The reasons for owning an offshore company will, of course, vary from situation to situation and we recommend that clients obtain specialist tax advice from an advisor familiar with their country of domicile/residence before establishing a company. The tax and other advantages which can be gained will depend upon the country of residence of the beneficial owner and its anti-avoidance legislation.

The following are a small selection of the uses which may be considered:-

Trading Companies:
An offshore company may act as a distributor or sales company accepting orders directly from the customer and arranging delivery of the goods direct to the customer from the manufacturer or place of purchase. The surplus arising on the difference between purchase and sales price may be accumulated free of tax. This can be of particular interest where goods are purchased in one country and sold in another, yet the businessman is located in a third country. Goods may be shipped directly from the supplier to the purchaser with the supplier invoicing the offshore company, which then invoices the purchaser at a higher price, retaining the profit offshore.

Professional Services:
A person working overseas may be able to limit his tax burden by receiving, into the country in which he is working, a fixed level of remuneration and accumulate the balance in an offshore company. Similarly, designers, authors, consultants and entertainers may assign or contract with an offshore company the right to receive fees due under a contract for services

Investment Companies:
Investment in property, stocks and shares, commodities and other assets. The offshore company may provide anonymity and tax savings. Funds accumulated can be invested or deposited throughout the world, although the funds may be subject to the tax regimes of the countries in which the investments are located. There are countries with tax free bonds or bank deposits where interest is paid gross.

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Inheritance Tax Protection:
Where a person is domiciled outside a territory and owns assets located in that territory, for instance, property, then such assets may be protected against inheritance tax and higher rates of taxation by holding the assets through an offshore investment company.

Using Double Taxation Treaties:
The use of companies incorporated in certain jurisdictions may be of benefit where double taxation treaties exist between the offshore jurisdiction and the country in which an investment (business/enterprise) may be made. Good examples of this are Mauritius (which has double taxation treaties with India and China) and Cyprus (which has many, but of significance are those with the ex-Russian states).

Royalties/Patent/Copyright Holding Companies:
The purchase or assignment of the right to use a copyright, patent, trademark or know how by an offshore company which may accumulate the royalties received in the tax haven. In some circumstances the royalties may be subject to withholding tax at source, however, the interposing of a second company in another jurisdiction may reduce the rate of tax withheld at source.

Shipping Companies:
Ships or yachts may be owned by an offshore company and registered in an offshore jurisdiction which can prove a cheaper and more tax efficient method of ownership.

Overseas Property:
Many of the difficulties and expenses associated with investment in overseas property, such as holiday villas, may be avoided through the use of an offshore company to hold the title of the property. Sales of the property at a future date can be dealt with quickly and easily by the sale of the company shares to the purchaser. This also saves legal fees and overseas transfer and value added taxes levied by certain foreign countries. It can also be used to successfully avoid capital gains and inheritance taxes.

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