The benefits of opening an offshore company versus an onshore company

 

Posted 22nd November 2018 - Credit: Nonjabulo Mbatha
 

Entrepreneurs interested in setting up companies have various options in terms of industries, types of entities and countries to choose from.

When it comes to the industry and the country they will operate in, things are pretty clear and thorough research has already been concluded, but the type of structure to use can be a little bit difficult to decide upon.

Most investors will usually choose between onshore and offshore companies, however, the differences between these two types of companies are usually unclear, which is why we will try to describe both of them below, in order to help enterprisers.

The onshore and offshore company

One of the most common questions about onshore and offshore companies is what the main difference between them is. Many people believe that offshore companies are located in so-called tax havens and that they pose difficulties from a taxation point of view. However, that is not true as many countries in the world can host both onshore and offshore companies. The only difference between these specific types of companies will be the market for their products or services will address.

To keep things simple: the offshore company (no matter the country it is registered in) can only sell goods or services outside the jurisdiction it is incorporated in, while the onshore company can also market its products and services in the country it is established in.

Locations for onshore and offshore companies

As mentioned above, most people believe that offshore companies can be established in a few countries only as small states or islands like Seychelles, the Malay province Labuan, the British Virgin Islands, the Dutch Antilles and so on. These are considered tax havens which is why they are often associated with offshore companies; however, they can host both onshore and offshore companies.

Those who want to open companies in Gibraltar, for example, must know they can set up both onshore and offshore businesses with the same benefits.

Benefits of offshore and onshore companies

Without a doubt, the offshore company established in a tax haven will have more benefits than an onshore company. Most of the times, people believe these advantages are related to taxes, however, this is only partially true: offshore companies have other benefits as well.

Those who want to create offshore companies in Seychelles, one of the world’s most renowned offshore destinations, will also have other advantages, such as the lack of special licensing requirements and the enhanced protection of the investor from a privacy point of view. However, we should specify that these advantages of offshore companies can be found in other countries which are not considered tax havens.

Onshore companies will also benefit from several tax advantages, however, most of the time, the tax rates applied to these structures will not be as low as in the case of offshore companies.

When having to decide between an offshore and onshore company, the location is very important. The taxes imposed must also be considered. Another aspect to consider is the type of products or services the company will sell and the markets it will address. Even if most of the time onshore companies seem like the easiest way of starting a business, offshore companies have begun earning popularity among those who now know these can be set up in other countries apart from the famous tax havens.

 Posted 22nd November 2018 - Credit: Nonjabulo Mbatha


 
 

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