What is offshore? Offshores - what is it in simple words

You will learn what offshore is, what schemes exist for working with offshore companies, as well as where and how you can register an offshore company

Good afternoon, dear readers! Dmitry Shaposhnikov is with you.

Today we will talk about such a concept as “offshore”.

All that the average Russian knows about offshore companies is that oligarchs hide their money there from taxes. But is this really so?

Who and in what cases is it profitable to deal with offshore companies today and how to choose the right one?

Let's look at this topic in more detail, because it is possible that you and I may find this knowledge useful in the future.

1. What is offshore - definition and history

The literal translation from the English term “off shore” sounds like “beyond the border” or “beyond the banks.”

Let me define this concept in simple words.

Offshore is a company that does not conduct commercial activities in the country where it is registered.

Offshore zones are states that create preferential tax treatment for business structures and representatives of private capital, up to complete tax exemption.

Commercial institutions in other countries receive preferential conditions for transactions in foreign currencies for that country. In other words, if you don’t want to pay taxes, go offshore.

This term also refers to international organizations operating in tax-exempt zones.

In the global economy, this is a stable and widespread practice, providing businessmen with a certain economic freedom and creating a kind of space for maneuver.

The concept " open an offshore“means – to transfer financial assets, business or part of it to foreign territory.

The correct spelling of the term is “offshore” with two “f”s, although sometimes even in the scientific literature there is another variant – “offshore” with one letter.

This phenomenon has deep historical roots. Even in ancient times, merchants often organized sales outside the borders of cities where tax duties were too excessive.

In the Middle Ages, European merchants sold wool exclusively in Flanders, rather than in populous England, where government taxes reduced profits to zero.

In the new history, there are more and more examples of offshore business: for example, the first North American merchants preferred to make transactions in the countries of Latin America, so as not to fall under fiscal dependence on the English crown.

For the first time in legal practice, the concept of “offshore” in its modern sense was used at one of the court hearings in Britain. The rebirth of the term occurred in the second half of the 20th century. In one of the newspapers, this word was used to describe the activities of a successful commercial company that moved its assets outside the country.

Russian commercial structures gained access to foreign territories with reduced taxes in 1991 after the collapse of the USSR. During this period, the first representative of offshore business appeared in the Russian Federation in the person of a Swiss company, now almost forgotten.

Registration of offshore companies has become extremely popular among domestic entrepreneurs - large and small companies, sometimes with dubious status, received a legal opportunity to evade taxes.

Today, offshore business schemes continue to enjoy some popularity, although the state’s attitude towards such activities has become tougher. However, in some situations, transferring assets to foreign accounts is the only way to save the business.

Example

After changes in Russian legislation regarding the organization of bookmakers and gaming establishments in 2014, most companies of this kind legally moved their activities to foreign territories.

Offices continue to accept bets from Russian players, but their official registered addresses are the Netherlands, Antilles, Cyprus, Belize and other exotic countries with flexible tax laws.

2. Advantages and disadvantages of opening an offshore company

The main advantage of moving a business to offshore zones is the following: the company gets the opportunity to repeatedly increase the net profit from its activities by legally reducing taxes. This is the main answer to the question why an offshore is needed.

It is clear that this type of business development has more advantages than disadvantages, otherwise offshore accounts and business would not enjoy such stable and widespread popularity.

Pros of offshore (+)

Below I will give you a few advantages of offshore business:

1. Low or zero taxes. Often the laws of most countries are such that they do not allow companies to develop normally and bring stable profits in their home territory.
2. Opportunity to expand the geography of business. Working in a foreign market helps accelerate the growth rate of a company.
3. Capital accumulation abroad. The ability to have cash accounts abroad and use finance exactly when you need it.
4. Business management through a proxy. To work offshore and manage a business, the company owner does not have to be abroad - all legal and financial transactions can be entrusted to a trusted person.
5. Reducing legal risks. An offshore company is a full-fledged subject of the international market, subject, first of all, to the jurisdiction of the country in which the company is registered.
6. Quick business registration. Registration of companies in offshores is happening at an accelerated pace. Everything is arranged in such a way that collecting the necessary documents takes a minimum of time.
7. Flexible choice of business form. When creating an offshore company, the owner of the company chooses the form of commercial activity that is beneficial for himself from the proposed list.
8. Easy to open and preferential operation. The company's costs for opening an offshore are minimal - in addition, in some countries there are no audit requirements.
9. Security of information about an offshore company. No one has the right to receive information about a company in an offshore zone, except in situations where such a right is granted by a court decision.

