What are offshore companies in simple terms

The motivation may range from an attempt to evade high taxes to a desire to ensure maximum confidentiality of commercial information.

Understanding the meaning of 'offshoring' becomes easier if you read through a list of key benefits:

• Easy registration of a new company.
• Low taxation right up to operating without paying taxes.
• Possibility to preserve anonymity of the real owner of the enterprise.
• Independence from the political regime of the country of operation.

The State is not very interested in the activities of such structures, because taxes are paid in the country where the company is registered. If the firm is established in Cyprus, it will also pay taxes there. This is the main feature of "offshore zones".

What types of offshore transactions there are?

Between the respondent and a foreign company

It also has several sub-types:

• For opening bank accounts. This type of transaction will be confidential. Almost no one will know about the amount of money you keep in the banks;
• To carry out exports or imports. In this situation, you will have to set up a special company which will carry out sales or purchases of goods in a simplified taxation zone;

To provide services

With the help of an offshore organisation, you will be able to obtain many services at a reduced cost, and at the same time there will be no need to tax them.
Between the offshore organisation and the party that will be making the purchase. As mentioned above, transactions can also contain a third party that will be targeted. In order to ensure that the buyer is satisfied with this type of cooperation, it is not only necessary to interest them in favourable terms and conditions, but also to conduct the transaction in compliance with the law.

Note: for the UK company formation non resident status can imply certain limitations

Transactions between an offshore organisation and a subsidiary

In fact, there are very careful checks on the activities of firms in the international market. Therefore, when such a company creates subsidiaries which do virtually all the work and receive for this a small percentage compared to the market value, this may give rise to some doubts. Such contracts should therefore be treated with the utmost care.

The nature of offshore transactions

In order to minimise possible taxation, offshore transactions are very often used in practice to maintain commercial secrecy. It is usual for very large companies to use such services. Through such an instrument, using legal provisions, the participants in the process are able to bring the system of taxation practically to zero.

They are used when:

• It is necessary to conceal the income from the transactions carried out.
• In order to conceal information about the amounts in the accounts, owners, shareholders or assets of the company.
• To conduct international trading or to protect trade secrets.

Offshore operations include the following activities:

• Purchase of certain property: buildings, firms, yachts. Offshore is used for this purpose so as not to pay taxes in the country where that person resides. However, note that the formal owner of the property will be a citizen of the country where the company will be registered.
• Forming capital and moving it out of an area where it can be taxed. You will have permanent access to the funds, so managing them will not be too burdensome.
• Buy or sell certain companies. Offshore makes it much easier to do this in terms of the simplified taxation system.

All in all, offshore operations are a whole system of different activities. In order to dive into all the intricacies, we will try to focus on explaining the most important things.