Why setting up offshore company for your offshore business ?

Almost every jurisdiction fails to provide a definition of an “offshore company”, in all of their company acts, regulations or ordinances. The classification of companies vary under the regulations of different countries. For instance, commonly used terms for types of companies in the U.S.A would be “Llc or Inc”, in the United Kingdom, the commonly used terms are “Limited or Ltd”, in France “Sarl”, in Germany “Gmbh”, in Itlay “Srl”, etc. are the commonly used types of companies. Any of the following classification may be adopted by these countries:

• Private or public company
• Local or overseas company
• Limited or unlimited company
• Listed or unlisted company
• Holding or subsidiary company

In practical world, an offshore company is of use to only the person who intends to expand the services of his/her business internationally. From this we can assume that an offshore company is probably one which has been registered under the laws of different countries, provided the law of your country does not govern those countries’ regulations or in other words, has no power to rule those countries. When the term “Offshore Company” is searched in encyclopaedia, we get a definition stating that it is a company that is incorporated following the laws of any country other than the one where its initial operations were conducted.

Why go for offshore?

Usually, international businessmen are more inclined towards opting for an offshore company, as a substitution to getting their companies registered locally. This is advantageous in the following ways:

• Benefits of proper taxation: By conducting the business with care, there may be a possibility that the imposed tax on the profits sums up to nearly zero.
• Easy process of registration: It is easy to register offshore companies that it can be done in one day. Whereas, some types of offshore companies can be easily registered with only one person.
• Availability publically: Public search is permitted by some of the offshore companies, whereas for others, public search is prohibited.
• Expenditure on registration: Depending upon the type of offshore company, the cost may vary from hundreds of dollars to thousands of dollars. Hence, offshore companies may be a bit costly, but they provide a range of option for costs.
• Requirements of reports: Again, depending upon the type of offshore company, the report about the operations of the company may be regularly prepared and filed or no report may be filed.
• Type of liability in an offshore company: Usually, an offshore company belongs to the class of private companies with limited liability. Hence, the shareholders are limited to make a contribution of a limited sum on their shares.

Opting for an offshore company is not a win-win situation. Offshore companies are accompanied with some drawbacks as well. They are as follows:

• Arrangement of finance: Lending money from banks is not an easy job for offshore companies. Although they may have a profitable business and may provide their belongings as securities to the banks, yet are reluctant to lend them money.
• Offshore bank account opening: Due to the unavailability of public records, it becomes uneasy to setup offshore bank accounts. Moreover, some banks argue that they would not provide the facility of setting up a bank account for offshore companies.
• Limitations on nature of offshore business: Usually, the offshore companies are setup for running businesses that involving consultation, international trade, shareholding of other corporate bodies etc. However, there are certain types of businesses that are not allowed to carry out under an offshore company. The businesses related to finance, trust and insurance are examples to it.

Which are the best jurisdictions for offshore companies?

Not all jurisdictions are suitable for an offshore company formation. The jurisdictions that claim to be most appropriate for the formation of an offshore company are the following:

How to select offshore company?

An important decision to be taken at the time forming an offshore company is about its type and jurisdiction. There are different jurisdictions for governing the formation and operation of offshore companies. However, they may have some attributes in common. These are as follows:

