Nature of offshore companies

What is an offshore company? What are its features?

Technically speaking, an offshore company is defined as a company that is incorporated in a jurisdiction that is other than where the beneficial owner resides. This means that if you can incorporate a company in Singapore while you live in Australia, it’s considered an offshore company.

It’s not that big of a deal, except decades of bad press has successfully associated the term “offshore companies” with “tax haven”, especially in jurisdictions like BVI or Cayman that are shrouded in skepticism. All the way in Hollywood, films like The Laundromat (2019) portray how money laundering and corruption using fake trusts and shell companies based in tax havens are still widespread.

An offshore company is a lawful business that is often framed outside the locale where the parent company is incorporated, and it conducts its business activities outside the country of its incorporation. Some of the features of an offshore company include:

  • It can be incorporated if it has one director and an investor
  • Its incorporation is quick
  • It holds legal, financial, and taxation benefits.

Exempt from Taxes:
One of the benefits of forming an offshore company is that it is exempted from taxes. This is because income earned outside Hong Kong are not taxed unless proven otherwise.

The activities of the company happen outside of Hong Kong:
Offshore companies must take into consideration that any form of business in Hong Kong with local companies will result in taxation which defeats the purpose of having an offshore company. You need to keep this in mind in case that you come across a business opportunity locally after you incorporate your offshore company in Hong Kong.

Degree of Anonymity:
The basic company information that includes the shareholders, directors, secretary and company address needs to be filed with the Company Registry of Hong Kong. If an offshore company wishes to keep its company information confidential then they can opt to choose the nominees as the company’s shareholders and directors since the nominees’ information are often made public.

Limited Liability:
Another reason why investors choose to incorporate an offshore company is that companies can have limited liability protection up to their share capital contributions.Finally, the incorporation process of an offshore company in Hong Kong takes between 4 to 7 days, and can be incorporated online.

FinReg business tip

An offshore company is a lawful business often framed outside the locale where the parent company is incorporated, and conducts its business activities outside its country of incorporation. In most cases, the rules and regulations governing a corporate company are less strict in the foreign country.