What is an offshore company? And how does it work?

What does the term “offshore” mean?

The definition of the word “offshore” has many different meanings. Originally, the word was used to describe situations or elements that were not located on the coastline of a country or island. For example, the term “offshore” can refer to a person moving to a foreign country.

A ship may also be said to be offshore, as it is some distance from the shore of the country or island. This second definition was common in naval units to refer to the location of certain ships. However, the word began to evolve over time. As some people said that someone was living offshore, referring to another country or island, the idea began to develop.

Gradually, business owners and entrepreneurs were referred to as having moved their operations offshore, which effectively means to another country. This is how we arrive at the meaning of the word as we know it today.

How does an offshore company work?

An offshore company can be used for purposes similar to those of a local company, such as opening and holding bank accounts, entering into any type of legal agreement, holding digital or physical assets, carrying out transactions and starting and running a business. Offshore companies are often referred to as “international business companies” or “IBCs”, which generally distinguishes them from traditional domestic companies. Other terms are also used, such as non-resident companies and foreign companies, but they all generally refer to the same type of structure.

An offshore company is a legal business entity incorporated in a tax haven that offers a favorable business climate for conducting business activities with the best tax exemption benefits.

An offshore company is a legal entity that is allowed to trade, hold assets and conduct normal business activities legally outside the jurisdiction where it is incorporated.

Offshore countries offer tax exemption to companies that set up or are incorporated in their territory if they limit their transactions and operations to outside the country’s borders. Companies incorporated in these offshore jurisdictions are non-resident because they do not conduct any financial transactions within their borders and are owned by a non-resident.

What is the purpose of setting up an offshore company?

There are many benefits to setting up an offshore company, whatever your objectives, whether it is asset protection, privacy or tax reduction. Setting up an offshore structure allows you to move your business from a high-tax, strictly regulated jurisdiction to a country where you can take advantage of local company laws and liberal corporate regulations.

Due to increased demand worldwide, most countries have become popular offshore jurisdictions. Offshore companies are also known as :

– Non-Resident Company

– International Business Company (IBC)

– Exempt company

Things to remember:

To help you understand better we have reviewed the main advantages of setting up an offshore company in the UAE below:

1. No corporate tax;
2. No accounting requirements;
3. Low management fees;
4. Preservation of anonymity;
5. Asset protection;
6. Legal protection;
7. No paid-up capital requirement.

Why choose the jurisdiction of Hong Kong to set up an offshore company?

One of the main reasons why many people choose Hong Kong for their offshore company is the stability of its economy. This can be important when selecting a location for your offshore company, as it sets a precedent for long-term success as a stable economy provides business owners with a stable workforce and ensures consistent profits. In addition, Hong Kong has a generous tax policy. The country is known for its relatively low tax rates for companies and business owners.

In addition, various regions and localities have signed tax treaties with the country to provide additional tax benefits to offshore companies. As a result, business owners are able to operate with little or no tax, depending on the location of the business they establish.

Finally, one of the main advantages that individuals appreciate in owning and operating an offshore company in Hong Kong is the ability to operate a business in Hong Kong while remaining overseas. Indeed, setting up an offshore company in Hong Kong does not require immigration or presence for businesses to be established, but it will require presence if you wish to open a bank account in Hong Kong.

By working with a company secretary in the Hong Kong area, business owners can easily obtain the necessary permits to start running their business and start operations.

The ease of setting up a business, coupled with affordable taxation and a stable economy, makes Hong Kong a preferred location for many people looking to operate their business remotely.

As business owners are not required to be physically present to oversee the operation of their company, they are often not held responsible for major incidents that occur, providing the extra layer of security needed to set up their offshore company in the country.

Reasons to set up an offshore company

To conclude, there are many reasons why a person may choose to set up an offshore company in Hong Kong or elsewhere.

Whether the person intends to use it as a means of outsourcing labour, or intends to use it for tax and banking purposes, each reason is valid.

The creation of these companies allows individuals to make financial investments that secure the future of their business.

Those considering setting up an offshore company should consider the advantages and disadvantages of each jurisdiction and determine which advantages are most suitable for them.

The term “offshore” indicates that a business entity can be established outside the area where the business owner resides. The basic concept of offshore has improved considerably because of the benefits that business owners can derive from it.

The concept of globalisation has allowed business owners to conduct business activities in different locations. In general, an offshore company is a company incorporated in a country different from the country of residence of the shareholders, and is generally intended not to carry out business activities in that particular country.

Merritt Asia’s support

Our team has been based in Hong Kong since 1998. We can assist you with your company formation project and its follow-up. Moreover, we are qualified to be your company secretary as required by Hong Kong law. For more information, please contact us at support@merritt.com .