The term offshore company is ambiguous. It may refer to either:

1. A company which is incorporated outside the jurisdiction of its primary operations regardless of whether that jurisdiction is an offshore financial centre (sometimes known as a non-resident company) i.e. a Canadian company may be offshore for the purposes of a USA citizen ; or,
2. Any company (resident or otherwise) incorporated in an offshore financial centre

Typically the requirements for company registration under the relevant provision for non-resident status (as in the former of the two options above) will be pursuant to some or all of the following criteria:

• Must be incorporated from outside the jurisdiction in question;
• Must not trade within the jurisdiction in question; and/or,
• Must meet nominal tax expenses levied by the jurisdiction in question.
Benefits

Offshore companies have the following features which may be beneficial:

• Taxation - In most jurisdictions authorities will not seek to tax companies which they treat a non-resident save perhaps for a nominal fee -$300 BVI, £320 Isle of Man etc.
• Simplicity and Reporting - except for regulated businesses, such as banks or other financial institutions, some jurisdictions make it relatively simple to set up and maintain companies especially with reference to lesser reporting requirements than so-called onshore jurisdictions - the level of information required by the registrar of companies varies from jurisdiction to jurisdiction.
• Legal and asset protection - some jurisdictions have stricter provisions for allowing a court to pierce the corporate veil, and in many cases, corporate governance rules require the laws of the jurisdiction where the corporation is chartered, rather than where it is sued, to apply. For example Gibraltar makes it illegal for the trustee of an Asset Protection Trust to surrender its assets to a creditor of the settlor and in Switzerland it is illegal to disclose banking information.
• Fees - some jurisdictions impose much higher fees to incorporate than other jurisdictions. They may also impose much higher maintenance fees on a corporations yearly renewal of its charter. This will vary from service provider to service provider and will be significantly based on the cost of local disbursements.
• Anonymity - by carrying out transactions in the name of a private company, the name of the underlying principal may be kept out of documentation since the company is a separate legal entity. Having said that, current anti-money laundering regulations often require banks and other professionals to look through structures. This will always be the case for any reputable bank but this does not render ineffective the use of corporate structures, rather it ensures they remain legally compliant.
• Thin capitalisation - Some offshore jurisdictions tend not to impose "thin capitalisation" rules on companies (except for regulated entities such as banks and insurance companies), allowing them to be formed with a purely nominal equity investment.
• Financial assistance - offshore companies are usually not prohibited from providing financial assistance for the acquisition of their own shares, which avoids the needs for whitewash procedure in certain financial transactions.
• Cost of operation - In many cases, i.e. where a self employment consultant provides service to a number of jurisdictions and is frequently travelling it is a matter of choice where he chooses to incorporate. In this case the fact that companies in an offshore financial centre are considerably cheaper than buying or renting premises, arranging to engage accountants, receptionists, IT providers etc would be.
From Wikipedia, the free encyclopedia