The term "offshore company"
For most people, the term "offshore company" is associated with ideas of tax avoidance, money laundering and secrecy. However, the reality is more complex and varied. In this article, we shed light on what offshore companies really are, what types there are and how this area is changing as a result of new regulations.
What does the average person understand by offshore? The common associations with offshore structures are often negative. Many people think of tax avoidance, asset protection in a legal gray area or opaque financial activities in countries with looser laws. The word "offshore" itself conjures up images of islands in the Caribbean or other exotic locations.
What are offshore companies really? In essence, offshore companies are simply companies that are established and registered outside the country or jurisdiction of their owner. The reasons for this are varied and not always illegal. Legitimate motives can be tax avoidance within the legal framework, international financial management or the protection of assets.
"If the taxation in my home country is too high and the existence of my company is jeopardized, I will move my company elsewhere. That's the principle of the free market and that's how it should be.
Types of offshore structures
There are various forms of offshore companies and structures. Here are a few examples:
- Completely offshore: The entire company structure is located outside the owner's home country without any connection to it.
- Partly offshore: The holding or parent company is registered offshorewhile operating subsidiaries are located in the home country or other countries.
- Offshore bank account: A bank account opened with a bank in a jurisdiction other than the account holder's home country.
The best-known offshore locations are tax havens such as the Bahamas, Cayman Islands or Panama. Other popular financial centers are Switzerland, Singapore and Luxembourg.
Regulatory changes and their impact
In recent years, international agreements such as the agreement on the automatic exchange of information (AEOI, CRS) have led to offshore activities becoming more transparent. Most well-known offshore financial centers have signed up to the AEOI (CRS).
This means that financial institutions in these countries must now transfer account information of foreign nationals to their home countries. This softens the once strict confidentiality of many offshore locations.
For company owners and investors who legally use offshore structures for tax optimization or asset protection, this trend is a challenge. Completely non-transparent offshore solutions are becoming increasingly rare.
The loopholes are closing for those who have misused offshore companies for illegal purposes such as tax evasion or money laundering. Regulators and authorities can track capital flows and assets more easily.
This reduces private capital, which also leads to instability on the global market. Unfortunately, even double taxation agreements (DTAs) do not always solve these problems in favor of capital owners.
The best-known offshore countries and the AEOI (CRS)
When you think of offshore destinations, the following countries and territories often come to mind:
LLC formation by experts
Affordable LLC company formation, also payable in installments!
Also anonymous company formation in the USA!
Found a company in the USA with a bank account as investment protection or as a start-up for your online business idea!
- Switzerland
- Luxembourg
- Singapore
- Bahamas
- Cayman Islands
- Bermuda
- British Virgin Islands (BVI)
- Panama
- Isle of Man
- Malta
For a long time, these were considered the most famous "tax havens" and offshore paradises in the world.
However, the myth of these countries as places with impenetrable banking secrecy and complete lack of transparency has changed in recent years. The reason for this is the Agreement on the automatic exchange of information (AEOI)which most of these financial centers have now joined.
Of the ten offshore destinations mentioned above, all have long since signed the AEOI (CRS).
