What is an offshore company?

Offshore companies are a certain type of legal entities which are incorporated under the laws of a jurisdiction but operate in the different jurisdictions, that is to say their economic activities are not deployed at their statutory seats, and of which the shareholders and other beneficiaries reside in another country than where the offshore companies have their legal seats. Classic tax haven countries such as Bermuda, British Virgin Islands, and the Cayman Islands are quintessentially offshore jurisdictions, and companies incorporated in those jurisdictions are normally labelled as offshore companies.

The offshore companies are just the same as the ordinary companies in some aspects. For example:

1. Offshore companies are the same as the other companies in essence;

2. Offshore companies are also registered in accordence with law.

Although all offshore companies differ depending on the company law in the related jurisdictions, all offshore companies tend to enjoy certain core characteristics:

1. The corporate regimes will be designed to promote their business flexibility;

2. Regulation of corporate activities will normally be lighter than in other countries;

3. They are broadly not subject to taxation in their jurisdictions. However, the certain degree of absence of taxation or regulation in their jurisdictions does not exempt the companies from taxation or regulation abroad;

4. Information about shareholders and directors of offshore companies is limited to the public. This varies from jurisdiction to jurisdiction. In the Cayman Islands, there is almost no publicly available information. In Hong Kong, companies file annual reports with particulars of directors, shareholders and annual accounts. However, even in jurisdictions where there is relatively little information available to the public, most jurisdictions have laws permitting authorities (either locally or from overseas) or even private individuals in certain cases to have access to relevant information.

When you are planning to establish a company in the so-called tax haven, you need to get a general understanding of the laws and policies of your intending incorporation jurisdiction, and you also need to collect the relevant legal information so as to avoiding unnecessary risks.