Following our discussion on the the roadmap to your offshore business venture, it is time for you to decide where to incorporate your business.
The choice can be complicated as there are various factors to be taken into consideration. Each offshore jurisdiction carries its own set of advantages, benefits, and possible issues.
While it is very difficult to get a definite answer, we’ve summarized a list of popular offshore locations as well as some recommended options that are worth looking into!
1. Tips on choosing the best offshore company jurisdictions
There are many things that you need to consider before determining the best place for your offshore company. Below are some recommended questions for self-check:
- Reason to incorporate: What are your expected benefits? Does the offshore location meet your needs?
- Jurisdiction reputation: Does that offshore location have a stable economy, politics, legislative system, and corporate laws? Is it included in the “blacklist” or “grey list” by EU Council?
- Taxation: Are there any special taxes or exempted status imposed on offshore companies? Under what circumstances may your company be liable to tax?
- Business structure: How many business structures are available? Are you allowed to incorporate your structure of choice (e.g. IBC, LLC, Pte, or Ltd) in that jurisdiction?
- Incorporation cost: How much is the incorporation cost in your chosen offshore location? Which countries offer the lowest incorporation cost?
- Compliance requirements: What are reporting requirements for your company if it carries on a business within that offshore jurisdiction?
- Business banking: Do you need a corporate bank account to run your business in that jurisdiction? What are the options of local and international banks available there? Does the country’s banking system allow the opening of offshore debit or credit cards, merchant account, or cryptocurrency accounts?
- Processing time, residency situation, the availability of tax treaties: How long does it take to incorporate your company in that offshore jurisdiction? Are there any residency requirements for your company directors, shareholders, or company secretary when moving offshore? Does that offshore country have any signed double taxation agreements or tax treaties that can be applicable to your business?
2. Examples of best offshore company jurisdictions for foreigners
Below are some common offshore jurisdictions for foreigners to incorporate their company, along with each place’s most recommended business structure:
2.1. Hong Kong
Hong Kong is top-listed as an ideal country for offshore company formation for its strong international reputation and beneficial business schemes, including:
- 100% of foreigner’s ownership
- Business-friendly tax regime: Free corporate tax for foreign-sourced profits, low tax rate from 8.25% to 16.5%
- Free sales tax, capital gain tax, dividends, and interest tax
- No exchange controls
- Open trade policy, competitive economy, the independent legal system
- Financial hub with 75 out of the 100 largest banks in the world
- Ease of access and entrance point to mainland China
Among many choices, Limited Company is the most common type of business entity in Hong Kong. It is popular among start-ups, entrepreneurs, and those looking for international trading businesses.
Below are some advantages and disadvantages of Hong Kong Co., Ltd that might worth your consideration:
- Shareholder’s liability is limited to the amount of shares
- Any change of company’s shareholders does not impact the existence of the company
- The company can enter contracts, acquire assets, sue or be sued under its own name
- Transfer of ownership can be done wholly or partially by selling or releasing the shares
- The company needs to fulfill compliance requirements on an annual basis with CR and IRD
- The identity information of shareholders and directors must be disclosed to the public
- Maintenance and dissolution for Hong Kong limited company are quite complicated
There are other factors of Hong Kong business entity types that you might want to consider, so it’s worth taking a look at other articles for more information!
Singapore is another fast-growing commercial center in Asia, also known as the promised land for start-ups, entrepreneurs as well as investors in respect of commodity trading and wealth management. Some key highlights of Singapore business nature include:
- Transparent tax scheme: Only businesses conducted in Singapore are taxed; the corporate income tax is capped at competititve rate of 17%
- More than 70 tax treaties available between Singapore and foreign jurisdictions
- Partial tax exemption schemes and various incentives for startups and investors, especially in fintech and technological innovation industries
- One of the world’s top-notch banking systems
- High-skilled workforce, beneficial visa schemes for foreigners
A private limited company is the most popular option to incorporate in the city-state. Either individuals or body corporate can be shareholders of a Singapore private limited company.
Below are some advantages and disadvantages associated with this type of entity:
- Shareholder’s liability is limited only to their shares and they are not personally liable for the business’s debts
- The company can own property, enter contracts under its own name
- Any change of members does not impact the existence of the company
- The ownership can be transferred completely or partly by transferring to another
- The company can enjoy many tax schemes for tax reduction
- Follow annual compliance requirements with ACRA and IRAS
- Maintain accounting and other relevant documents
2.3. British Virgin Islands (BVI)
British Virgin Islands is a well-known tax haven and financial offshore jurisdiction. The reasons behind the attractiveness of the BVI maybe its ease of setting up a company and its cost-effectiveness in comparison with the company incorporation in other offshore locations like the Cayman Islands.
