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By creating an offshore company, it is possible to secure a number of advantages.
Standard uses to which an offshore company might be put are:
Trading Organizations
An import or export organization might establish itself in an offshore jurisdiction. The offshore
company would take orders directly from the clients, but have the goods delivered directly to that client from the manufacturer or place of purchase. The profits arising out of this transaction would then be
accumulated in either a tax free location. With such trading companies, it is important to choose an offshore jurisdiction which has good infrastructure and flexible approach.
Investment Entities
Funds accumulated through investment companies set up in offshore jurisdictions can be invested
or deposited throughout the world and whilst generally returns or interest payable in respect of these funds could be subject to local taxation, there are a number of offshore areas in which funds may be placed
either in tax free bonds or as bank deposits where interest is tax free. Similarly, in many offshore jurisdictions capital gains are generally exempt from taxes. Use of an offshore company incorporated in a suitable
country allows the possibility of investing tax efficiently in a high tax country where there is a concessionary tax treaty in respect of investments made by companies incorporated in the offshore country.
Holding Entities
Offshore holding companies can be in good use - which would fund the operation of subsidiaries in
various countries so that the subsidiaries obtain the benefit of tax deductions on interest paid. Hence, when the holding company is situated in an offshore jurisdiction where there are no taxes and no requirement
that dividends must be paid, then the profits which are accumulated in the tax free climate can be used to fund the requirement of subsidiaries or reinvested as required.
Probate and Privacy
A high net worth individual with Assets in various countries may wish to hold these through the
medium of a personal holding company so that upon his demise or incapacitation probate would be applied for in the country in which his company was incorporated rather than in each of the countries in which Assets
may be held. This saves enormous legal expenses and avoids unwanted publicity. Persons not wishing to advertise their wealth and or individuals wishing to hold property through an offshore entity simply because of
the privacy which the offshore arrangement gives.
Professional Services
Individuals who receive substantial fees in respect of their professional services may use an
offshore company to receive such fees. The offshore company may not have to pay tax on its profits which can be reinvested again. Payments to the individuals involved can be structured in such a way as to
minimize their tax liabilities.
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