Keeping money offshore is safe, profitable and completely legal, however, the method also has its drawbacks. If you don’t know, you should definitely consider a way to take them abroad.

Disadvantages of working with offshore companies (-)

In addition to the advantages of offshore business, there are also disadvantages.

Here are a few of them:

1. Increased attention to offshore companies from international law. International legal structures pay close attention to companies operating under such schemes.
2. There are risks. When choosing a territory, extreme caution should be taken: there is a certain risk of completely losing the business.
3. Negative image. Many large corporations refuse to work with enterprises that conduct their business using offshore companies.
4. Difficulty in attracting credit funds. Companies with foreign accounts are often unable to obtain large loans.

A significant part of the disadvantages can be neutralized if you cooperate with reputable professional companies involved in registering offshore companies. Knowledge of laws and international legal experience also helps.

3. Schemes for using offshore companies - TOP 10 most popular schemes

Let's move on to the main question - how to withdraw money offshore? First, of course, the feasibility of such a decision should be determined.

If you really think that registering abroad in an offshore zone is the only option for the company’s development, then go ahead. If in doubt, look for other ways to increase your income.

A separate type of procedure is the liquidation of companies through an offshore: this event is used when there are large debts and the need to quickly and without much hassle liquidate a legal entity.

If you have opened a company, for example in the form of a limited liability company, then it can be liquidated in the usual way - we have already written. The same procedure can be carried out offshore.

10 popular schemes for using offshore companies

It is worth saying that mass interest in offshore companies has subsided somewhat in recent years, which is due to the global tightening of currency controls and the global policy towards transparency of capital movements. However, offshore companies still remain the easiest and most reliable way to withdraw monetary assets abroad.

Scheme 1. Using offshore companies to organize export-import relations. Officially, the company leaves its home territory, but in fact continues to be present on the market, importing and exporting products.

At the moment, this scheme is the leader among all others. But there is a nuance: the fight against transfer pricing policy at the legislative level can significantly undermine the benefits of the export-import option.

Scheme 2. Creation of a holding company created for operations with production, monetary and other assets. This scheme successfully combines confidentiality and tax breaks.

Scheme 3. An offshore company as the title owner of real estate is an effective tool that provides the opportunity for confidential ownership combined with tax benefits.

Scheme 4. Investments in your own business using selected offshore instruments. The option provides the opportunity to finance your company without unnecessary taxes on the invested amounts.

Scheme 5. Offshore as a tool in the market for shares and other valuable assets is a favorite scheme of stock exchange players and private investors who want to minimize tax deductions.

Scheme 6. Offshore via the World Wide Web. It is extremely difficult to determine the location of such an object; it is also difficult to subject it to taxes. The most promising scheme for today.

Scheme 7. Funds in offshore territories: a favorite scheme for large businessmen entering “well-deserved retirement.” A good way to protect against the consequences of a tumultuous youth in the form of claimants to inheritance and property.

Scheme 8. Organization of an insurance company, financial company or bank. The global financial system could not leave the possibility of tax planning unattended - companies with large monetary assets are especially interested in fiscal relief.

Scheme 9. Registration of an offshore company by the owner of a yacht or vessel. An excellent option for tax optimization of both personal profits and income from commercial activities. A ship flying a certain flag provides many financial and sometimes political advantages.

Scheme 10. An offshore company as the owner of copyright or intellectual property.

All options are used depending on the specific circumstances, goals and capabilities of the person concerned.

If you are going to organize an offshore and use the described schemes, then you need to familiarize yourself with the offer. Below are a few words about this concept.

Offer– an offer from a company interested in organizing an offshore from a foreign side.

Such a proposal can also be varied in content and form.

If you cannot or do not want to open such a company yourself, then you can purchase ready-made offshore companies from companies. Now there are many offers on the Internet from companies that provide such services.

4. Main offshore zones of the world

The geography of offshore zones is very diverse, but the most popular of them can be combined into the following regions:

• Caribbean;
• island states of the European zone - Jersey, Maine and others;
• Cyprus and Gibraltar;
• Switzerland and Luxembourg;
• Asian countries.

