We have already discussed the roadmap to your offshore business venture ("How to set up an offshore company for 2020"). Among its key set of steps, deciding where to incorporate may be the first issue. Unfortunately, to find the answer for the best offshore company jurisdictions for foreigners, hundreds of people may generate hundreds of ideas.
While it is very difficult to get a definite answer, this given blog will walk you through useful tips to consider your best-suited offshore location as well as some recommended options for you!
- 1. Tips on choosing best offshore company jurisdictions
- 2. Examples of best offshore company jurisdictions for foreigners
- 3. Which is the best country to set up an offshore company?
1. Tips on choosing best offshore company jurisdictions
There are many things for considerations to decide your best offshore company jurisdiction. Below is the list of questions that may help you to get your best idea!
|Relevant factors||Recommended questions for self-check|
|1. Reason to incorporate|
What are your reasons to set up an offshore company?
Does the location you chose meet your needs?
|2. Jurisdiction reputation|
How was your choice of offshore location popular with respect of its tax advantage, compliance requirements, associated costs, or corporation and banking privacy?
Is that offshore location attached to the stability and soundness of its economy, politics, legislative system and corporate laws?
Has any of your choice of offshore jurisdiction been delisted in the “blacklist” or “grey list” by EU Council?
Does your choice of location levy corporate tax on offshore companies? If yes, what is the corporate tax rate imposed?
Could you get any tax related benefits, tax incentives or reliefs for your offshore status?
Under what circumstances may your offshore company be liable to tax?
Are there any tax rules specifically associated with offshore companies?
|4. Business structure|
What are company options available in your choice of offshore jurisdiction?
Does that place’s corporate law allow the formation of the business type (IBC, LLC, Pte Ltd, etc) that you are looking for?
*You may also make some comparing questions to narrow down your consideration list. For example:
“BVI’s IBC vs Cayman Islands’ Exempted Company: Which to choose?”
|5. Incorporation cost|
How much is the incorporation cost in your chosen offshore jurisdiction?
If the cost of formation is your top priority, then which countries offer the lowest cost?
|6. Compliance requirements|
What are the reporting requirements for your offshore company if it carries on a business within that offshore jurisdiction?
|7. Banking needs|
Does your choice of offshore location allow you to own a corporate bank account?
What are the options of local and international banks available there?
What are its offshore banking services available?
Does its banking system allow the opening of offshore debit or credit cards, merchant account, cryptocurrency accounts?
|8. Other factors|
How long does it take to incorporate your offshore company in that offshore jurisdiction?
Are there any residency requirements for your company directors and shareholders (some places also require the appointment of the company secretary) when moving offshore?
Does that offshore jurisdiction 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 Co., Ltd
Hong Kong is top listed ideal countries for offshore company formation. Countless things can be mentioned when it comes to the strong international reputation of Hong Kong:
- Allow 100% of foreigner’s ownership
- Offer an excellently 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
- The international financial mecca where to concentrate 75 out of the 100 largest banks in the world
- Ease of access to the growing market of mainland China
Among many choices, Limited Company is the most common type of business entity in Hong Kong. It is widely chosen by most start-ups, entrepreneurs and those looking for international trading business.
Below table represents some pros and cons of Hong Kong Co., Ltd:
|Shareholder’s liability is limited by their respective shareholdings||The company is required to fulfill compliance requirements on an annual basis with CR and IRD|
|Any change of the company’s shareholders does not impact the existence of the company||The company must disclose identity information of its shareholders and directors to the public|
|The company can enter contracts, acquire assets, sue or be sued under its own name||Maintenance and dissolution for Hong Kong limited company are quite complicated|
|Transfer of ownership can be done wholly or partially by selling or releasing the shares|
You can visit our blog Hong Kong Business Entity Types for more information!
2.2. Singapore Pte Ltd
Singapore is another fast-growing commercial center in Asia. This is the promised land for start-ups, entrepreneurs as well as investors in respect of the commodity trading and wealth management. Below are a few key highlights:
- Reputation creates Singapore’s trustworthiness
- Transparent tax scheme: Only businesses conducted in Singapore are taxed; the corporate income tax is capped at 17%, which is much more competitive than that in other jurisdictions
- The availability of over 70 tax treaties concluded 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. Further features of this business structure can be described as the following table:
|Shareholder’s liability is limited only to their shares and they are not personally liable for the business’s debts||Follow annual compliance requirements with ACRA and IRAS|
|The company can own property, enter contracts under its own name|
Maintain accounting and other relevant documents
|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|
You can learn more about Singapore LLC to get more useful information!
2.3. BVI Business Company (BC)
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 Cayman Islands.
In addition, there are some other pull factors that make the BVI become one of the top pick offshore company 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 considered to be 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. A BVI BC’s relevant details of beneficial owner, directors and shareholders are guaranteed to disclose with the competent authority (the Registrar) and the Registered Agent only, but not made publicly available.
2.4. Cayman Islands Limited Liability Company (LLC)
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, 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 offshore company formation tends to charge you a higher price than the BVI.
You may feel interested: BVI vs Cayman Islands: Which to choose?
One widely-selected offshore business type in the Cayman Islands is Limited Liability Company (LLC).
A Cayman LLC is exempted from 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, et cetera.
2.5. Belize International Business Company (IBC)
Belize is a golden site for overseas businesses, high net worth individuals and international investors to move offshore. Belize offshore company formation is set at a competitive price, 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, proving its economy health
- USD as an official currency
- 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, low deposit, et cetera
International Business Company (IBC) is the most commonly used type of business structure for foreigners to Belize. This offshore location is considered to be 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 tax-free entity (***). Not only is Belize IBC set up with a favorable incorporation cost, the fixed annual fee to the Government that you need to submit is also fairly competitive compared to the required amount from many other offshore countries.
To get more details, you can visit our article: From A to Z: Belize International Business Company
NOTE: (*) (**) (***)
Effective from 1 January 2019, a number of offshore jurisdictions like the Cayman Islands, the BVI or Belize (from October 2020) have initiated legislation for the economic substance to ensure the tax benefits under offshore structures in such jurisdictions are eligible in EU standard manner.
In respect to the economic substance rules and its relation to tax implications, there are some certain notes that should be taken into account. Key of note, among others, is that if your incorporated company (any 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 requirements as well as subject to tax (if applicable).
For this reason, please engage a professional expert/service firm to understand clearly the relation between Economic Substance and your intended offshore business!
If you wish to get to know more about ES and Tax Matters, please take your reference to Belize Economic Substance Requirements & Tax Guide
2.6. RAK International Business Company (IBC)
Ras Al Khaimah, or RAK in short, is one of seven fastest-growing emirates of the United Arab Emirates. RAK is regarded to have 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 offshore 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.
International Business Company is a highly-recommended type of business to incorporate in RAK. What are the reasons for choosing RAK IBCs?
- Allow 100% ownership of foreigner
- Enjoy 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
3. Which is the best country 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 for 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 consult our experts now!