INCORPORATING AN OFFSHORE COMPANY TO MANAGE YOUR VENTURE

Offshore financial centres are often (but not always) current or former British Colonies or Crown Dependencies, and often refer to themselves simply as offshore jurisdictions.

The term is fluid to a certain extent, and it has been remarked more than once that whether a financial centre is characterized as "offshore" is really a question of degree.

The IMF considers the following to be characteristics of an offshore financial centre:

Jurisdictions that have relatively large numbers of financial institutions engaged primarily in business with non-residents;

Financial systems with external assets and liabilities out of proportion to domestic financial intermediation designed to finance domestic economies; and Centres which provide some or all of the following services: low or zero taxation; moderate or light financial regulation; banking secrecy and anonymity.

Views of offshore financial centres tend to be polarised. Proponents suggest that reputable offshore financial centres play a legitimate and integral role in international finance and trade, offering huge advantages in certain situations for both corporations and individuals, allowing legitimate risk management and financial planning.

Critics argue that they drain tax from wealthy (and not so wealthy) nations, are insufficiently regulated, and facilitate illegal activities such as tax evasion and money laundering while avoiding legal risk under corporate veil.

Proponents point to the tacit support of offshore centres by the governments of the United States (who promote offshore financial centres by the continuing use of the FSC) and United Kingdom (who actively promote offshore finance in Caribbean dependent territories to help them diversify their economies and to facilitate the British Eurobond market).

OPIC a U.S. government agency, when lending into countries with underdeveloped corporate law, often requires the borrower to form an offshore vehicle to facilitate the loan financing. One could argue that US external aid statutorily cannot even take place without the formation of offshore entities.

What is certainly true of offshore financial centres is that recently they have attracted a great deal more attention than in the past, and international initiatives spearheaded by the OECD, the FATF and the IMF have had a significant effect on the offshore finance industry.

A number of smaller, less regulated jurisdictions figuratively went to the wall, and closed up shop. Most of the principle offshore centres that remained considerably strengthened their internal regulations relating to money laundering and other key regulated activities.

On 23 February 2007 The Economist published a survey of offshore financial centres; although the magazine had historically been very hostile towards OFCs, the report represented a shift towards a very much more benign view of the role of offshore finance, concluding: "although international initiatives aimed at reducing financial crime are welcome, the broader concern over OFCs is overblown.

Well-run jurisdictions of all sorts, whether nominally on- or offshore, are good for the global financial system."

Taxation

Although most offshore financial centres originally rose to prominence by facilitating structures which helped to minimise exposure to tax, tax avoidance has played a decreasing role in the success of offshore financial centres in recent years.

Although most offshore financial centres still charge little or no tax, the increasing sophistication of onshore tax codes has meant that there is often little tax benefit relative to the cost of moving a transaction structure offshore.

Most professional practitioners in offshore jurisdictions refer to themselves as being "tax neutral", referring to the fact that, whatever tax burdens the proposed transaction or structure will have in its primary operating jurisdiction or market, having the structure based in an offshore jurisdiction will not create any additional tax burdens.

For example, international joint ventures are often structured as companies in an offshore jurisdiction when neither joint venture party wishes to form the company in the other party's home jurisdiction, but both parties wish to ensure that the company's jurisdiction of incorporation will not attract unwanted tax consequences.

Many offshore financial centres used to "ring fence" offshore companies formed in those jurisdictions (International Business Companies formed in the British Virgin Islands were a good example).

However, recent international pressure has brought an end to ring-fencing in most jurisdictions, and most offshore financial centres simply restructured their tax codes so that the activity of the offshore companies, whilst technically subject to tax in the jurisdiction, was never likely to result in tax being assessed.

Critics of offshore financial centres argue that a lack of transparency in offshore financial centres means that they are vulnerable to being used in illegal tax evasion schemes.

A number of international organizations also suggest that offshore financial centres engage in "unfair tax competition" by having no, or very low tax burdens, and have argued that such jurisdictions should be forced to tax both economic activity and their own citizens at a higher level.

