All of us are aware that Covid-19 caused severe economic damage to the global economy. Given the uncertainties of the immediate and medium term future, business owners should consider a new formation option to diversify the ownership structures during this difficult time and take advantage of international laws and incentives. Here’s how offshore company formation can be a noteworthy option.
Opportunities from an offshore company
- Reduce tax rate
Setting up an offshore company can offer you special benefits or incentives from the jurisdiction, mainly tax concessions. Non-resident beneficial owners are entitled to conduct their offshore corporation in some countries, with little to no corporate or income tax.
- Require little capital and paperwork
To enjoy minimum corporate requirements and reporting is another reason to establish an offshore company. For most jurisdictions, there is no requirement for minimum capital, accounting, audit or annual tax reports and a company can save time and capital for more important business activities.
- Simple to operate business
Most offshore jurisdictions have a registration process that is simple and quick, which sometimes can be done from 3 - 4 days depending on the preparation of the documents.
- Open to more investment opportunities
Offshore company is also a way for individuals and businesses to enjoy other opportunities offered by jurisdictions. Certain opportunities are available for foreigners only when they form a business entity in the country. By establishing an offshore company, business’s owners are entitled to conduct other activities such as buying real estate, trading or investing in foreign market.
- Increase confidentiality
The level of confidentiality is increased in an offshore company as some host countries have very strict privacy laws that do not make publicly available the names of directors and shareholders, account and financial information, unless legally requested.
Possible drawbacks from offshore company formation
- Limitations on some business activities
While the majority of jurisdictions encourage offshore company formation by providing many incentives, there are certain jurisdictions that place restrictions on offshore companies in order to limit these offshore strategies, such as the US. This can result in the company not being able to enjoy some trade benefits.
- Potential instability in the economic and political system
The operation of an offshore company also depends largely on whether the jurisdiction has a stable political and economic system. Business can secure their finances better in a transparent and politically stable system than an unstable and corrupt one.
- Law changes
Recently certain offshore jurisdictions, including the Cayman Islands, the British Virgin Islands (BVI) and Bermuda have introduced their own substance legislation that require certain reporting and economic substance requirements for entities conducting relevant activities.
Although most jurisdictions offer similar benefits, each country has its own set of laws and requirements that can hinder offshore company formation. In order to successfully establish an offshore company that can bring the most benefits, business needs to take serious and thoughtful consideration when choosing a jurisdiction. To select the right jurisdiction and offshore formation service that is the best fit for your strategy and compliant to outbound investment requirements of Vietnam, please don’t hesitate to contact our experts.