| Country | Year of joining | Effects on companies and bank accounts |
|---|---|---|
| Switzerland | 2018 | Switzerland has signed the AEOI with some restrictions and reservations that limit the application of the agreement for certain accounts and companies. Nevertheless, most accounts and companies are affected by the automatic transfer of information. |
| Luxembourg | 2017 | Luxembourg has signed the AEOI and is therefore obliged to automatically pass on information about financial accounts and taxpayers in other countries to these countries. This can lead to higher tax obligations in their home country for the owners of offshore companies and bank accounts in Luxembourg. |
| Singapore | 2018 | Singapore has signed the AEOI and is therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. This may result in higher tax obligations for owners of offshore companies and bank accounts in Singapore in their home country. However, Singapore has some exemptions for certain companies and accounts that are not covered by the treaty. |
| Bahamas | 2018 | The Bahamas has signed the AEOI and is therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. This can lead to higher tax obligations in their home country for the owners of offshore companies and bank accounts in the Bahamas. However, strict banking secrecy laws still apply in the Bahamas for accounts opened before 2017. |
| Cayman Islands | 2017 | The Cayman Islands have signed the AEOI and are therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. This may result in higher tax obligations for owners of offshore companies and bank accounts in the Cayman Islands in their home country. However, the Cayman Islands has some exemptions for certain companies and accounts that are not covered by the treaty. |
| Bermuda | 2017 | Bermuda has signed the AEOI and is therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. This may result in higher tax obligations for owners of offshore companies and bank accounts in Bermuda in their home country. However, Bermuda has some exemptions for certain companies and accounts that are not covered by the treaty. |
| British Virgin Islands (BVI) | 2017 | The British Virgin Islands (BVI) have signed the AEOI and are therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. This may result in higher tax liabilities for owners of offshore companies and bank accounts in the BVI in their home country. However, the BVI does have some exemptions for certain companies and accounts that are not covered by the treaty. |
| Panama | 2018 | Panama has signed the AEOI and is therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. This can lead to higher tax obligations in their home country for the owners of offshore companies and bank accounts in Panama. However, Panama has some exceptions for certain companies and accounts that are not covered by the treaty. |
| Isle Of Man | from 2016 | The Isle of Man has signed the AEOI and is therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. |
| Malta | from 2016 | Malta has signed the AEOI and is therefore obliged to automatically pass on information about bank accounts and taxpayers in other countries to these countries. |
By participating in the AEOI (CRS), these countries are obliged to automatically transfer information on bank accounts and assets of foreign citizens to their respective home countries. This means a significant loss of confidentiality and privacy for offshore structures in these jurisdictions.
The once strict Protection of banking secrecy and the possibilities for complete anonymity for offshore companies and accounts have thus been severely restricted. While these countries continue to offer attractive locations for legal tax optimization and asset protection strategies, they must now adhere to significantly higher transparency and compliance standards.
The myth of the completely isolated and secretive offshore paradise is no longer entirely true for the majority of well-known financial centers. International regulations such as the AEOI (CRS) have led to greater openness and monitoring.
In search of the unknown
We did not take the USA into account - that was a mistake!
One destination that is often overlooked is the USA itself - or more precisely, certain US states:
- Wyoming, Nevada, Delaware and New Mexico offer extremely cost-effective and remote company formations for foreigners.
- For company formations in these countries, there are no Corporate income tax or trade tax (watch out for withholding tax).
- Profits are only taxed as personal income at the director level (income tax), and for non-US citizens, income on US soil is tax-free.
- The USA has not joined the AEOI (CRS), which means that US banks do not have to automatic messages about accounts of foreigners to their home countries.
- Sales tax, sales tax deduction is not mandatory.
Anonymous and legal
States like Wyoming and Nevada also allow a largely anonymous company formation without disclosing the beneficial owners. Registered agents can serve as contact persons instead of the actual owners.
Thus, certain US states fulfill the four main criteria for offshore havens for non-US citizens:
- No taxation at company level
- Absolute Data protection the owner
- Liberal regulation of the corporate structure
- Banks without an obligation to report automatically to other countries
The myth of the completely foreign "tax haven paradise" is no longer entirely true for the majority of well-known financial centers. Thanks to regulations such as the AEOI (CRS), many have become less transparent. The USA itself, and some states in particular, have become an often overlooked offshore destination.
Unbeatable value for money
In addition, the Founding a company in the USA makes it possible to open a bank account without personal presence and high fees. Unlike the thousands of euros required as an initial deposit at banks in banana republics, opening an account in the USA is free and does not require a personal presence as is the case in banana republics.
Deutsch (Sie) 
English 
Français 
Русский