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Last updated: 13 Apr 2020

Difference between onshore and offshore

It is crucial for any entrepreneur to make a decision on where he/she wishes to register their company. “Offshore”, “Onshore”, “Mid-shore” terms refer to different types of jurisdiction in which a company can be registered. In this article, we will shed light on key differences between these types.

Offshore vs Onshore: Key differences that you should know

Definition “offshore” vs “Onshore”

Getting started with the term “offshore” can make you easier to understand this type. Offshore generally indicates another place, regardless of its land or water based, situated outside of your national boundaries. An offshore company refers to an entity incorporated or registered in jurisdictions which provide favorable tax treatments, especially tax-free or low tax advantage. A key highlight for any offshore company is that it is not allowed to carry out any business activities within the jurisdiction where that company is incorporated/registered.

Read more: Offshore company: An efficient path moving your business overseas

There’s a striking contrast between “Onshore” versus “Offshore” companies. An onshore company illustrates the entity registered or incorporated in a nation and its sole purpose is to conduct business within that particular country. An onshore company does not attach to any kind of preferential tax treatments like offshore companies. Due to this distinct feature, you can find out onshore companies typically registered in such an economically developed jurisdiction with high tax rate applied.

Advantages of offshore vs onshore

Every year, there are millions of offshore companies to be registered in the most commonly used jurisdictions like Belize, Seychelles, The British Virgin Island, etc. Why choose offshore company? Well, in addition to a range of tax benefits, the offshore company in most jurisdictions:

  • Can be registered quickly just for several days, or even 24 hours.
  • Can obtain more financial and privacy-related advantages. Evidentially, an offshore company, more often than not, can benefit from:
    • Minimal financial and auditing requirements
    • No monetary control
    • No obligation for company owners to reside in the offshore host country

Another key difference between onshore and offshore lies in its incorporation process. You can have an offshore company incorporated through a faster and simpler procedure compared to that of onshore company.

On the opposite side, onshore company is a widely used option as it helps companies:

  • Minimize cultural as well as language barriers
  • Allow it to be easier for the communication process as well as monitoring the business outsourced projects thanks to the same time zone

Disadvantages of offshore vs onshore

Despite some of its outstanding features, especially so much attractive to new startups and entrepreneurs who desire of expanding their business overseas, the offshore company has some drawbacks as the followings:

  • Normally, offshore companies are subject to a fixed amount of fee on an annual basis.
  • In order to be qualified as a legal offshore company, the particular company also must satisfy certain requirements of which its business activities should not fall into some “restricted” categories for conducting business as per in the rules of the offshore country.

It is also noteworthy that making the decision on the best-fit offshore jurisdiction for a company can take much of time and require great efforts of research. It is highly recommended that you should engage a trusted service provider to save time and resources for your offshore company formation.

Onshore companies, on the contrary, link with some disadvantages:

  • Onshore companies are more likely to conduct most of their businesses in the country of registration; therefore, they are required to comply with the state control and the local set of rules as well.
  • Unlike offshore company which can benefit from non-disclosure treatments in some offshore jurisdiction, details of identity of onshore company owners are less privacy. Most information of beneficial owners of an onshore company are normally divulged to the public.
  • For an onshore company to be established you also need to prepare for a more complicated process and more money to deal with the hiring and training of employees. 

Mid-shore company: Feature between Offshore and Onshore

It may be lesser-known when it comes to the “mid-shore” term. As its name denotes, “mid-shore” stays somewhere between “offshore” and “onshore”. In fact, a mid-shore company is an entity which is featured of both offshore and onshore. This type typically is suitable for non-resident companies who wish to expand the business internationally with various partners throughout the world. It is noted that despite bearing similar facilities like offshore jurisdictions, mid-shore locations set out specific structures and procedures for the company incorporation.

Mid-shore company is a combination of offshore and onshore ones; thus, it also offers a fair tax rate for business with all international laws regarding tax transparency guaranteed, and allows them to open bank account worldwide. The increasing popularity of mid-shore jurisdiction for company incorporation is obvious, and it is believed to be a more preferred option for international companies in the future.

Examples of some common mid-shore countries include:

  • Singapore
  • Hong Kong
  • Malta
  • Cyprus
  • Labuan
  • Ireland
  • UAE

Talk to us

To summarize, the onshore company is a good choice for the proximity and easy communication, while mid-shore company is growing its popularity for great features between onshore and offshore, and offshore companies now are to be a top of trend for most investors looking for doing business overseas by dint of its attractive benefits. Different types of companies will be appropriate for different companies’ goals and demands. It is important to distinguish these types and consider whether offshore, onshore or mid-shore is best suited to your company. 

Still feel uncertain about difference between offshore vs onshore vs mid-shore? Don’t hesitate to contact us via email, or drop us a live chat with our expert!

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