Another criticism leveled against offshore financial centres is that whilst sophisticated jurisdictions usually have developed tax codes which prevent tax revenues leaking from the use of offshore jurisdictions, less developed nations, who can least afford to lose tax revenue, are unable to keep pace with the rapid development of the use of offshore financial structures.

Most offshore financial centres now promote themselves on the basis of "light but effective" regulation, and generally only seek to regulate high-risk financial business, such as banking, insurance and mutual funds.

An extremely high proportion of hedge funds (which characteristically employ high risk investment strategies) who register offshore are presumed to be driven by lighter regulatory requirements rather than perceived tax benefits.

Many capital markets bond issues are also structured through a special purpose vehicle incorporated in an offshore financial centre specifically to minimise the amount of regulatory red-tape associated with the issue.

Some offshore jurisdictions have sought to replicate this success with equity issues by forming local stock exchanges, but these have not been a notable success to date.

A number of internet-based businesses have recently set up business in offshore financial centres which, whilst lawful in the offshore financial centre, would not be lawful in its target market.

Critics of offshore financial centres suggest that they are not effectively regulated in all areas, and in particular that they are vulnerable to being used by organised crime for money laundering.

However, partly in response to international initiatives and partly in a defensive move to protect their reputations, most offshore financial centres now apply fairly rigorous anti-money laundering regulations to offshore business.

Some even argue that offshore jurisdictions are in many cases better regulated than many onshore financial centres.

For example, in most offshore jurisdictions, a person needs a licence to act as a trustee, whereas (for example) in the United Kingdom and the United States, there are no restrictions or

regulations as to who may serve in a fiduciary capacity.

Some commentators have expressed concern that the differing levels of sophistication between offshore financial centres will lead to "regulatory arbitrage", and fuel a race to the bottom, although evidence from the market seems to indicate the investors prefer to utilise better regulated offshore jurisdictions rather than more poorly regulated ones.

Critics of offshore jurisdictions point to excessive secrecy in those jurisdictions, particularly in relation to the beneficial ownership of offshore companies, and in relation to offshore bank accounts.

The criticisms are slightly difficult to assess. In most jurisdictions banks will preserve the confidentiality of their customers, and all of the major offshore jurisdictions have appropriate procedures for either law enforcement agencies to obtain information regarding suspicious bank accounts.

Most jurisdictions also have remedies which private citizens can avail themselves of, such as Anton Piller orders, if they can satisfy the court in that jurisdiction that a bank account has been used as part of a legal wrong.

Similarly, although most offshore jurisdictions only make a limited amount of information with respect to companies publicly available, this is also true of most states in the U.S.A., where it is uncommon for share registers or company accounts to be available for public inspection.

In relation to trusts and unlimited liability partnerships, there are very few jurisdictions in the world that require these to be registered, let alone publicly file details of the people involved with those structures.

However, there are certainly well documented cases of parties using offshore structure to facilitate wrongdoing, and the strong confidentiality laws in offshore jurisdictions have clearly played a part in the selection of an offshore vehicle for those purposes.

The bedrock of most offshore financial centres is the formation of offshore structures.

Offshore structures are characteristically involve the formation of an:

Offshore Company

Offshore Partnership

Offshore Trust

Private Foundation

Offshore structures are formed for a variety of reasons.

Legitimate reasons include:

Many corporate conglomerates employ a large number of holding companies, and often high-risk assets are parked in separate companies to prevent legal risk accruing to the main group (ie. where the assets relate to asbestos, see the English case of Adams v Cape Industries).

Similarly, it is quite common for fleets of ships to be separately owned by separate offshore companies to try to circumvent laws relating to group liability under certain environmental legislation.

Wealthy individuals who live in politically unstable countries utilise offshore companies to hold family wealth to avoid potential expropriation or exchange control restrictions in the country in which they live.

These structures work best when the wealth is foreign-earned, or has been expatriated over a significant period of time (aggregating annual exchange control allowances).

Many countries from France to Saudi Arabia (and the U.S. State of Louisiana) continue to employ forced heir ship provisions in their succession law, limiting the testator's freedom to distribute assets upon death.