In addition, there are some other pull factors that make the BVI become one of the top pick offshore jurisdictions:
- Tax exemption for profits derived outside of the BVI (*)
- Ease of doing business and banking
- USD as an official currency
- No currency exchange control
- No annual meeting requirements
- No financial statements, annual return requirements
BVI Business Company (BVI BC) is among the most popular vehicle for foreigners seeking offshore investments, international trade, savings, corporate banking, estate planning, and other purposes. A BVI BC can enjoy favorable tax benefits and reduced compliance requirements by virtue of the islands’ business-friendly offshore environment.
Unlike Hong Kong and Singapore, where the publicity of identity information is a key requirement, offshore countries like the BVI are highly confidential. The details of the BVI BC’s beneficial owner, directors, and shareholders are only disclosed with the competent authority (the Registrar) and the Registered Agent, but not publicly available.
2.4. Cayman Islands
The Cayman Islands is another well-recognized offshore incorporation jurisdiction.
The BVI and Cayman Islands share many common features with each other. Both are leading offshore financial hubs for international business services, linked with economic and political soundness, the simple incorporation process, and a set of their tax-related advantages for investors and offshore players.
The key comparison may lie in its incorporation cost. Cayman company formation tends to charge you a higher price than the BVI.
One widely-selected offshore business type in the Cayman Islands is Limited Liability Company (LLC).
A Cayman LLC does not pay local corporate tax for any earnings generated outside of its jurisdiction (**). There are no direct taxes, no exchange control, and minimal reporting requirements for LLCs.
Cayman LLC is also an ideal option for business seekers of asset protection, investment funds, private equity transactions, securitizations, movable or immovable assets holdings, etc.
For more information of how this company structure works, simply check out our guideline of Cayman Islands LLC.
Belize is a golden site for overseas businesses, high net worth individuals and international investors to move offshore. Belize provides fairly competitive cost of formation, swift incorporation process in combination with a set of preferable privacy policies and tax benefits for non-residents.
What can make you attracted to Belize offshore jurisdiction?
- Among the top highest per capita income in Central America
- Official currency is USD
- Tax exemption on overseas income
- Simple and straightforward incorporation process
- No accounting requirements or tax return
- High level of confidentiality and privacy in terms of records of directors and shareholders, and account related information
- The prominent banking sector to support for businesses: high liquidity ratio of banks, remote bank account opening, and low deposit.
International Business Company (IBC) is one of the most common business structures for foreigners in Belize, and it is also among the fast IBC Registry. It normally takes only 1 to 2 days to incorporate a Belize IBC, or even in just a few hours.
Belize IBCs are a low-tax entity (***). It offers a favorable incorporation cost and fairly competitive fixed annual fee compared to the required amount from many other offshore countries.
Ras Al Khaimah, or RAK in short, is one of seven fastest-growing emirates of the United Arab Emirates. RAK has the highest degree of industrialization in the UAE, and it is the prospective destination for a large number of foreign investors and business owners.
RAK company formation is now high in demand since it allows you to carry out almost all types of business activities, especially for holding companies, consultancy, financial service companies, investment, or international trading.
- 100% ownership of foreigner
- Tax neutrality in respect of foreign-sourced earnings
- No obligation for a specific currency used as the company’s capital
- No limit on bank transfer and deposit for share capital
- Guaranteed confidentiality regarding the register of company members
- No annual reporting or accounting requirements
- Fast incorporation in 1 or 2 working days
Effective from 1 January 2019, a number of offshore countries including Cayman Islands, the BVI, Belize, and RAK have enacted Economic Substance to ensure the tax benefits are eligible in EU standard manner.
With respect to the economic substance rules and their relation to tax implications, there are certain notes that should be taken into account.
One important point is that if your incorporated company (e.g. IBCs, LLCs, LLP, other than a domestic company, under the respective laws) falls under the in-scope entities of Economic Substance Regime in that particular jurisdiction, then your company must be subject to specific reporting requirements as well as subject to tax (if applicable).
If you want to understand everything about Economic Substance and its compliance requirements, then make sure to check out our comprehensive overview and detailed guideline.
3. Where are the best countries to set up an offshore company?
Find the country that will suit your needs and work best for your company! It is also crucial to invest your time to understand your choice, consider relevant factors (the jurisdiction’s reputation, trustworthiness, tax policies, compliance requirements, et cetera), and then narrow down the list to reach the best-suited option.
To save time and resources, you can also engage a professional offshore service provider to get practical advice on your specific needs and circumstances. BBCIncorp Limited has had more than 12 years of experience in offshore incorporation services. Our expert team has worked through thousands of cases with our clients across the globe. We aim at simple, fast, and transparent services for our clients in setting up their company overseas!
Still uncertain about your choice? Feel free to get in touch with our experienced consultants for more practical advice!