Uses of “Offshore Companies”
A. International Trading Company
International business is usually buying products in low-cost production countries(such as China, Vietnam, Thailand, India and Cambodia) and selling them to the high-profit yield markets, like USA, Canada, Europe, Brazil, Russia and South America. When the products have been completed, they can be shipped from the manufacturing country to the buyer country directly.
As most of the operation can be conducted by business partners (such as a logistic company, quality control inspector or sourcing company), the manager can operate the international trading business in any country, or elsewhere. The offshore company is suitable to act as an international trading company, where the profit generated by the trading business is tax free in the country of registration. The company should open a bank account in a country without exchange control. Countries and regions such as Hong Kong and Singapore are good choices. They do not have capital gain tax.
B. Holding of personal investment products and offshore investing
Most of the investors would use an offshore company as a vehicle to hold their investment portfolios in foreign exchanges, shares, bonds, certificates of deposit, futures, gold and many other investment options. All of the investment broker firms and investment banks accept an offshore company opening an investment account. Having privacy and tax benefits, investors can generate the highest return with the lowest cost in a safe way. Investors can also use offshore company to carry out offshore investing in other offshore jurisdictions.
C. Professional services company
Many self-employed individuals who are engaged in the industries of engineering, consultation, information technology, financial analysis, construction, aviation, film and music production can use offshore companies to receive their commission or service fees in order to earn tax savings benefits as the income earned is tax free in an offshore country. Through tax planning and deduction of expenses during the service works, they can save the personal income tax of the owner resident country as most of the countries are charging worldwide tax. This is particularly evident in Europe, USA and Canada.
D. Property holding company
More similar to the investment holding company in B., many investors would use an offshore company for holding their property in a different country to limit the liability and to change the ownership structure easily. In many countries, transfer of legal title on the property is taxable on stamp duty. However, the offshore company can save the stamp duty when the property is owned by the offshore company. There is no stamp duty when transferring the ownership of the offshore company.
Privacy is another benefit which can protect the name and details of the owner of the property. Usually, the property owner information is required to register in the Land Registry and it is accessible by the public. When the offshore company has been used, the public record will only disclose the name, address and relevant information of the offshore company, not the owner of the offshore company.
Generally, transfer of property legal title to the successor at the time of the legal owner’s death is not easy and simple, especially if the property is not located in his country of residence. To solve this problem and earn tax benefit, investors can use an offshore company to hold the property as the transfer of ownership of the offshore company is very easy and simple. It does not have inheritance tax. Probate or Will in a recognised language and Certificate of Death are sufficient to prove the transfer of shares of the offshore company to the successor and the time for registration can be completed in a few days.
E. Holding of Intellectual property, patent or trademark
Intellectual property is an intangible asset of a company. This includes trademark, patent, design, copyright, technology and IT software. An offshore company can be a legal owner of the intellectual property. When the ownership is sold, transferred or franchised to the buyer, inter-group company subsidiary or franchisee, the profit generated by these activities can be recorded as offshore income. Withholding tax on royalty income can be saved.
F. Listing (Initial Public Offering “IPO”) and Funding purpose
Cayman Islands, Bermuda and British Virgin Islands are recognised offshore jurisdictions for a company applying an IPO in Hong Kong. Most of the famous stock markets such as London, New York or Singapore also recognise offshore companies for application of IPO. It is important to emphasise that the offshore company option is internationally acceptable.
G. Offshore Foundations / Panama Foundation
A private foundation is of great advantage as it is a legal entity,which is established like any other commercial organisation. This entity acts like a trust and operates like a company. The major advantage of Offshore Foundation is the security of the inalienable rights such as secrecy, confidentiality and anonymity.