|
Investment Holding Company
Both individuals and large companies regularly
use offshore companies as vehicles to hold investment
portfolios, which may consist of cash, stocks,
bonds and other investment products. Cash assets
held by offshore companies can earn deposit interest
gross or can be placed in collective cash funds.
Offshore companies are regularly used for inheritance
purposes and to reduce probate expenses. Such
companies can provide privacy and may save legal
and other professional fees.
Property Holding Company
Another form of offshore holding company
that has gained a lot of interest and popularity
in recent years is using a company to hold property
and property rights in an offshore location. Such
companies are used to avoid capital gains taxes
on property when it is sold, as well as inheritance
taxes. This type of structure also provides privacy
which ensures tenants are unaware of the property
owner’s identity.
The sale of property held by such an offshore
company can be arranged easily by transferring
the shares in the company and thus avoiding stamp
duty payable by the purchaser.
A high net worth individual with properties or
other assets in a number of countries may wish
to hold these using a personal holding company
so that upon their demise the need to obtain probate
in each country is avoided. This will save on
legal fees and avoids publicity.
International Trading Company
International trading is the purchase of goods
in low cost production countries e.g. China, India,
Thailand etc. and selling them to distributors
in high income market areas e.g. USA, Europe,
Australia etc., where the actual trading operation
may take place from a third country. The goods
bought by the trading company are sent directly
from the country of origin to the country where
they are to be sold.
Significantly improved profits can be achieved
by forming a company which will be used as a trading
medium for buying, shipping, and selling the goods.
Most of the profits will be retained by the new
trading company that would otherwise be lost in
taxation to authorities at the original home location
of the trading operation.
Professional Service Companies
Many individuals engaged in providing services
in construction, engineering, aviation, computer,
finance, film and entertainment can achieve considerable
tax savings via an offshore-based private company.
Individuals receiving consulting income can be
employed by a company incorporated in a low or
no tax jurisdiction and the fees generated will
flow into this company. The offshore company can
contract with an individual to provide him/her
with services outside his/her normal country of
residence and personal income can be accumulated
free from taxation in the offshore centre.
It is possible to minimise income tax through
proper planning and representation of your personal
income.
Finance Companies
Offshore finance companies are normally established
for the purpose of inter-group treasury management.
Interest payments from group companies may be
subject to withholding tax, but these taxes differ
from the standard corporation taxes. Many large
companies establish their own offshore companies
for the purpose of mixing dividends of subsidiaries
and deriving maximum advantage from tax credits.
The interest paid can be a deductible charge for
taxation purposes, thus consolidating interest
payments in an offshore finance company provides
a tax saving.
In certain countries, foreign exchange losses
are not deductible for tax purposes. For example,
if an offshore finance subsidiary that has been
set up suffers a foreign exchange loss and that
subsidiary company is then liquidated, the investment
should be a tax-deductible item for the parent
company.
Offshore finance companies are also used for leasing,
particularly where an offshore structure is rich
in funds which, if they are not invested, may
be repatriated or subject to high levels of corporate
taxation.
|