By placing assets into an offshore company, and then having probate for the shares in the offshore determined by the laws of the offshore jurisdiction (usually in accordance with a specific will or codicil sworn for that purpose), the testator can sometimes avoid such strictures.

Mutual funds, Hedge funds, Unit Trusts and SICAVs are formed offshore to facilitate international distribution. By being domiciled in a low tax jurisdiction investors only have to consider the tax implications of their own domicile or residency.

Wealthy individuals often form offshore vehicles to engage in risky investments, such as derivatives trading, which are extremely difficult to engage in directly due to cumbersome financial markets regulation.

In countries where there is either exchange control or is perceived to be increased political risk with the repatriation of funds, major exporters often form trading vehicles in offshore companies so that the sales from exports can be "parked" in the offshore vehicle until need for further investment.

Trading vehicles of this nature have been criticised in a number of shareholder lawsuits which allege that by manipulating the ownership of the trading vehicle, majority shareholders can illegally avoid paying minority shareholders their fair share of trading profits.

Offshore jurisdictions are frequently used to set-up joint venture companies, either as a compromise neutral jurisdiction (see for example, TNK-BP) and/or because the jurisdiction where the joint venture has its commercial centre has insufficiently sophisticated corporate and commercial laws.

Successful companies who are unable to obtain a stock market listing because of the underdevelopment of the corporate law in their home country often transfer shares into an offshore vehicle, and list the offshore vehicle.

Offshore vehicles are listed on the NASDAQ, AIM, the Hong Kong Stock Exchange and the Singapore Stock Exchange. It is estimated that over 90% of the companies listed on Hong Kong's Hang Seng are incorporated in offshore jurisdictions. An article in the Daily Telegraph in March 2007 indicated that 35% of companies listed on AIM during 2006 were from OFCs.

Large corporate groups often form offshore companies, sometimes under an orphan structure to enable them to obtain financing (either from bond issues or by way of a syndicated loan) and to treat the financing as "off-balance-sheet" under applicable accounting procedures.

In relation to bond issues, offshore special purpose vehicles are often usedin relation to asset-backed securities transactions (particularly securitisations).

Legitimate Purposes Include:

Highly indebted persons may seek to escape the effect of bankruptcy by transferring cash and assets into an anonymous offshore company.

The Enron and Parmalat scandals demonstrated how companies could form offshore vehicles to manipulate financial results.

A number of high profile money laundering investigations have indicated schemes facilitated by offshore structures.

Although numbers are difficult to ascertain, it is widely believed thatindividuals in wealthy nations unlawfully evade tax through not declaring gains made by offshore vehicles that they own.

It is often suggested that offshore vehicles might be used to assist terrorist financing, although exhaustive investigations have yet to obtain any evidence of this.

Proponents of offshore jurisdictions argue that because their regulatory structures tend to be designed to focus closely on high risk geo-political areas, and since September 11, 2001 attacks all financial institutions tend to scrutinise United Nations embargoed persons lists with enormous care in international transactions, trying to use offshore structure for terrorist financing would be like putting a red flag on it.

Although these structures are characteristically set up as companies, they can also be set up as trusts or partnerships, and many offshore jurisdictions offer specialised forms of these entities (for example, the STAR Trusts in Cayman and the VISTA Trusts in the British Virgin Islands).

Many offshore jurisdictions specialise in the formation of collective investment vehicles, or mutual funds.

The market leader is the Cayman Islands (the Cayman Islands have been estimated to home to about 75% of world's hedge funds, with nearly half the industry's estimated $1.1 trillion AUM, followed by Bermuda, although a market shift has meant that a number of hedge funds are now formed in the British Virgin Islands.

By incorporating the investment vehicles (usually an offshore company, offshore trust or private foundation) offshore, the promoters seek to minimise additional tax complications for incoming investors.

But the greater appeal of offshore jurisdictions to form mutual funds is usually in the regulatory considerations.

Whilst most well regulated offshore jurisdictions do regulate who may form mutual funds, and restrict the class of investors who may subscribe in the fund accordingly, offshore jurisdictions tend to impose few if any restrictions on what investment strategy the mutual funds may pursue.

