Offshore company as Investment Vehicle
The term “offshore” is used in at least two different ways which is as follow:
1.Legal entity which is incorporated or registered in an offshore financial center
2.Company or corporate group which engages in offshoring business services.
Generally, Offshore company or investments is mostly portrait in negative way such as investors stashing their money or avoiding taxation in their home country by routing money through offshore company. Mostly it is true that there are instances of shady offshore deals but majority of investment made through offshore company is perfectly legal. Depending on situations, offshore investment offers many advantages.
Meaning: Offshore Investment
Offshore Investment refers to a wide range of investment strategies for taking advantages offered outside of an investor’s home country. In simple words, Offshore Investment means investing money in foreign country through company registered in a jurisdiction other than one’s country of residence. Mostly investors prefer to invest outside their home country to avoid tax in their home country.
Reasons for Offshore Investment
•Tax advantages – Registering an offshore company can legally minimize the tax obligations of a business and this is often the primary reason for incorporating offshore company.
•Investment diversification – Through offshore company, investors can manage their risk by diversify investments.
•Asset Protection – An offshore company can be used as a vehicle for holding assets such as intellectual property or real estate investments.
•Lower levels of regulation – There are lower levels of regulations in offshore jurisdictions such as submission of financial statements or annual reports, as a result broader range of investment options are available to investor.
•Privacy – The details of shareholder and directors is not revealed in offshore company as such maintaining anonymity of investor. Confidential financial information helps the investor manage taxes on capital gains, income, and inheritance.
•Lower set up and maintenance costs – An offshore company can be set up with minimum cost and with less timeframe. Also, cost of maintaining an offshore company is less compared to other companies.
Arguments against Offshore Investment
•Lack of Transparency – As details of investors is not easily accessible, it can lead to suspicious transactions. An offshore investment reduces transparency, which leads to illegal activities.
•Creditability – Financial Institutions and lenders are more likely to be hesitant in approving or granting financial assistance to offshore company as they don’t have proper registered office address or details of Ultimate Beneficiary Owner (UBO).
Considering this, investment through offshore company or offshore investment has its own pros and cons. However, if investor has clear intention and wide business idea, then offshore investment can prove to be fruitful and advantageous.
This article is written by Mr. Praveen (Business Consultant at flyingcolour business setup services), Please feel free to call us at +971 4 4542366 for any further queries.
