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Draft Implementation Rules of the BVI Economic Substance Law

The British Virgin Islands (BVI) recently...

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VIE structure and functions

VIE, namely variable interest entity, also known as agreement control,...

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You may have come across information about offshore companies in the media, but it can be fragmented and difficult to understand. In this article, we aim to provide a clear and concise explanation of what offshore companies are and how they operate.

The process of registering an offshore company is not complicated. Regardless of the size of the company, expanding the market and driving growth requires a deep understanding of the market context, customer behavior, purchasing habits, and changing expectations.

With our extensive market knowledge and experience, our professional team provides timely and well-organized communication and education. We stay informed about changes in the market environment and determine the best time to take action, enabling us to develop and implement the most effective strategy for success.

I.What is an offshore company?

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  • Offshore companies are similar to domestic companies in that they can open bank accounts, own property, conduct business, sign written agreements, trading, and engage in other forms of business activities.
  • They are also known as international business companies (IBC or Offshore IBC).
  • An offshore company is typically a company established in a country or region that is different from the country of residence of the company’s owner. This means that it does not engage in any economic activities in that specific country or region. For example, if your business operates in Europe and uses a Hong Kong company to conduct European trade while conducting business activities outside of Hong Kong to take advantage of benefits such as Hong Kong’s income tax exemption, some may wonder if this is a violation of the law.”
  • It is common to associate offshore companies with criminal and corrupt individuals who seek to evade taxes. While this may be true in some cases, many companies use offshore companies for legitimate reasons. Just like any other type of company, offshore companies are subject to the laws of their jurisdiction, allowing for legal business conduct.”

II.What are the pros of registering an offshore company?

  • Why do you need to set up an offshore company? Offshore companies can offer benefits to a variety of entities, including intellectual property holders, consultants, traders, e-commerce providers, cryptocurrency investors, and international investors. The purpose and operating methods of offshore companies can vary, and the conditions and advantages of offshore companies registered in different locations can also differ. So, what exactly are the benefits of establishing an offshore company?
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Obtain tax incentives:

You can take advantage of tax incentives offered by offshore companies, which often have low or no taxes, contributing to the growth and expansion of your business. Every country is a part of the global tax market and provides its own unique resources and tax system. You can "shop around" by the tax policies and plans of various countries or regions. Keep in mind that using an offshore company does not exempt the owner from personal tax liabilities in their home country. However, with careful planning, offshore companies can help reduce, defer, or even eliminate certain taxes that would otherwise be due.

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Investment holding:

Establish offshore companies to invest in entities in various countries to reduce investment risks. Private funds pooled through offshore holding companies can be invested in investment projects around the world, accumulating returns and capital gains in a tax-free or low-tax environment, and the profits obtained can be stored, distributed or reinvested, making funds highly flexible Sex and flexibility. At the same time, the use of overseas holding companies will provide investors with additional confidentiality and serve as a firewall for overseas investment, reducing investment risks that are difficult to predict.

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International trade:

Conduct triangular trade or cross-trade in the international market. Offshore companies can serve as trade intermediaries for sales, distribution, import, and export. Purchase products directly from manufacturers or wholesalers using offshore companies and arrange for direct delivery from the place of production or purchase to foreign end customers. Domestic importers can use offshore companies to buy goods from abroad, and domestic producers can use them to distribute their products. The profits earned from the difference between the purchase and sale prices can be accumulated in a tax-free environment. These profits can be reinvested in business development, streamlining operations and fund management, and can also help control and mitigate the risk of daily fluctuations in international exchange rates.

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Intellectual property (IP) protection:

Offshore companies can hold the intellectual property rights to protect your company's patents, trademarks, copyrights, and other IP assets from infringement and secure them from potential litigation and political instability. An extra layer of protection is added when your company is located overseas, as those seeking to locate your company's assets must file a lawsuit in the jurisdiction where your company was established.

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Asset planning:

Effective and flexible asset planning for personal and family. High-net-worth individuals who own property or other assets in foreign countries may wish to hold these assets through a personal holding company to avoid the need for obtaining multiple certifications in each country regarding inheritance matters in the future. This saves on legal fees and protects assets from inheritance taxes or higher tax rates.

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VIE structure-function

Variable interest entity, also known as agreement control, is a legal business structure in which investors still have controlling rights even though investors do not have the majority voting rights. VIE actually controls a company not by holding shares but by signing agreements.

III.How to set up an offshore company? Steps of incorporation of your offshore company:

  • Offshore company registration is fast, and both individuals and companies can apply. The establishment of an agent company is entrusted, and there is no need to register in person.
  • The steps for offshore company registration are as follows:
O.C. establishment process
  • Step 1: Consult a professional agency service company
    In an uncertain economic environment, it has become increasingly important to conduct careful risk and return analysis. Smart investing strategies often stem from avoiding financial mistakes, identifying good investment opportunities, taking calculated risks, and saving as much as possible. Therefore, it’s crucial to regularly rebalance your investment portfolio to ensure it aligns with your goals and objectives.
  • Step 2: Choose the location of the offshore company and make the right plan
    How to choose the most suitable offshore company? What are the characteristics and principles of different offshore companies? How to understand the conditions and norms of each country/region? It is recommended to find a trusted company service provider. Professional agency companies can clearly understand the applications and operations of each offshore company, including how to formulate the correct strategic structure based on customer needs (for example, does the company structure involve multi-country and cross-regional planning? Which offshore company should I choose to register? Where should I open my bank account?) Each customer’s needs will not be the same, so only by clearly understanding the individual operational needs and understanding what the best plan is.

