An onshore company is a business entity which is formed and managed within the jurisdiction of the hosting country. The legal status determines the obligations of the company towards the country's jurisdiction, such as detailed corporate documentation, obligatory management protocols, auditing and reporting, and tax payments.
The benefits of the onshore jurisdictions include favorable regulation and taxation policies for companies operating outside of the jurisdiction, broad networks of tax treaties, developed business, banking and supporting sectors, and many more.
Most onshore corporations enjoy these benefits only when operating a business outside of the country's jurisdiction.
An offshore company is a business entity which is formed in, but managed outside of the country's jurisdiction. The legal status determines the requirements that the company should conduct within the country's jurisdiction.
Being the preferred corporate structure nowadays, an offshore company offers many advantages, such as limitation of investors' liability, minimization of or exemption from tax, Confidentiality and privacy protection, cost reduction and risk management.
Choice of Jurisdiction
A jurisdiction is chosen based on various criteria, such as common fiscal policies, taxation treaties, fiscal and geopolitical reputation, fiscal or geographic proximity to other jurisdictions and the country's legal system.
Certain jurisdictions offer better protection of assets or property, while others offer lower taxation and simpler incorporation procedures.
It is highly recommended to obtain a professional advice before making a choice, in order to have the optimal choice of jurisdiction and to integrate all business considerations.
Many jurisdictions offer preferred terms to other jurisdictions with which they have mutual taxation treaties. Such terms could include lower withholding taxes for funds transferred between jurisdictions, exemption from tax on dividends, royalties or interest, simplified fiscal policies and the like.
An optimal structure shall reflect the individual or the entity's origin, the destination jurisdiction (where actual business is operated), different holding ratios, the type of business (services, financial, retail, asset holding, etc.), need of peripheral consultancy or management services, and benefit of taxation treaties.
Formation of a corporation typically requires the following items:
- Choice and registration of the corporate name
- Declaration of the authorized share capital
- Registration of company seat, agent, director(s), secretary and other domiciliary requirements
- Declaration of beneficial owner(s)
- Opening of a bank account
- Registration with relevant tax authorities (where applicable).
(requirements may vary from one jurisdiction to the other)