However, there are positive and negative aspects to consider with every business decision - going offshore is no exception. We look at the expert advice of company formation services and business consultancy managers on going offshore, with a complete appraisal of the potential pitfalls.
The first thing your offshore investment business consultant will look at is whether your particular company type and cash flow patterns will be eligible for the full range of offshore benefits.
For example, if you currently reside in the UK, and have a certain portion of control of the company from your position in the UK, tax authorities may consider that your offshore investment business is simply an overseas arm of a UK company, and tax you accordingly. Corporations tax on worldwide profits would be levied, wiping out most of your potential benefits.
Even for companies that are not considered tax-resident in their owner's home countries, if there is an office in that country which derives a portion of its profits from the overseas operation, it is possible that UK tax will have to be paid on the entire amount of profits. There are some exceptions, where the UK has negotiated taxation treaties with other countries, and your investment management services will have the entire details of these.
A worst-case scenario for those thinking of offshore bank account opening and company incorporation is that you are liable for taxation on profits derived by an overseas company you transfer capital to ... even if you never see those profits yourself. Your tax liability would eventually be increased, rather than decreased. This is why professional advice is absolutely essential.
Even if your particular type of company is suitable for offshore incorporation, there are several business issues that company formation services will need to ensure won't impact on your day-to-day running for you.
In many jurisdictions, offshore investment businesses are prohibited from (or penalized for) conducting business or retaining employees from this jurisdiction. Some jurisdictions require a license to carry out certain types of trade, and due diligence on bank account opening tends to be stricter.
If your business requires loans for start-up, equipment, or to cover business expenses in the future, certain types of companies will be recommended over others by your investment management services. The privacy that offshore company formation affords you can also make it difficult for potential lenders to determine your net worth, and they may refuse loans on this basis.
Since the seizing of assets will be legally much more difficult in the case of offshore companies, even secured loan applications may be consistently rejected.
Many of these drawbacks are easily avoided by seeking expert advice before incorporation - go for a full service business consultancy management firm, rather than cheaper, quicker options to avoid wasting money, rather than saving it.
Zetland Fiduciary Group provides the offshore investor with investment management,corporate advisory services and Financial consultancy in Hong Kong.
Tags: finance, taxes, china financial services, asset protection hong kong, company secretarial services hong kong