Almost all of us have heard of the existence of such a thing as offshore, but not everyone understands the meaning of this term. What is offshore in economic terms? These are financial centers that attract foreign capital through the provision of various tax benefits and special offers.
There are disputes among legal scholars about what exactly can be considered offshore, so there is still no consensus on this.
Offshore concept
The first country where the term was applied was the United States of America. Back in the 50s of the last century, newspapers began to write about this new trend, although people at that time still had no idea what offshores were.
Newspaper articles described a financial company that managed to escape state control. Company executives simply chose a different area with a more favorable tax climate. Since then, the concept of “offshore” has both a legal meaning and an economic-geographical one.
The history of offshore
As for offshore schemes, they took place back in ancient Greece. Then in Athens introduced a tax of two percent on the import and export of various goods. In this situation, merchants were not at a loss and traveled around the city on the tenth road to avoid taxation. Place steel products on the territory of small islands, where smuggling could be imported and exported without duties.
There are many more examples of similar schemes in which offshore countries have participated. So, in the XV century, English merchants drove to sell wool to Flanders, where taxes were much lower than in England. And in the XVIII century, US entrepreneurs tried to evade the taxes imposed by England on the import of products through trade with Latin America.
Offshore jurisdictions
Offshore zones are defined powers or parts of countries where a special registration regime is established and business for non-resident companies. Today, there are many offshore companies where it is possible to register a company. Conventionally, offshore jurisdictions are divided into several groups:
- European. There is a fairly high status and, accordingly, the high cost of maintaining an offshore. In these offshore zones there are tax incentives only for certain types of businesses. Not all financial analysts call these territories offshore, because there are no black bookkeeping, on the contrary, an audit is carried out, data on business owners are open and accessible.
- Island. In this case, entrepreneurs can open an offshore in small islands. In particular, the concept of taxes is absent on the archipelagos of the Caribbean Sea, the islands of the Pacific and Indian Oceans. Accounting is practically not conducted, and information about the owners of the companies is closed, that is, you can maintain anonymity. The downside in this situation is the dubious reputation and distrust of partners and consumers.
- Administrative-territorial formations, where there is a special tax regime. Such territories include some US states, Labuan in Malaysia, as well as Russian areas: Altai, Kalmykia, Uglich, etc.
Offshore Organizations
Offshore companies are foreign companies that are registered in the same zone of the state that provides tax benefits. Such companies have the right to conduct activities only abroad, and not at the place of registration.
Which countries benefit from having such offshore companies on their territory? Basically, their creation is encouraged by small states, which, through these schemes, find additional revenue items in their budget.
What are offshore companies, and why do business owners need them? The main purpose of their use is to optimize taxes and duties. If you properly structure the named organization, you can get important advantages: data confidentiality, cost optimization, the absence of any accounting requirements, etc.
It is no secret that many well-known companies use offshore companies in order to reduce tax payments. Among them: BMW, General Electric, Microsoft, Pfizer, etc.
Features of offshore companies
One of the most important characteristics of offshore companies is the fact that they are non-resident in relation to the state in which they are registered. This means that all control, management and activities are carried out in another country. As a rule, these firms have tax benefits or are exempted from taxes in general. It happens that they only have to pay an annual registration fee, which is a small amount.
The registration process itself is much simpler in offshore countries. There is no need to constantly convene a board of directors, but the use of nominal owners is permitted. Also not held audits and currency control.
One of the specific qualities of an offshore is the ability to hide as much as possible the information of the owner, who usually finds local employees for company registration. However, in most cases it is impossible to completely hide the name of the beneficiary, as these hired directors must know who they work for in order to ensure their financial and legal security.
How to open an offshore?
There are two main ways to register an offshore company: to go in person to the country where the zone is located or to contact a company that helps with the registration of such organizations.
Persons who are familiar with what offshore companies are sure to have information about how to open them. And firms involved in this usually provide a list of specific services. These include:
- Assistance in company registration, including a full registration package and obtaining certificates.
- Sale of an offshore company already registered previously.
- Opening a bank account in order to place money in offshore.
- Assistance in conducting business, including secretarial services, telephone numbers.
- Provision of nominee managers and shareholders.
Key offshore schemes
Today, there are a great many schemes that help to evade taxes and provide higher profits. Economists identify the most common offshore schemes:
- an agent, in which the offshore company finds any company, hires it as its agent and carries out activities through it;
- construction - in this case, the offshore organization is a contractor and receives payment for construction services;
- transport, which takes place during international transport;
- production - an offshore company at low prices pays for production services and raw materials of the manufacturer.
In addition to the above, schemes are also popular transfer pricing the provision of services, the registration of new enterprises, the supply of raw materials, etc. The choice of one or another offshore scheme depends on the tasks and goals that the company sets itself.
