Everything you need to know to create an offshore company
Is it legal to create an offshore company?
Offshore or non-resident companies are described as companies that conduct an insubstantial or zero volume of business within their jurisdiction of incorporation.
More specifically, offshore companies have three characteristics: Firstly, they should be registered as an entity within the jurisdiction of incorporation. Secondly, the ‘incorporators’ should be domiciled outside of the jurisdiction of incorporation.
Finally, the company should transact the major majority of business outside of the jurisdiction of incorporation. However, most associate the term ‘offshore company’ as a means of increasing tax efficiency.
Definition of an holding company?
A holding company provides a means of concentrating control of several companies with a minimum of investment; other means of gaining control, such as mergers or consolidations, are more complicated legally and more expensive.
A holding company can reap the benefits of a subsidiary’s goodwill and reputation while limiting its liability to the proportion of the subsidiary’s stock that it owns. The parent company in a conglomerate corporation is usually a holding company.
Strictly speaking, the term “holding company” might be used to describe any company that owns a majority of shares in another company however this may only apply if that corporation’s only reason for existence is to hold stock in other companies.
Usually, though, the term signifies a company which does not produce goods or services itself, but, rather, whose only purpose is owning shares of other companies (or owning other companies outright). Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies.
The owned companies may be: subsidiary companies – the holding company owns more than 50% thus giving control. Associated companies – the parent company owns 20-50%. This is a large shareholding should provide considerable influence (but not control) over the associated company.
How much influence will depend on ownership of the other shares? Owning 49% and wanting control when a rival company has a 51% stake may be a less than appropriate strategy. Related companies as similar to associated companies. They typically own fewer than 20% of shares in another company.
This holding may be held because good dividends may be expected or the two companies are co-operating with each other in some area of business. Small shareholdings may be held by banks or Unit or Investment Trust companies as ingredients in their portfolio of ownership.
Which jurisdiction should I choose for my company?
The most important factor in choosing a jurisdiction is to be sure that your company will be incorporated in a country that has :
1) reliable means of communication
2) political and economical stability
3) good reputation
4) sophisticated corporate laws
All the jurisdictions we work with enjoy the above mentioned advantages. However, the right choice of jurisdiction also depends on where you live and on the business you conduct.
Our advisors can assist you in finding the jurisdiction that makes the most sense with regard to your personal situation.
Why are your fees lower than those of your competitors?
Having our own offices or partners in the jurisdictions where we provide our services, we are able to offer straight-forward and competitive prices, given we can avoid any intermediaries.
How can I settle my company fees?
You can either pay by bank transfer, check or banker’s draft or also cash in our offices, if you prefer.
Does my company have to provide accounts to any tax authority ?
No, generally not. This is one of the main advantages of “offshore” companies. However, in a few select jurisdictions, such as HK, Cyprus, and the UK, for example, it is indeed mandatory for companies to produce yearly accounts and to have them audited, and in some cases, to pay taxes
Do I need to come to your office to open my offshore company ?
No. Our headquarters are located in Switzerland for practical reasons but that does not mean that you will have to travel here to open your offshore company. Everything can be finalized by correspondence.
How long will it take for me to receive my corporate documents?
Every jurisdiction has its own incorporation time-frame. Once the company has been incorporated, it will generally take about 2-6 days for the corporate documents to reach you.
Can I choose the name of my company?
Yes. It is even recommended that you do so. On the application form you are asked to input two company names, in order of your preference.
We will then check with the Company Registry of the offshore jurisdiction if those names are available for incorporation.
If not, we shall send you some alternative names. We also have a list of shelf companies or pre-approved names that we can send to you upon request.
What is a shelf company?
Shelf companies are corporate entities that have been established by a provider, who holds the company until a purchaser is found. Post transaction, the ownership of the company transfers from the provider to the third party, who then commences trading activity under the company name. The benefits of purchasing an off the shelf company includes:
To the time it would take to create a new corporation
To allow contract bidding (some jurisdictions require a fixed business age to allow this functionality)
To create the appearance of corporate longevity
Note: shelf companies are usually more expensive than newly incorporated companies because of their age.
What is the difference between a shareholder and a director?
The shareholder is the person who owns the company through a share certificate. A company can be owned by one or several shareholders. The shareholder can be an individual or a company.
The director is the person responsible for the management of the company. He will sign any business contracts, account opening forms etc. Directors are usually elected by the shareholders, but sometimes are appointed by resolution. A company can have one or several directors. The director can be an individual or a company.
When do I have to pay my company’s yearly fees (Renewal Fees)?
You will be asked to settle the yearly fees prior to each anniversary of your company, not at the end of each calendar year. To avoid any last minute rush, we will send you a renewal invitation two months before the anniversary.
Do I have to pay taxes on profit or interest earned by my company?
No. Most of the jurisdictions we work with do not impose taxes on profits made or interest earned by the company. Some, like Hong Kong, only tax profits made within the jurisdiction, whereas Cyprus charges a 10% flat tax.
Who should use an offshore company?