Offshore jurisdictions also tend not to limit or regulate the amount of leverage which mutual funds can employ in their investment strategy. This has had the natural effect of pushing more and more high risk funds (particularly hedge funds) offshore.

Many offshore jurisdictions (Bermuda, British Virgin Islands, Cayman Islands and Guernsey) also allow promoters to incorporate segregated portfolio companies (or SPCs) for use as mutual funds; the unavailability of a similar corporate vehicle onshore has also help fuel the growth of offshore incorporated funds. SPCs are particularly well suited for the formation of umbrella funds.

A tax haven is a country or territory where certain taxes are levied at a low rate or not at all.

Individuals and/or Corporate entities can find it attractive to move themselves to areas with reduced or nil taxation levels.

This creates a situation of tax competition among governments. Different jurisdictions tend to be havens for different types of taxes, and for different categories of people and/or companies.

There are several definitions of tax havens. The Economist has tentatively adopted the description by Geoffrey Colin Powell (former Economic Adviser to Jersey):

"What ... identifies an area as a tax haven is the existence of a composite tax structure established deliberately to take advantage of, and exploit, a worldwide demand for opportunities to engage in tax avoidance."

The Economist points out that this definition would still exclude a number of jurisdictions traditionally thought of as tax havens.

Similarly, others have suggested that any country which modifies its tax laws to attract foreign capital could be considered a tax haven.

According to other definitions, the central feature of a haven is that its laws and other measures can be used to evade or avoid the tax laws or regulations of other jurisdictions.

In its December 2008 report on the use of tax havens by American corporations, the U.S. Government Accountability Office was unable to find a satisfactory definition of a tax haven but regarded the following characteristics as indicative of a tax haven.

A “company” or a “corporation” is what's called in legal-speak a juridical person, or a corporate body. A corporation can have and do much of the same as any private individual – it can own assets in its own name, enter into contracts, acquire rights and obligations liable for its actions.

So, same like an adult human being, a corporation normally has own legal personality. Even a corporations' life is somewhat similar to that of a human being – a corporation is “born” (by a fact of registration in an official Registrar) and it can “die” (by being dissolved or liquidated).

Own purpose. As this article primarily deals with what is popularly known as “offshore company”, a question may arise: what is the difference between an offshore company and an “ordinary” company?

Structurally – there is no substantial difference! An offshore company will quite simply be the same sort of corporation, just created outside the usual domicile country of its owner(s).

So, as far as semantics go, “offshore” for an American can be Canada, or Russia ... or British Virgin Islands. Quite simply, offshore is something that is not onshore.

However, for quite some time, the term “offshore” has been used in a much narrower sense – pointing to a company, which is not only formed outside the normal domicile of its actual owner, but is also enjoying a number of cool extra benefits.

For instance, it can be free of taxation. Free from onerous reporting and book-keeping requirements. Free from burdensome capitalization rules. Free from the necessity to register its owners on a public file. Fast and easy to register. Simple to maintain and operate.

That's what most people would deem as an “offshore company”. However, structurally, this offshore company still retains most of the components of a “regular” company.

Following is a description of the main elements and components of an offshore company, in particular, as applicable to a British Virgin Islands Business Company.

Offshore companies, like onshore corporations, use shares to reflect their ownership. Shares are in essence units of internal accounting, which represent a participation of an owner in the company.

Taking (or buying) a share in a company means simply that a person has agreed to invest some of his personal money, or assets, or intellectual rights or property into the company.

When he does so, he acquires the right to participate in the profits of the company, in proportion to his share.

In addition to the right to receive dividend, the shareholder would also usually have the right to participate in the decision-making process of the company – although this may not be the case with non-voting shares

There Are A Few Different Types Of Capital.

This is the total amount of money that the company has been allowed (by its Memorandum of Association) to cash in from the prospective shareholders in return for giving out its shares to them.

In theory the Authorised Capital is supposed to be just that amount of money which the principals of the company have decided to pool together in order to get the business going, until the company breaks even and revenue stream is sufficient to support its operations.