• Initially required documents: Under all the jurisdictions, it is a compulsion, to have memorandum and articles of association at the time of incorporation in the written form. These documents should briefly explain the division of powers between the members and the directors of the company and the methods for managing the internal affairs of the company
• Incorporation certificate: Upon the incorporation of an offshore company, a certificate about the incorporation of company, should be given to that company. This document will be an evidence to the legal existence of that incorporated company.
• Secretary or Representative: It is a requirement for an offshore company to make an appointment of a person who either acts as a local secretary or agent and handed over the duty of handling all the official communications of the company.
• Registered Office: Another common obligation for an offshore company is to get an office registered and the registry of companies must be made aware of the fact that, the registered office will be the address for the receipt of every corresponding that is official.
• Ownership of company given to shareholders: Initially, when the memorandum and articles of association are formulated, the shares in the company will be taken up by the shareholders. Hence they will be given the ownership of the offshore company. However, they will only be considered as the investors and will play no part in the administration of the company.
• Directors of an offshore company: At the time of incorporation and formulation of memorandum and articles of association, and similar documents, the appointment of the directors will be done by the members holding shares of the offshore company and the directors will be given the responsibility of administering the company and running its business. However, they do not hold the status of an investor or owner of the company, rather they are considered as the officers of the company.
• Keeping and maintaining the statutory records: It is mandatory under the laws of companies, for an offshore company to maintain statutory record which includes the information of inner framework of the company, these information includes the shareholders and any changes in them, information about secretary and related variations, information about share capital and relevant modifications etc.
• Renewal of documents every year: Nearly every jurisdiction makes it a compulsion on an offshore company to get its licenses renewed on a yearly basis. Also, the files either related to outer affairs of the company or the inner matters of the company, should be updated. 

In our views, the following jurisdictions can be considered as more related to one another than others:

Which are the best ones?

There are certain jurisdictions that are more similar in nature than other jurisdictions. The advantages as well as the disadvantages are quite similar. Such jurisdictions include, Marshall Islands, British Virgin Islands, Belize, Cayman Islands, Samoa, Hong Kong, Belize, Nevis, Mauritius, UK, Delaware (US) and Seychelles. Opening an offshore company may have to face some crucial setbacks. So a case study is mentioned below to beware you about the potential difficulties that may be faced by your offshore company.

The owner of an international trading business was Mr. Simon and his business was very profitable. At the beginning, the business was run in Hong Kong. But the business was registered under the laws of BVI. An account for his business was opened in an offshore Bank. When few months passed, the Bank hanged the account of Mr. Simon, asking for an evidence of his source of earning, in a letter. The bank was actually doubting the money that was being transferred to the account. Mr. Simon had to go to Hong Kong to meet the manager. He informed the manager that the money was coming from his business.  The manager still insisted upon providing any evidence for the source of income. But there were no records of the profits made by Mr. Simon’s business as it is not a compulsion to keep such records. Hence, the manager refused to provide any assistance to him and said that the account would remain subjected to suspension until any new order was sent. The case was taken to the court by Mr. Simon but the court did not favour him. 

Usually, the clients argue that such cases are happening in different parts of the world with U.S.A, Europe and West inclusive, after the crisis of finance. This is also becoming common in Belize and BVI etc. The worries that may hit the mind of any person who expects to make an offshore investment are the following: What is the cause for this situation? Do you not know that there can be gains in a business that is done overseas? Should I register my company at a local level even when the tax charged by my country is as much as 50% of the overall profits? The rate of taxation is large in Canada, U.S, U.K etc. then which country should I go for?

We have realised from the history that many serious problems have taken place in the course of an offshore company whenever the significance of providing security to the finance in offshore bank accounts has not been considered. Once you open an offshore company, only two consequences will take place, a successful business or a complete failure. When the business begins to get successful it returns a lot of revenue. The revenue may be kept in offshore bank accounts. You may then move all your earnings from that account to any local account. But it remains unsafe. The reason is the strict rules that are designed to stop money laundering and counter the violation of taxation. Moreover, there are governmental rules that demand a proper notice to be given to the government when any transfer of money has to be done. So if this is not a good solution then what else can we do?

You may relieve your mind from all such worries. Because we are going to share with you information about a jurisdiction that is most reliable for offshore companies. It is Hong Kong. 

Why Hong Kong company?

The Hong Kong is famous internationally. Many foreign investors like investing their capital in Hong Kong. What makes Hong Kong so attractive? Let’s share some of the advantages of the jurisdiction of Hong Kong for offshore company formation:

The Government of Hong Kong interferes the least in the economic matters of companies of Hong Kong. It is more oriented towards marketing, provides an open choice for the nature of business to the persons investing in Hong Kong and according to the global statistics, Hong Kong tops the list of providing freedom of economy.