An offshore company may be of interest to a great number of people and it may be used for various activities:
- Businessmen: Creating an offshore company allows you to begin an activity without having to deal with the set-up of a complicated infrastructure. An offshore company allows you to benefit from fiscal advantages and ease of administration.
- Commerce over the Internet (E-Commerce): Internet traders can use an offshore company to maintain a domain name and to manage internet sites. An offshore company might be ideal for people whose business is on the internet. You might choose to incorporate the registered office of your company in an offshore jurisdiction to take advantage of the various benefits offered by these jurisdictions.
- Consultants / Counselors: You can also carry on your consultancy or counseling business through an offshore company. You will find it easier to manage your company and will have reduced or even zero taxation depending on the jurisdiction in question.
International business: International business can be carried out through an offshore company. It will handle purchases and sales operations, taking advantage of the fact that its profit will not be taxed, or only at a low level, depending on the jurisdiction. This type of use is particularly interesting where goods from one country are sold in another country while yourself are based in a another country.
- Holding intellectual property rights: Any kind of intellectual property right (a patent or trade mark) may be registered in the name of an offshore company. The company may also buy or sell this type of rights. It may also grant rights of use to third parties against payments which will be considered as revenues and will thus benefit from the low level or zero taxation of the jurisdiction in which it is registered.
- For the custody of movable and immovable property: Offshore companies are used to hold both movable property (such as yachts) and immovable property (e.g. houses and buildings). In addition to confidentiality, the benefits and advantages they offer include exemption from certain types of taxes (e.g. inheritance tax). It should be noted, however, that some countries do not allow the acquisition of movable/immovable property through offshore structures and therefore those wishing to form an offshore structure are advised to check with a competent authority before proceeding.
- For inheritance purposes: An offshore firm that always stays afloat (provided all costs associated with running it are paid) may, in some countries, be used as a means of avoiding inheritance tax laws. With a view to optimizing inheritance tax liability, the offshore structure may also be combined with a trust or a foundation.
Offshore companies are very often used for share or foreign exchange transactions. The main reasons being the anonymous nature of the transaction (the account can be opened under a company name) and the attractive fiscal conditions of offshore regulations (little or no tax levied on profits made).
Do I need to come to the bank in person to open an account?
You are not obliged to come in person to open a bank account. The whole procedure may be completed by post. However, if you wish, we can organize a personal meeting with the managers of the banks we work with.
Does opening an offshore company mean that a bank account will automatically be opened for the company?
No. If you tick the bank account opening option, we shall – in close collaboration with yourself choose the bank which most suits your needs from amongst our network of prime banks. The bank will then decide if the account can be opened, depending on how comfortable they are with the nature of your business and the personal information provided by you. However, in more than 95% of the cases, we are able to open the account for our clients.
Which banks do you work with?
For legal reasons, we cannot disclose the names of the establishments we work with. However, be assured that we only work with first class banks, which are able to offer you all the services you may require (internet banking, anonymous credit and debit cards).
Is it possible to open a private account as well as an account in the name of my company?
Yes. We can also take care of opening a private account in addition to the account in the name of your company.
What fees apply for maintaining the bank account?
The banking fees depend on the establishment holding your account. On average the fees for maintaining the account come to around 200 Euros per year. As for us, we do not charge any further fees once the account has been opened.
Can I have a bank account in different currencies?
Once the bank account has been opened, you can choose a multi-currency account. This will allow you to keep several currencies in the same account. When a new currency is used, the bank will automatically open a ‘sub-account’ so that you don’t have to pay any exchange fees.
How can I use the funds from my offshore account?
Like for any other bank account, the funds of your offshore company bank account will be accessible through credit/debit cards, checks, internet banking or withdrawal at the bank.
What is a nominee director?
The nominee director service is used to ensure the highest degree of privacy and confidentiality, as the name of the director will appear in the corporate documents, in any business contract and eventually in the jurisdiction’s business register. Another advantage of using a nominee service is to place the “management and control” issue firmly outside a high tax jurisdiction.
Upon appointment of a nominee director, a Nominee Service Agreement will be signed between the client and the nominee. It will guarantee the client that the nominee can only act or sign documents upon the client’s request and with the client’s prior approval. Professional directors provided by CKSA work with the highest level of integrity and confidentiality.
What is a nominee shareholder?
The nominee shareholder is appointed in order to shield the real owner of the company from being publicly associated with the ownership of that company. Upon appointment of nominee shareholder, a nominee service agreement (declaration of trust) will be signed between the client and the nominee. Nominee Shareholders provided by CKSA work with the highest level of integrity and confidentiality
What is the Virtual Office?
The Virtual Office allows your company to have an address in one specific country and to receive mail there, which, in some cases, can lend more credibility to your company.
What is the notarization and apostille?
A notarization means that a notary will check all the documents we issue for your company and that he will confirm their authenticity.
An apostille is an internationally recognized certification and legalization of the corporate documents by the Government of the jurisdiction where your company has been incorporated.
We highly recommend to choose this option if you consider opening a bank account or if you need your corporate documents for any legal proceedings (such as concluding a contract, for example).
To get started simply email us through our contact form.
CKSA Advises you!