Offshore company outsourcing is a new business practice that continues to transform economies. Offshore outsourcing means relocating business functions from one country to another in order to achieve superior and constant performance in a relentlessly competitive marketplace.
The greatest misconception about offshore business is tax evasion and hiding money from governments. No matter what you’ve heard, setting up your business offshore is legitimate. The benefits of offshore company setup are laws that protect assets and reduce the tax burden.
To set up an offshore company or relocate your existing business overseas is a crucial step towards becoming an international business. It can be quick and easy to open an offshore company and here are 8 reasons why you should do it.
Easy and Quick Set up Procedures
Setting up offshore is often a swift and easy process. Special Economic Zones have been established in some jurisdictions to help fast-track companies set up a genuine physical presence in that country. With an office and staff in these zones, a company can take advantage of the benefits of a jurisdiction, including tax-free offshore income. These SEZ’s help with business licensing, work permits, office space, offshore hosting, payment gateway and more.
Company formation red tape discourages investors from expanding their businesses to various countries. This is not the case in many popular offshore jurisdictions. In a bid to attract foreign direct investments, these territories develop and implement policies that simplify the process of incorporating a company. In general, you do not have to worry about bureaucratic processes or corrupt government officials that make company formation a painful, costly and time-consuming exercise in many onshore states.
Driven by international trade and investment, and connected by technology, globalization is quickly creating opportunities for businesses structured offshore that were not available before.
Traditional barriers are gone – growing your company means thinking globally. Your best market could be one you haven’t thought about yet, and it might just be emerging. With a global mindset and an offshore company, identifying good opportunities and moving fast is easier. Globalizing also gives an edge over the competition.
Protect Physical Assets and Preserve Intellectual Properties
Offshore companies are good vehicles for holding all kinds of global assets, including intellectual property. Some jurisdictions have strong laws regarding formation and protection of assets held by a company incorporated there, and intellectual property can be a big part of those assets. Patents are the most common type of IP, but designs and copyrights are also eligible. In some cases, even trademarks and trade names qualify for IP protection. Intellectual Property can legally be placed in a jurisdiction where its revenue is taxed at a low rate.
Forward-thinking offshore jurisdictions encourage research and development, and other work that will improve a company’s intellectual property. They understand how quickly technology is evolving and how new ideas become reality every day, so good protection is necessary.
Access New Markets
An ‘in-country-for-country’ approach enables your company to expand business reach, access new target markets and be close to end-users. Not only will your offshore outsourcing partner assist in determining the best approach for market entry, but will also provide the project management skills needed to implement the strategy.
Beyond asset protection, expanding into new markets from an offshore company is a great way to grow a business in a new region or country. Some offshore jurisdictions are perfect locations for accessing new international markets. Setting up an offshore company in Hong Kong, for instance, can help you to easily access trade markets in mainland China.
The right off-shore outsourcing partner supplements your operations with disaster recovery mechanisms and detailed backup plans so you can rapidly respond to situations, such as natural calamities, accidents, market fluctuations or technical crises and get operations back on track quickly. Not only that, should you wish to quickly expand your focus to another campaign, using a flexible off-shore outsourcing partner will allow to shift gears and make transitioning easy.
Less Red Tape
It’s simple to set up an offshore company in a jurisdiction that is a good fit for your business, and it’s easy to maintain it. To attract direct investment, local governments grant concessions and offer benefits for new companies as well as existing companies wanting to expand internationally. Laws are designed to offer flexibility in off-shore structuring and capital. There are usually no requirements to hold annual meetings, or where a company can hold meetings; no restrictions on the number of directors and shareholders. This means less paperwork because receipts or reports are not required to be filed.
Set up and managed properly, an offshore company will reduce or completely remove a business’ tax burden depending on the laws of the country incorporated. High corporation taxes can have a destructive effect on businesses. Not only do they take away a significant portion of their profits, but also force corporations to adopt cost-reduction measures, such as job cuts and low wages.
As such, the primary benefit of moving your business offshore is to take advantage of low taxes. Many off-shore territories, popularly known as tax havens, typically levy taxes at very low rates. In fact, the Bahamas, Isle of Man, Bermuda, Bahrain and the Cayman Islands don’t have any corporation taxes at all. Other forms of tax, such as property tax, personal income tax, capital gains tax, stamp duty, dividend tax and inheritance tax are either not applicable or very low.
Therefore, if you feel that the tax burden in your home country is too heavy to bear, setting up an offshore or international business company (IBC) in a zero tax jurisdiction could be the best way to ease up things.
Avoid Double Taxation
In international business, double taxation occurs when the same profit or income is taxed in two different countries. For instance, if you are a British national with business operations in the Slovak Republic or any other country that doesn’t have an active double tax treaty with the UK, your income will be subject to taxation in both territories.
To avoid double taxation, you must either set up your business in a country with a double taxation agreement with your home country or set sail to a zero-tax jurisdiction.
When offshoring, it is important to consider whether your preferred offshore territory has an active double tax treaty with your home country. This will help protect your business from double taxation in case the territory introduces corporation tax on all overseas companies.
As companies race to scale their operations, some still opt to remain exclusively onshore, putting themselves at a competitive disadvantage to their competitors who are operating from a lower-cost offshore base. While these companies may remain competitive through aggressive process improvements and cost-cutting, their opportunities for growth and improvement are limited by closing their corporate minds to the many benefits of offshore outsourcing.
Regardless of the misconceptions, you may have heard about off-shore, moving your business to a suitable off-shore territory is a sound strategy that can help to minimize business costs and maximize profits. But to fully enjoy these benefits, you must get your off-shore strategy spot on. Don’t move your operations to a territory because it’s highly recommended for your competitors recently moved there. Evaluate your reasons for off-shore, study the political and economic stability of your preferred territories, and then settle on one that best meets your needs.
So if you’ve been thinking about taking your company or idea offshore, what are you waiting for?
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