When one has to transfer money from an account in Hong Kong to any other part of the world, he/she will have to undergo trivial checks and controls and no restriction on the type of currency. Yen of Japan, Dollars of U.S and GBP are supported for making payments between the rest of the world and Hong Kong.

There is no tax imposed on the profits that are gained by an offshore company under the Hong Kong laws for taxation. The tax is imposed only on local business. However, there is a trivial tax of 16.5% of the total gains earned by a local company of Hong Kong. If any overseas company registers in Hong Kong, it will be considered as an offshore company. For instance, if a company registered in Hong Kong buys stuff from China and trades them to America then the profit gained will not be taxed.

Tax Rate: The tax rate in Hong Kong on the local businesses of the region are quite trivial. It is not more than 16.5 % of the total profit generated by the business. There are no extra charges in the form of VAT tax, business taxation or taxation on capital etc.

Procedure of forming Hong Kong company: The method for the formation of a company in Hong Kong has little necessities. A foreigner can be assigned the directorship or membership with shareholding in the company in Hong Kong. The professionally local corporations may elect a secretary and provide the location of registered office.

You do not need to invest capital if your company is being formed in Hong Kong. As a member having shares in the company, you just have to sign the documents of memorandum and company’s articles for claiming that you will put up in the capital of the company. Hence, the person holding shares, is not necessarily required to make a payment to the company.

Using freely the name of the company: In certain parts of the world it is not freely permitted to companies to make use of certain terms in their names. Such as, international, holding, group etc. But, in Hong Kong there is a permission granted to companies that have such terms in their names, to utilise their names freely. However, it should be taken care that none of these names had already got their registered in Hong Kong.

The procedure of forming an offshore account in Hong Kong is quiet simple. Just needs submission of copies of Hong Kong’s company formation documents, passport of the applicant, evidences of the location, and a general idea about the type of business being run in Hong Kong. These documents should be given to the international bankers who will after accepting them, assign the company an international account with the benefits of online banking. This procedure may take some days or if fortunate enough, a single day.

The Lawful framework of Hong Kong, derives its structure from the regulations implemented in U.K. and other countries of Commonwealth.

Generally, the type of companies in Hong Kong is private with a limited liability.

As per the rules of Hong Kong, an overseas company is permitted to hold the directorship and shares in any company of Hong Kong. That means, a BVI’s corporate body can be the director as well as the shareholder of Hong Kong’s company.

The regulations regarding trust can find their implementation in Hong Kong. For instance, if someone invests and desires that nobody comes to know about his/her identity, then he/she can assign a trustee to his/her shares as a beneficiary. He will have to keep the ownership of a trust deed as a proof to his/her proprietorship over the business. But implementing laws of trust is not permissible, in different parts of the world such as in China.

For a company in Hong Kong, the maintenance of yearly records is a compulsion. Also, the registration of statutory audits should be done each year to the departments concerning taxes.

It may seem after reading the last point that it is a disadvantage, but it is very beneficial to offshore companies. So to move further, first of all, the significant fundamental regulations of Hong Kong need to be understood.

Under the law which is given by Hong Kong Inland Revenue Department (IRD), it has been made mandatory clearly by Section 51 that any company in Hong Kong has to maintain its records properly as well as data relevant to its accounts. Hence, it may help in calculating the total cash flow, loss, and other expenditure for taxation.

According to Section 14 Inland Revenue Department law, the gains that are made by any company running its business in the bounds of Hong Kong has to be subjected to a profit tax. Also making it clear that any business outside the border of Hong Kong will not be made liable to any profit tax. The case studies like HK-TVB and Hang Seng Bank support the rule that no taxes are imposed on offshore profit. Therefore, only tax of profit at local level is imposed in Hong Kong.

The law for companies in Hong Kong has made it compulsory for the companies to keep their records of accounts safe in books so that financial statements can be prepared every year. For this purpose, a person has to be assigned as an auditor every year, whose task would be to submit an auditor’s report catering all the business deals taking place in Hong Kong.