Most offshore jurisdictions have a minimum required Authorized Share Capital, and the share capital selected usually affects the fixed government fees payable.

In British Virgin Islands, a more flexible alternative have been introduced, whereby the Business Company may elect to state only the number of shares it will issue, but it does not have to determine the monetary value of its capital.

Thus, the company may issue its shares at a “market value”, or rather at a value that its first owners deem fit, depending on the capitalization requirements of the company.

Thus, a company with the same 50'000 shares may decide to issue its shares at 1 US cent, or 1 hundred euros, or 5 thousand pounds sterling each, and thus raise substantially different amounts of capital from its would-be shareholders, depending on its capitalization needs and plans of the shareholders.

Indeed, in this time and age it should be recognized that a company may not need a single dollar of capital, if it has a super-original business idea – or may need to be highly capitalized for a cash-intensive project.

Flexibility on a structural level, as provided by the BVI Business Companies Act, is therefore very useful.

This is the amount of money that the prospective shareholders actually agree to invest in return for their shares.

The Subscribed Capital can quite often be less than the Authorised Capital.

This would simply mean that the company has actually issued (or sold) only a part of its shares to the shareholders, whereby the remaining shares stand by, unmissed and idle.

Thus, if company ABC has an Authorised Share Capital of 50,000 shares and John agrees to take 1000 shares, and then the company's subscribed share capital is 1000 shares.

Regardless of the fact that he only took 2% of the Authorised Capital, John would still own the company fully, until another shareholder comes in.

If the company also issues 1000 shares to Mary, the company's subscribed share capital is 2000, and each of John and Mary would own 50 percent of the company (1000 shares each of the total issued 2000).

The exact procedures and methods of accepting new shareholders, subscribing to and issue of shares are usually determined in detail by the Articles of the offshore company.

This document, or a set of documents, represent a number of important official decisions carried out by the Subscriber or by the Registered Agent after the offshore company is incorporated.

These Resolutions Shape The Internal Structure Of The Company.

The First Resolutions would contain information about the name, Registered Address and registration number of the new company and they would establish who the Registered Agent of the company is, who are appointed director(s) of the company, how many shares are being issued to the shareholders, and who those shareholders are. Sometimes, as the case may be, the First Resolutions would also deal with appointing a Secretary to the offshore company, appointing what is an offshore company, anyway?

Accountant, auditor, attorney or any other consultant or advisor to the company, resolving to open a bank account with a particular bank and appointing the account signatories to such account, appointing someone to act as Agent for the company, etc.

The First Minutes or First Resolutions are usually signed by the Subscriber or by the Registered Agent of the company.

The First Minutes is usually the best document to look at if you wish to quickly get to know all the important particulars of the company. Usually, the First Resolutions are not getting filed onto a public registrar (unlike Memorandum & Articles), but some of the information contained in those Resolutions can be filed as an option, if the company owners want it to be filed.

So, for example, in British Virgin Islands the particulars of the Directors and Shareholders of a Business Company MAY be filed with the Registrar (and thus, become part of the public record), if the beneficial owners of the company so wish.

Obviously, when the offshore company commences operations, there may be further changes in its structure.

Resolutions on such changes may be carried out by the Directors or by the Meeting of Shareholders of the company, depending on the weight of the decisionand on how the Memorandum and Articles prescribe such decisions to be carried out.

Normally, all Resolutions as to any structural changes or replacements in a company must be kept on file with the Registered Agent of the Company.

If such resolutions are not carried out by, or in the presence of the Registered Agent, they should be submitted to the Registered Agent for due filing and registration on the (internal) file of the Company.

To incorporate itself officially, a company files one original of its Memorandum of Association and Articles of Association with the Registrar of Companies.

These documents can be brief or very detailed, depending on the applicable corporation's law, on the standards adopted by the particular company formation agent and on the particular requirements of the client.

The Memorandum and Articles provide the legal “skeleton” of the company, by setting forth all the general parameters of the company.

