First of all, let’s understand the offshore companies; these are those entities that are set outside the jurisdiction of a particular country to enjoy tax exemptions. The term is normally used for a company whose head offices are a location in countries which are a known tax havens. Following are the major advantages of an offshore company along with tax exemption being the major:
Advantages of an Offshore Company
- Low Taxes are imposed and in some cases, zero taxes are applicable to such organizations.
- Such companies can open accounts in multiple currencies in order to avoid the hit that they might get upon conversion.
- They have the permission to own assets with different names.
An offshore company is free to do business with any other company that is operating in a normal manner. The company may even get into international contracts. A typical offshore company will do business in some other part of the world and pay taxes according to the tax haven in which it is registered. Hence saving a lot of capital as compared to the situation in which it was to be a situation in the non-tax haven country. Normally an offshore company is a corporation with a limited liability, the liability is normally limited to company’s shares. The shares can be owned by one or more than one person. The Company’s management, however, comprises of Directors.
In the end, it can be said that an offshore company is not anything illegal but the motive behind it distinguishes. There is a need to draw a line when tax evasions can be stopped. When a company’s motive is to evade taxes then it tends to get into a dirty business like money laundering, financing terrorism and drug trafficking.
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