Offshore company selection comparison table

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The above information is for reference only, and the actual need to be subject to local implementation regulations.

  • Step 3: Prepare the required documents
    After confirming the necessary plans, select the company name and confirm the investment documents about directors and shareholders, and submit the passport/address proof.
  • Step 4: Registration is completed,and the offshore company registration documents will hand over to the client.
  • Step 5: Bank account opening
    A comprehensive offshore company service includes not only registering the company but also opening a bank account. An offshore company without a bank account is useless, so we provide practical assistance in opening a bank account to ensure the company can function as intended.

IV.Strengthen the highly flexible and diversified global layout

  • The evolution of offshore companies has shifted from covert to transparent, from tax exemption to preferential treatment, and from trade to investment. Coupled with modern algorithms and big data processing, compared to the past, the evolution in recent years has made engaging in international investment much smoother and less cumbersome, much like the task of changing tires in F1 racing.
  • However, what we want to express is that the past mode of operating offshore companies is outdated and no longer as straightforward as it appears to be. Individual companies or investors should select the proper combination and sequence to efficiently operate and implement their plans. The optimal strategy arises at the crossroads of thorough preparation and chance, and propels us towards the future!
  • Inter Area Market Intelligence Team is familiar with the establishment of offshore companies and helps customers understand the functions of offshore companies. We provide our customers with the most complete, fast, and reliable services, including planning, registration, practical case studies, and related notes, as well as the latest information. Our focus is on the customer’s practical investment background and purpose. Different products and services bring new experiences and determine future value.
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V.How to register an offshore company? Frequently Asked Questions Q&A

Q1.How long does it take to apply for an offshore company (working days)?
A: The entire process may take 3 days to 3 weeks, depending on which country or region the company is established in.

Q2. Are there any restrictions on the registered English name of an offshore company?
A:Yes, the company name usually ends with “Limited”, “Corporation”, “Incorporation”. The use of certain words in the company name is restricted or prohibited. 

Like related to specially licensed activities-such as Bank, Assurance, Society, Trust. In fact, you can use these words, but only if you go through a prior permission process designed to carry out a particular activity. For example, to allow the use of “bank” in your company name, you must apply for a bank license from the local Financial Services Commission. 

Another type of restricted words is those that incorrectly imply some kind of official connection or sponsorship. Words like “Government, Imperia, Chamber of Commerce, Municipal, etc., of course, cannot use “Royal”.

Q3. Does the offshore company’s capital need to be in place?
A:No, the registration system is adopted for the establishment of offshore companies, and the registered capital does not need to be in place. 

Certain offshore companies do not even need to specify any authorization or registered capital amount in their establishment documents. Of course, if the business environment requires it, it can choose to do so.

The company only needs to state how many shares it owns (this can determine the percentage of the company held by any particular shareholder), but there is no requirement to attach a fixed monetary value to each share.

Q4.How many people can establish an offshore company?
A:It needs to be established in accordance with the laws and regulations of various countries, but generally only one person can be established in areas such as the British Virgin Islands, Seychelles, Samoa, and a small number of registrations such as Singapore companies will additionally require a local director.

Q5.Do I need to go abroad to set up an offshore company in person?
A:The person in charge of the company does not need to go to the local area to set up an offshore company. The person in charge only needs to provide relevant information and sign the company establishment documents, and then entrust a professional secretary company to handle it.

Q6. How to maintain the effectiveness of offshore companies?
A:The government of the country where the offshore company is registered will collect annual fees on time every year to maintain its effective existence. Some areas still need to comply with local laws and regulations for additional declarations. 

Generally, before the expiration, the secretarial agency will notify the client in advance to let the client confirm whether it will continue to exist. 

If you want to continue, you need to pay an annual fee in order to maintain your offshore company while the company continues to operate. Maintain a good legal status under the regulations of the country of registration.

Q7.Where should offshore companies choose to register?
A:This is one of the most frequently encountered problems. 

What is your purpose of setting up an offshore company? Depending on the features you want, the country/region will be different. In addition, it largely depends on the type of business you have. Then there are the issues of nationality and country of residence, in addition to some considerations. 

This is why it is necessary to consult a professional agency company to guide the client through all the steps and ensure that nothing is overlooked. Some of the most common countries for offshore companies are BVI, Seychelles, Samoa, Singapore, Hong Kong, the United Kingdom… etc. 

Where to register, these countries/regions need to be evaluated according to your purpose. You may want to avoid certain jurisdictions altogether, while other jurisdictions only apply to certain types of businesses. After all, an offshore company that is helpful to Customer A may not be helpful to Customer B.

Q8. If the offshore company is no longer used, do I need to cancel it?
A: If an offshore company confirms that it is no longer in use, traditional offshore establishments such as Samoa, Virgin Islands, etc., generally small businesses or individuals can choose not to renew the annual fee, but some offshore establishments such as Hong Kong and Singapore You need to apply for cancellation separately.

However, it is still necessary to pay attention to the non-renewal of the annual fee, and the company that does not renew and cancel shall still be responsible for any due and unpaid fees. 

The company is also liable for all its obligations and debts. Companies that have not renewed fees shall not legally continue to trade or conduct any new transactions, and their directors, shareholders, managers, and owners shall not conduct any transactions with company assets. 

Because in essence, the company can still apply for reinstatement with the Registrar within the time limit without renewing the payment but not canceling it. However, depending on the length of time overdue, additional government fees and fines will be charged.

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