Usually these documents describe the form and type of the company, state its Registered Address and Registered Agent, list the operational objects of the company or state that the operation of the company is not limited to Any particular objects, determine its Authorised Capital, if any, and how it should be paid up and how the shares should be issued and allocated, what types of shares the company will have, and what sort of rights will be attributed to any particular type of shares, how the directors and officers will be appointed and how they can be replaced or dismissed, what are their rights, obligations and responsibilities, how the shareholder's meetings are called and held, the acceptable quorum for such meetings and how corporate resolutions shall be adopted, which resolutions will require what type of majority to be approved, the procedures of keeping accounts, how the company can enter into liquidation, etc.

The Memorandum and Articles of an offshore company will usually signed by a person called “Subscriber” or “Incorporator”, or by the Registered Agent of the company, or affiliated entity.

The Registered Agent essentially incorporates the offshore company for the client and signs the formation documents on clients' behalf.

This relieves the client and actual owner of the offshore company from the necessity to travel to the particular offshore jurisdiction in order to sign the incorporation paperwork.

In fact, in British Virgin Islands signature of the incorporation documents by the actual owners would accomplish little, because new Business Company incorporations would anyway only be accepted by the Registrar through and from licensed Registered Agents.

The initial Subscriber usually subscribes for the legally acceptable minimum amount of shares in the company.

After the registration of the company, the initial Subscriber may remain registered on public file and act as nominee shareholder, or the amount of shares that he holds can be transferred to a different shareholder, as required by the client.

The actual management (directorship and practical operation) of your BVI Business Company will mostly fall into one of the two main options:

Option 1: Company directed by the owner.

You, the beneficial owner, can be appointed as the Director of Your Business Company.

At Your wish this appointment may be directly logged on public file in the Registrar of Companies - or may not be registered, if anyone so desire.

The Registrar of Director(s) will also be held by us, the Registered Agent in the Registered Address of the Company.

Obviously, the particulars of the Company Director will also show up in some of the main documents of the Company.

Option 2: Company directed by an appointed Director (nominee).

In this case the directorship of the company is taken by a professional Director.

This position is also commonly known as "Nominee Director" or "Third-party Director"

The Directorship service can usually be provided by the Agent (us), as we are appropriately licensed, approved and supervised by our Regulator (the Financial Services Commission) to carry out such service.

Certainly, the owner of the company may just as well requre anyone else to be appointed as the Company Director.

This can be any person whom the owner trusts.

An offshore company is a flexible business instrument and as such can be integrated into a wide variety of tax planning and asset protection arrangements.

Reduced or deferred tax liability and increased confidentiality are just two of the benefits which can be achieved by proper application of an offshore company.

The practical implementation of an offshore strategy will of course depend on the anti-avoidance laws that may be in force in the country where the beneficial owner is citizen, is domiciled or does business.

Therefore to all potential customers we recommend to obtain a qualified tax advice from a specialist in your country of residence, domicile or proposed business operations.

An offshore company may act as a trading intermediary in sales, distribution, import & export, buying and selling.

The company would typically buy directly from the manufacturer or wholesaler and arrange the goods delivered directly to the end-customer from the place of production or purchase.

This can be of particular interest where goods originate from one country, are sold in another, yet the principal is located in a third country.

An offshore procurement company can be used by a domestic importer to source goods abroad, or an offshore sales company can be used by a domestic producer to distribute the goods.

The profits arising on the difference between purchase and sales price may be accumulated in a tax-free environment.

Such profits can be re-invested into further development of the business, without incurring any excess tax liability.

There are about fifty countries in the world that offering various tax benefits to non-residents, thus promoting what is called offshore business.

Some of those countries are extremely popular and widely perceived as offshore tax havens - like British Virgin Islands, Panama or Seychelles.

At the same time interesting tax breaks to non-resident businesses are actually available in some places that are not at all recognised as “offshore” for instance, UK, US, Denmark or Netherlands.

And there are all sorts and types in between. So, which is the best jurisdiction to incorporate an offshore company?

There is really no standard answer. The choice of the right offshore jurisdiction will depend on the intended use of the offshore company, the personal and business circumstances of its owner, and the actual regions of the world where this company intends to trade.