Why is this done? The first reason for doing this is to present the auditor’s reports in general meetings annually so that the persons holding shares get a chance to go through them and discuss about it and give their approval. Another cause is that it is a compulsion for the investors to register these files with the Inland Revenue Department (IRD). It should also be informed to IRD that the company has gained a heavy amount of profits after running its business and hence an exemption from the tax on profits should be requested. Then, after going through general processes, IRD will issue a notice notifying that an exemption from profit tax has been granted to your company. Moreover, there are safe records with the government proving about the legality of your source of income.

Such a procedure cannot be found in any other country. It involves:

• The records are maintained by the offshore company along with its account’s minutes.
• A person is assigned the task of auditing the accounts and prepare a report of audits.
• A general meeting is held every year for the approval of an audited account and the report is submitted to IRD.
• The documents related to the audits are shared with IRD and it is then claimed to get exemption from profits tax on offshore gains.
• Later, the IRD gives your company assurance that no tax will be imposed on the cross border profits gained by your company. For example, check the sample of a letter in the order form portion.

Is it not wonderful that as a person making an international investment, you will be involved in overseas business and will just have to hire someone who helps you with your company’s records and paperwork, prepares the annual reports of accounts for your company and claims an exemption from the tax due to offshore profit. That means, you will have to pay no tax even if the cash flow is up to millions or billions of dollars.

Why are you providing all this information about the offshore?

Our firm, namely, Stephen M.S. Lai & Co CPA limited is a CPA firm, working globally. The location of our firm is Hong Kong, which is famous as a commercially international city. Our clients belongs from different countries. Our services include, serving the international investors and businesspersons in a professional manner for the following purposes:

• Forming company in Hong Kong
• Setting up the Chinese WFOE
• Forming an offshore company
• Consultations
• Account in offshore bank
• Arrangements concerning auditing of accounts
• Taxes for a company and its planning
• Company secretary
• Arrangements for trust

Sr. Partner of our firm, Stephen M.S Lai & Co. CPA Limited

Mr. Stephen Lai having qualification of HKICPA, ACCA, PDA, MBA, LLB, and PCA.

Arrangement for Trust

Two documents will be prepared by us for you. These include agreements for trust and the second one is Power of Attorney. The trust agreements will mention that our firm will play the role of trustee by giving nominations for shareholders and it will be claimed by us that we will hold the shares of your company as a beneficiary. Hence, this will conceal your identity publically. The agreements will be stamped to legalise them. In the power of attorney, there will be provided natural and corporate nominees for directors for your company, and we will issue authorities of the managers as well as agree by signing that you can sign any agreement or contract of the company via the power of attorney.

We utilise our knowledge and skills professionally and our experience to help our clients expand their businesses overseas. Our clients are running businesses of different natures, such as consultation, production, trade etc. They belong to overseas countries, Hong Kong or Mainland China usually.

Here are the six types of bank networks we are providing our services on:

• Remote process offshore banks.
• Banks of Singapore by visit.
• Banks of Hong Kong by visit.
• Banks of Switzerland by remote process.
• Banks of Europe by remote process or special application for remote.
• Banks of UAE either by remote or visit.

We can help you in setting up accounts in these banks or refund you your money.

The international offshore bankers in countries that we are working and with which we can continue the process remotely are the following:

• Antigue
• Anguilla
• Belize
• Andorra
• B.V.I
• Cook Islands
• Caymen Islands
• Lebanon
• Nevis
• Mauritius
• Seychelles
• Pamana
• St. Vincent
• St Lucia
• Vanuatu

By our services, we can assist you in opening an offshore account in an international bank. Moreover, you will not have to visit these banks for every jurisdiction. But the following documents should be given:

• Documents of company formation.
• Copies of passport.
• An evidential copy of address (It should be noted that some bankers, may require evidences for business for clients belonging to risky countries such as North Korea).

