What is offshore?
An international business company or international business corporation (IBC) is an offshore company that is established based upon the laws of certain jurisdictions as a tax-free company. IBCs are not permitted to conduct business within the jurisdiction in which they are incorporated. Antigua, Anguilla, the British Virgin Islands, the Bahamas, Gibraltar and Nevis are all offshore financial centers that permit the formation of IBCs.
Although the characteristics of an IBC tend to vary from jurisdiction to jurisdiction, they usually include the following:
- exemption from local corporate taxation and stamp duty, as long as said company does not engage in local business (nevertheless annual agent's fees and company registration taxes are still due and are generally several hundred U.S. dollars per year);
- preservation of the confidentiality of the beneficial owner of the company;
- extensive corporate powers to conduct different businesses and activities;
- abrogation or restriction of the requirement to demonstrate corporate benefit;
- the freedom to issue shares in either registered or bearer form;
- an abrogation of any requirements to appoint local directors or officers;
- provision for a local registered agent.
Despite pressure from the Organization for Economic Cooperation and Development, the OECD, and the Financial Action Task Force, the FATF, the majority of offshore jurisdictions has either removed or is removing the "ring fencing" of IBCs from local taxation. Many of the jurisdictions have also simultaneously reduces their levels of corporate tax to zero hoping to avoid damaging the offshore finance industry.
What’s more, with the notable exception of Panama, most jurisdictions have also either eliminated or highly restricted the issuing of bearer shares by IBCs.
A Slightly More Detailed Explanation…
An IBC is a legal entity that has been incorporated in a tax haven and is free from all local taxes but is responsible for paying small fixed annual fees. In general an IBC is prohibited from conducting business in its country of incorporation. Dominica, British Virgin Islands, Seychelles, Belize, and Nevis have special IBC legislation in place; this legislation is similar to the legislation for Panama Corporation and Gibraltar Non-resident Company.
IBCs are most often used for offshore banking to conduct international trade, investment activities, by professionals and for asset protection. Offshore companies are permitted to be involved in buying and selling goods and services, to hold bank accounts and to operate businesses. Moreover, IBCs are regularly used as a means of owning real estate as well as intellectual property, licensing and franchising. Lastly, IBCs are often used for personal service by individuals that are working overseas and offshore e-business.
An IBC is able to hold assets in a safe, secure financial center. Simultaneously, an IBC also gives the owner the ability to retain 100% control of assets; said assets remain incredibly private. Offshore jurisdictions do not require an ITIN to open an IBC bank account. Moreover, any banker who reveals one’s association with a bank account to an individual outside of the bank may have legal action taken against him/her. As a rule, IBC ownership records are not available in any public record.
Some countries have IBC laws that take privacy especially seriously, and similarly, certain countries have especially strong asset protection provisions. A number of these countries are island nations that have become financially strong by offering a safe-haven in which to store one’s money. Keeping this in mind, when choosing a location for establishing an IBC, it is important to consider the purpose of the IBC and to investigate the various strengths of different jurisdictions. For example, the Island of Nevis has some the strongest IBC asset protection laws and would be appropriate for someone who is especially concerned with asset protection.
The cost of forming an offshore company varies from jurisdiction to jurisdiction. Historically speaking, Seychelles, Belize and Dominica have some of the best prices for incorporating. Following the initial incorporation fees, there are annual fees. These fees are usually fairly affordable.