these formations the business itself is not taxed, it’s the individual owners. By forming one offshore, the profits are split evenly between all owners and are not taxed in the partners’ home country.
Offshore Companies And Free Zones
One thing that eats into a company’s profits is all the different taxes that they must pay. To help attract businesses some countries offer what is known as free zones, which are not the same as a tax exemption.
Most free zones are set up within an area that has a large amount of commercial property. A free zone is a specific area that does not tax businesses for many of their operating costs. Tariffs are a great example of taxes that are waived for offshore companies set up inside a free zone.
The tax advantages are only one of the financial benefits of offshore companies. If you have any more questions please contact us and we will put you in touch with a reputable financial adviser.3
Offshore firms are quite commonly used for asset protection. When looking for asset protection chances are you have spent some time looking around to see what different places have to offer.
The problem is many of these places make offers that sound too good to be true, so how are you supposed to weed out the best offers.
Offshore Firms & Income Tax
Perhaps the biggest scam that people fall for when it comes to asset protection is that by moving your assets offshore you will not have to pay any taxes unless you move the money back into your home country. Moving assets offshore into a tax haven is not a way to avoid paying taxes, no matter how you look at that it’s tax fraud. Any income that you earn from your investments offshore4 must be reported to your home country. Companies that tell you otherwise or that tell you to simply lie about having assets offshore are not who you want handling your assets.
Look Closely At The Company
One of the biggest problems with companies that offer asset protection services is many of them claiming they are experts. Some of these companies will offer free seminars that will show you how to go about protecting your assets, which will also require you to buy their book that gives out the details of the secrets that they use. No matter what pitch they are selling you chances are if the deal seems too good to be true it probably is. Asset protection is not cheap; expertise and time are required to do it properly. When looking at the companies offering these services always check references, but also look into any training they say they have. And always keep in mind that you get what you pay for!
One claim that many companies make is that by protecting your assets you will actually save money on income taxes. This claim is 100% false; asset protection5 will not save you any money on personal taxes. All asset protection does is move your assets to another jurisdiction where it makes it harder for creditors and others to find out what assets you have. This protects your assets in case creditors come after you or if you are sued and must pay a court judgement. Asset protection can only help you save money on estate taxes. Though going offshore will not eliminate taxes, there are considerable tax benefits you can receive. Apart from the tax benefits, you will have a variety of investment opportunities that is normally not available in your country of residence.
If you have any questions in regards to offshore firms and asset protection contact our office today. Our reputable financial advisers can answer any questions you might have in regards to how our services work, as well as help you create an asset protection plan that will work for you.
Many business owners look to offshore incorporation because of the benefits it provides for businesses, such as privacy, protection, and tax savings. Other business owners simply wish to expand their business, going offshore allows them to easily expand into the global marketplace.
No matter what the reason may be for incorporating a business offshore it must be done carefully. As a business owner, you must ensure that you pick the right country to incorporate in based on the needs of your business, choosing the wrong one can have a negative impact on your business.
Many business owners go offshore strictly for the tax benefits. Incorporating in a country that is often referred to as a tax haven, such as Belize, offers businesses the opportunity to be tax exempt because these countries do not tax corporations and if incorporated correctly the corporation is also exempt from taxes in the owners home country. Offshore companies also save on taxes due to the lack of employee taxes in other countries. For example, in the US employees pay into specific taxes and the employer has to match those payrolls taxes. However, the exact tax benefits are going to vary depending on what country you decide to incorporate in.
Going Offshore Offers Anonymity
Incorporating your business offshore provides both you and your business with a high level of privacy, as long as everything is done in the name of the business. For example, in Belize the names of the shareholders, officers, and the directors of the business can be left off any business documentation. Not only that but the names of the people who formed the company will also be withheld from any foreign government or third party, unless terrorism or criminal activity is being investigated.
Offshore Incorporation Protects Assets
One of the best things about asset protection is how the assets are no longer at risk if you are personally held liable for something. Many individuals place all of their personal assets under the name of their offshore company so they do not lose everything in case something happens. A lawsuit’s the perfect example. During the course of a lawsuit an asset search is performed to uncover any personal assets, the other party wants ensure asset security in the event a judgement is awarded in their favour. If the assets are listed under your name they will be detailed, whereas giving ownership of these assets to your offshore company they are shielded from everyone, including the judges and the final court ruling.
One of the main benefits of incorporating offshore is how simple the process is, with most countries making it as easy as possible. If you still have questions about how offshore incorporation works or if you are ready to start the process you can contact our office today. Our reputable financial advisers will be happy to assist you in deciding what jurisdiction to choose, as well as working with you to create a plan that works right for you.