As the policies for opening bank accounts may vary from bank to bank, a better approach would be that we analyse your case after the application is filed. This will help us in suggesting you banks that are more suitable for your case so that you are helped in expanding your business overseas and benefit from tax free profits.

Want a bank account in Hong Kong? 

We can help you in opening bank accounts in the following banks of Hong Kong:

• HSBC (Hong Kong)
• ICICI Bank (Indian Bank)
• OCBC Wing Hang Bank
• Hang Seng Bank
• Public Bank
• Dah Sing Bank
• China Citic Bank
• CitiBank (Hong Kong)
• DBS Bank
• Nan Yang Bank
• Bank of China

The requested documents by the bank as well as other relevant documents will be prepared by our firm. We will also arrange an appointment with the bankers for you. Also, we will handle the matters regarding submission of the required paperwork to the bank. An account number along with a token, password and debit card for the company will be given to you soon. It is possible in specific cases that the client may receive all these things within few hours. However, the duration that is required for the completion of the procedure depends upon the country of the client, the completeness of the required paperwork and the nature of the business. The appointment will be accepted or rejected depending upon the present rules of the banks.

What if it’s not possible for me to visit Hong Kong for opening a bank account?

We can provide with some old companies whose bank accounts are still active in HSBC Hong Kong and Hang Seng Banks. We can help you in transferring the company’s ownership and account in your name and this can be done distantly. For further information, kindly contact us.

We are also working in collaboration with banks that provide the service of setting up accounts remotely via a special request. For further information, kindly contact us.

Visiting Singapore for opening a bank account? 

If you wish to visit Singapore and setup bank accounts in the banks of Singapore, then, we will provide the service of getting appointments and making arrangements and proceed with the submission of required documents. The documents may include documents for company formation, passport, evidences for address and other documents related to these. The requested documents will be submitted to the Bank before your visit to the Bank. At first, you will have to select a bank for opening the account. Then we will send the documents to the bank for verification and acquire a pre-approval. After that, the bank will coordinate with us to choose a day and timings for your appointment. During this, you can inform us about your suitable schedule and the suitable day and timings for the appointment. However, the meeting will not be more than 30 minutes and during that your account will be processed and opened.

An interesting point to notice is that as we will get a pre-approval for you, you can stay in Singapore just for some minutes instead of staying in a hotel. It will save your time and fare.

We can also provide our service in the following Banks of Europe:

• Croatia
• Austria
• Czech Public
• Liechtenstein
• Cyprus
• Hungary
• Estonia
• Luxemburg
• Germany
• Portugal
• Finland
• Latvia
• Monaco

We can provide our service in the Banks of Switzerland remotely. We can also provide our service in the Banks of UAE remotely or through visit.

For Further information, please feel free to contact us.

What you do next?

The next thing that you will have to do is that fill the form of formation. We will analyse your case and suggest you the suitable bankers to you. We give you the guarantee that we can setup an offshore account in banks on your behalf and we also assure you that the operations taking place in your offshore business will not be taxed lawfully.

We have been rewarded as having the best partnerships with HSBC Bank and Heng Seng Bank from 2008-2012.

So, visit the section of order form, download it, and fill the information and email us after that. Our staff will get the related documents ready, and email to you for your signature. The bank documents will also be sent to you. For any query, please click the top right icon “chat to me” or you may email us.

Incorporating your company with Stephen M.S Lai & Co CPA Limited, will include the following in the price:

• Name check for free.
• Incorporation certificate.
• Design the Articles of Association.
• An original version of documents of formation.
• Certificate of registering business.
• Statutory details.
• 5 copies of Memorandum and Articles in printed form.
• Share certificate.
• Round acknowledged chop.
• Signature chop.
• Black file.
• A copy of documents of formation that has been certified.

Currently, we also provide the following along with the above documents:

• Forwarding mail for free up to one year.
• Appointing a secretary of corporate and local agency for one year.
• Also an office that is registered and address of business for one year.
• Public telephone line for free for one year.
• Public fax line for free for one year.

So just download the form & go for it right now!