But, before going into the details, what is a tax haven, anyway?

According to a formulation by the OECD (Organization for Economic Co-operation and Development), a tax haven is a jurisdiction which actively makes itself available for the avoidance of taxes which would otherwise be paid in a higher tax jurisdiction.

The keyword here is “tax avoidance”. There is another one: “tax evasion”.

From purely legal point of view, tax avoidance is legal, while tax evasion is a crime.

Basically, tax avoidance is structuring ones' business affairs in such a way that minimum possible amount of tax is payable, without still breaking the law.

In principle, the whole international offshore financial services industry is about tax avoidance, not tax evasion.

An offshore jurisdiction, therefore, is one that offers certain attractive instruments or opportunities for tax avoidance, and for asset protection.

In its broadest and historical sense, offshore also means simply a jurisdiction other than your own. So, for a Canadian, United States is technically “offshore”, because it's on the other side of the border.

However, it's the practical meaning that usually prevails. There, offshore means a country or territory which offer specific benefits or incentives, mostly tax concessions.

Such benefits can be available to (A) foreigners and non-resident businesses, or (B) to all businesses registered and situated in that country, regardless of their ownership and area of operation.

Increasingly, option B becomes more popular amongst the more advance offshore tax havens.

The concessions and benefits may come in different forms.

It may be a zero income tax for all (British Virgin Islands Business Companies), a complete tax exemption for all international business operated by non-residents (Seychelles or Belize International Business Companies), an ultra-low income tax for international businesses (Seychelles Special License Companies pay 1.5% tax), local tax exemption for non-residents of that jurisdiction (Gibraltar, Channel Islands); zero tax on receipt and distribution of dividends (holding companies in Cyprus, Denmark, Netherlands), tax holidays for certain types of investments (Portugal, Iceland); favourable tax treatment through treaties and agreements with the investor's home country (Cyprus, Netherlands, Malta).

In addition, some countries offer superior legal protection from creditors and potential litigants who might attempt to seize an individuals' wealth.

This is the other most important reason why offshore jurisdictions are so popular – asset protection.

Sometimes, asset protection may not even have a tax motive, although most usually both are related. It's just safer to be offshore.

Strict banking secrecy regulations, supported by stiff criminal penalties for those who might breach them, blanket confidentiality provisions for trust and company management firms, minimum information on public file are only some of the reasons why someone's' assets are often better protected offshore than at home.

So, what are the most important questions that need to be evaluated before the choice of a particular offshore jurisdiction is made?

As we are an international offshore incorporation service provider ourselves, this might perhaps not be the best question to speculate on, for fear of a biased opinion. Nevertheless, just some considerations for your own judgment.

To start with – what is an offshore service provider anyway?

They tend to differ, but generally all do the same type of job. The 'product' or, rather as the name suggests, the 'service' being offered the following are the main applications of offshore companies:

By an offshore service provider is the incorporation and registration of an offshore company or an offshore trust at a request of a client, who would be the “beneficial owner” of the offshore company.

The offshore corporate service provider is also supposed to take care of the administration tasks necessary to maintain the offshore company in good legal health (also known as “good standing”) in its country of registration.

This support usually includes the provision of the Registered Address and Registered Agent for the company, following up the annual renewal formalities of the company by acting as official intermediary between the Government and the owner of the offshore company, taking care of the mandatory annual filing and reporting requirements (if any), keeping and updating such books and records pertaining to the company as the law prescribes.

Similarly, the support and administration services would be provided to offshore trusts.

The offshore service provider would also provide various optional services which enhance the confidentiality and functionality of the offshore company.

Such services include provision of individual and corporate directors, provision of nominee shareholders, mail and fax forwarding services, document custody and re-mailing services, telephone call handling services, bank account introductions.

In some offshore jurisdictions the corporate service providers also assist the client through the more complicated matters of licensing the company to carry out some of the specifically regulated activities – offshore banking, offshore insurance, mutual funds, online gaming.

On top of that, some providers would offer certain legal assistance or tax advice, although not many do that.

This is an extract from BVI registration website.