What is an offshore company?

An offshore company is a legal entity created in a foreign country for commercial, financial or tax purposes. The term "offshore" refers to the fact that the entity is located outside the territory where the company's operations are carried out or where its head office is located.

Offshore companies are primarily used to take advantage of tax and financial benefits, as well as to protect the privacy and confidentiality of the company's owners and operators. These companies are registered in countries with more favourable and less restrictive tax regimes than those of the company's home country, allowing them to reduce taxes and operating costs. For this reason, it is important to consult a business advisor before setting up or using an offshore company.

Some of the main benefits offered by offshore companies include:

• Low taxes or tax exemptions in the country where they are registered.
• Confidentiality and privacy in commercial and financial transactions.
• Protection of the assets and wealth of the company's owners and operators.
• Access to international markets and business opportunities.

It is important to note that offshore companies are not illegal per se, but their use may be subject to regulations and restrictions in some countries. In addition, it is important to note that some practices of using offshore companies may be considered as tax evasion or money laundering, which can have serious legal consequences.

How is an offshore company set up?

The creation of an offshore company involves following a legal process that varies depending on the country where you want to register the entity. However, in general, the main steps in setting up an offshore company are as follows:

• Choosing the country of registration: The first step is to choose the country where the offshore company will be registered. It is important to consider aspects such as legislation, taxation, registration costs and reporting requirements.
• Choose the type of legal entity: Depending on the country chosen, the type of legal entity that best suits the needs of the company should be selected. For example, some options may be a public limited company, a limited company or a limited liability company.
• Registering the company: Once the country and type of legal entity has been chosen, the corresponding registration process must be followed. This includes filing the necessary documentation with the relevant authorities and paying the registration fees.
• Opening a bank account: Once the offshore company has been registered, it is necessary to open a bank account in the country where the entity has been registered. This will allow for transactions and management of the company's finances.

Functioning of an offshore company

The functioning of an offshore company is similar to that of any other legal entity, but with some particularities related to its registration and location in a foreign country. Some relevant aspects of the operation of an offshore company are described below:

• Registration and incorporation: An offshore company is registered and incorporated in a foreign country, which allows it to take advantage of the tax and financial benefits offered by the country where it is registered. In some cases, the offshore company may be registered in a tax haven, i.e. a country that offers minimal regulation and supervision and tax benefits to attract investors.
• Administration and management: The offshore company has a governance structure similar to that of any other company, with a board of directors, shareholders and management. Shareholders and directors may be citizens of the country where the offshore company is registered or of other countries. In many cases, intermediaries or agents are used to administer the offshore company, which can ensure the privacy and confidentiality of the owners and operators.
• Tax and financial benefits: The main advantage of an offshore company is that it can take advantage of the tax and financial benefits offered by the country where the entity is registered. For example, it may be exempt from taxation, have access to more flexible regulation, have a less restrictive legal framework and offer greater privacy and confidentiality for commercial and financial transactions.
• Commercial operations: The offshore company can conduct commercial operations anywhere in the world, allowing it to access international markets and business opportunities. Commercial operations can be related to any economic sector, from import and export to real estate investment or financial asset management.

Which countries are offshore?

Some of the countries best known for offering these types of benefits are:

1. Cayman Islands: This is one of the world's leading offshore financial centres. It offers a favourable tax regime, with low taxes and a flexible regulatory framework.
2. Switzerland: It is a financial destination known for its privacy and banking confidentiality. It offers an attractive tax regime for foreign investors and companies.
3. The Bahamas: Another offshore financial destination known for its privacy and banking confidentiality, as well as its favourable tax regime.
4. Panama: A country known for its favourable tax regime, low tax burden and flexible regulatory framework.
5. Singapore: An offshore financial centre in Asia offering an attractive tax regime and a stable regulatory framework.
6. United Arab Emirates: An offshore financial destination in the Middle East known for its low taxation, privacy policy and stable regulatory framework.