When it comes to forming an offshore LLC everybody is always focused on the advantages that they provide. Sure, all the advantages are nice, but being responsible means looking at both sides of things.
While the downfalls to forming an offshore company are few, there are still some things that you want to watch out for. Not being aware of these downfalls can often affect your offshore company sooner rather than later.
Harder To Get Financing
One of the biggest advantages to forming an offshore company is the privacy laws. With an offshore company, there are laws in place to prevent third parties from finding out information, including what is owned and who owns the company. The only time that this information can be disclosed is during the course of a criminal investigation or if it’s so ordered by the courts. While this might sound great for the most part the privacy laws can actually cause a lot of problems. These privacy laws make it harder for you to get financing because potential investors have a hard time figuring out how much the company is worth. Not to mention very few lenders will be willing to loan money to a company that is not within their jurisdiction for fear that they are not going to be able to get their money back.
Offshore LLC Are Not Looked At Favourably
Another major downfall to opening an offshore company is the way others look at them; there are quite a few people who look down on offshore companies. The main reason why so many people think poorly of offshore companies is because of the media, they tend to only report on the bad things, and they sensationalise it. For example, the media often reports on people who are involved in money laundering through offshore accounts. However, there’s nothing illegal with forming an offshore company, make sure you are using a reputable company to help you with the process, they will ensure that you choose a jurisdiction that is not known for its illegal activity.
Limitations Are Placed On The Company
The last thing that you need to watch out for is the limitations that you might be faced with when opening an offshore company. Certain jurisdictions, such as the United States, place a variety of restrictions on offshore companies. This is not to prevent the success of your offshore company, but to protect that jurisdictions businesses, nobody wants to see their local economy go under. Something else to keep in mind is that trade benefits that are provided to businesses in your home country might not be available to you if you decide to go offshore. However, these limitations do not apply to all industries.
If you still have concerns about an offshore LLC contact our office today. Our reputable financial advisers will be able to address any concerns that you might have and can help you develop a plan that is suitable for your business needs.
Tax Free Company
One of the main reasons why people want to start a tax free company is because they do not want to have to pay taxes on profits. In order to legally do this you must form your business in one of the few countries that are considered a tax haven, but the question many business owners have is what country is right for me. What country you decide on is really going to depend on what type of business you plan to form.
Forming A Tax Free Company In The Caribbean
The Caribbean is one of the most popular jurisdictions for forming an offshore company; particularly for International Business Companies. Some of the more popular tax havens in the Caribbean include Anguilla, British Virgin Islands, Nevis, and Dominica. Anguilla and Nevis also allow you to form an offshore company as a foundation or an offshore limited liability company, in addition to an International Business Company.
Central America Offers Great Options
Central America is often overlooked when it comes to forming offshore companies, but Belize and Panama provide some of the best options. In Belize and Panama, business owners can form an offshore company as a foundation or as an International Business Company; both formations allow you to legally avoid paying taxes in your home country. An interesting thing to note is that Panama has more guidelines that must be followed when forming your company; they also have a franchise fee of $250 that must be paid each year so your company remains in good standing.
Starting A Tax Free Company
When looking to start an offshore company the majority of us think about islands, such as the Caribbean and Panama. However, there are a few places that allow you to legally avoid taxes in your home country by creating an offshore company. Exempt company or tax free company was the original company form in Gibraltar. Tax free companies were allowed in Gibraltar from 1967. However, the laws regarding exempt or tax free company in Gibraltar has changed. A tax free company in Gibraltar is a limited company that has received a certificate of tax exemption from the Gibraltar Financial and Development Secretary. Only those companies with share capital can be exempt or tax free in Gibraltar. The United States also offers a tax haven for non-residents. However, the only two states that offer you this business opportunity are Delaware and Oregon and both require you to form an offshore limited liability company.
No matter what country you opt for when forming your tax free company, all of the countries listed above value your privacy. These countries have passed numerous laws that ensure everything you do in their country is kept confidential. For example, in Belize, none of the documents for your company will contain the name of any of the shareholders or directors, nor will these names appear in any public records. In Anguilla, the International Business Companies Act makes it against the law for anybody, including an auditor, to give out any information about corporations. The only time any information can be given out is if there’s any criminal activity suspected or if it’s ordered to do so by the courts.
You can contact us and speak to our reputed financial adviser regarding forming a tax free company.
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