What You Need to Know to Form an Offshore Company
Offshore companies can have many benefits. Primarily, an offshore company can be used to save money on tax by diverting income to a foreign location. Offshore companies can also be used for investment purposes, and for protecting inheritance tax. However, it is important to understand some of the issues involved in forming an offshore company, as well as knowing some of the things to avoid, from understanding tax registration status, to the local taxation laws of another country. These issues are expanded on in the list below:
1 – Knowing What Kind of Offshore Company You Want
Offshore companies can take many different forms. In most cases, they represent holding companies for UK income, or act as investment companies for paying dividends and reducing capital gains taxes. Offshore companies can also be used for trading purposes and shipping, with the aim of eliminating cross border taxation issues.
2 – Research the Market
Many companies will offer advice on setting up an offshore company, and will provide everything from a recommended location, to establishing articles of association. It is worth researching the market and checking a number of different companies before beginning to form a company.
3 – The Incorporation Process
The actual incorporation of a new offshore company can be relatively straightforward, and typically involves choosing a country in which to register, while paying fees on registration, as well as statutory, compliance and license fees. These may vary from country to country, so seek advice beforehand.
4 – Understand UK Taxation
You need to make sure that you understand what assets and income will become liable for UK taxes, even if the company is registered abroad. Income and dividends that are transferred into the UK, or that involve UK trade, can be subject to UK tax.
5 – Look for International Areas
While there are many countries that offer excellent locations for offshore formation, some of the more recommended areas include Mauritius, the British Virgin Islands, and Belize.
6 – Look for Local Options
It is often easier to go for an offshore company location in a country that is closer to home. The Isle of Man is particularly recommended, with a low rate of income tax, and capital gains and corporation tax making it a regular destination for taxpayers and companies.
7 – Registering Interests
UK law typically involves an individual to declare their directorship of an offshore company, particularly if it affects their taxable status. You will need to confirm your non domiciled status outside of the UK, as well as what country you choose as your ordinary residence.
8 – Look Into Offshore Trust
Another option for offshore company formation is to establish a parallel offshore trust that can act as a holding company. Offshore trusts are particularly good options for protecting wills and inheritance.
9 – Seek Professional Advice
Again, professional international tax and offshore company experts should be consulted prior to setting up a new company. Experts such as Faulkner International can help you to ensure that you do not become liable for additional, or double taxation, as well as advising on general issues.
10 – Caution
Setting up an offshore company means being very attentive to the specific rules for UK taxation, as well as for the tax laws of individual countries. Failure to comply, or to evade taxation through an illegally run tax haven, can result in significant criminal punishments.
Author Bio: Liam Ohm writes about tax and finance. He enjoys giving tax advice to those who need it and often hosts webinars and online help sessions.
Category: Business
