16 Oct Benefits of having an offshore company
Having an offshore company secures a number of advantages. Opening an operation in your overseas market is generally the most costly and time-consuming way to enter it, but the rewards can be great.
Local rules may restrict your options, but the three main ways to open an overseas operation are to set up:
A local office in which you have to have one or more of your employees physically there. A local office gives you the chance to identify and enjoy opportunities in your target market. It also gives you the flexibility to control your operation, and expand if necessary. Your exposure and service to customers will increase if you have a local base. This is particularly true if your products need specialist after-sales service.
A locally registered subsidiary company – a new business in the target market, subject to local company, employment and tax rules, and generally hiring some local staff. A local subsidiary company also offers limited liability if things go wrong & is also easier to expand than a local office.
A joint venture – partnering with a local business to set up a new business with ownership shared between you. If you use a joint venture, you will be able to share the risk. You will also enjoy your partner’s local knowledge and reputation.
There are also other benefits in having an offshore company
The use of offshore shipping companies can drop direct or indirect taxation on shipping. Shipping companies may own ships, the profits from which activities can be accumulated tax free. There are some tax and legal requirements to be followed.
Low Capital Requirements
Offshore companies usually provide flexibility the structuring of the capital of the company. This often includes no minimum paid up capital.
Individuals who receive large fees in respect of their professional services in capacities such as designers, consultants, authors or entertainers, may assign or contract with an offshore company the right to receive those fees. The offshore employment company may not have to pay tax on its profits which can be invested again in a tax free climate to generate further income from the offshore company.
Copyright and Royalty Companies
An offshore company can buy the right to use a copyright, trademark or name known by its original holders with a sub license. With the ideal property right, the offshore company can then enter into agreement with licensees around the world who would be able to obtain the ideal property right in various countries. Often royalties paid out of a high tax area attract withholding taxes at source. Often an interposing holding company may allow a reduction in the rate of tax withheld.
Offshore companies are often ideal vehicles for holding global assets of all kinds due to strong laws in the jurisdiction of formation around protection of assets held by the company.
In conclusion, there are important legal and financial implications involved in setting up an overseas business. Always take advice from your accountant or business adviser before setting up since most of the time such institutions would have more local legal knowledge, and therefore able to direct you to achieve better results in the least amount of time.