Each region has its own advantages and characteristics.

Below we will briefly consider the advantages and disadvantages of organizing a company in each zone.

For example, in the Caribbean countries there is no need for reporting or auditing, and entrepreneurs themselves can count on complete confidentiality.

Cyprus and Gibraltar have a mandatory tax rate and insist on auditing companies. This simultaneously increases the prestige of offshore enterprises in these regions, but increases the costs of their organization.

Switzerland and Luxembourg also have an offshore tax, but under certain circumstances you may not have to pay it. Organizing companies in Asian countries requires mandatory registration and a certain tax percentage (usually low).

A more clear picture of the conditions of offshore companies in different countries is shown in the table:

№	A country	Registration cost, USD USA	Income tax, %	Peculiarities
1	Cyprus	2 500	12,5	Mandatory audit
2	Scotland	2 200	20	Mandatory checks
3	Canada	2 600	4,5	No reporting required
4	Hong Kong	2 500	16	Financial report required
5	British Virgin Islands (BVI)	1 900	No	No audit or reporting required
6	Luxembourg	23 200	29	Mandatory reporting
7	UAE	18 900	No	No reporting required
8	Switzerland	18 900	12	Mandatory reporting
9	Cayman islands	7 500	No	No reporting required
10	Malta	5 000	5	Mandatory audit

It is up to you to choose in which zone to register your offshore company. As can be seen from the table, there are no ideal options; each has its own advantages and disadvantages.

5. Pitfalls in working with offshore companies

The negative aspects of offshore business have already been partly mentioned above - close attention from international organizations, restrictions in credit matters.

The offshore zones themselves do not hide their activities - they are official centers of international commerce.

However, all territories of this kind are divided into two groups:

1. Completely closed to outside control.
2. Zones with minimal benefits.

The absence of a unified list of offshore territories indicates an ambiguous attitude towards this phenomenon among the subjects of the world community.

Each country has its own “black list” of such zones, the purpose of which is to increase control over currency movements and force partner banks of offshore companies to create additional reserves for transferred finances.

The presence of tax havens on the planet does not please the government authorities of the countries from which financial assets are being withdrawn. Under pressure from the “powers that be,” tax breaks in European countries are gradually being leveled out. Liechtenstein, Luxembourg and Switzerland are no longer so attractive for asset withdrawal.

6. FAQ - answers to frequently asked questions about offshore companies

These questions are most popular among aspiring entrepreneurs and current company managers. Here I will answer the most popular ones.

Question 1. How to open an offshore company?

Most Russian companies wishing to open offshore companies turn to intermediaries. This option saves time and allows you to conclude an agreement taking into account all the legal subtleties. It is clear that this service is not free.

If the interested party decides to carry out the procedure independently, then each jurisdiction provides those interested with a complete list of necessary documents and conditions of the offer.

Question 2. Where to buy a ready-made offshore?

You can buy a ready-made offshore from a company that sells this “product”. There are dozens of such organizations in the world: in particular, you can find a suitable option on the website Worldwide Incorporation Services. This resource provides a quick selection of almost all the most relevant modern jurisdictions.

Question 3. What is deoffshorization?

Deoffshorization– reducing the influence of the offshore factor in Russian business.

As a rule, all that the average Russian citizen knows about offshore companies is that oligarchs use this tool to hide money from tax authorities. This is not entirely true. Anyone who is not associated with the financial sector, but on whom the entire economy of the country is built and rests, must know what this term really means, and whether everything connected with it is so illegal. This article will help the unenlightened, but irreplaceable units of society that support the country's economy, understand the issues of good and evil in the offshore world.

Offshores abroad

Offshores are certain foreign countries or their states with favorable conditions for doing business for foreign entities in relation to that country. To put it simply, these are states where you can open a company or conduct business without paying taxes and fees. Another advantage of offshore zones is that, in addition to the lenient tax regime, they can secretly conduct reporting and hide the real owner of the company. Most of these “tax-free countries” do not disclose financial transactions. This is precisely what attracts scammers: to carry out illegal schemes to siphon off funds, confuse the traces of “criminal capital”, and evade taxes on purchase and sale transactions. According to statistics, part of the taxes that the state where the enterprise was located before the transfer of rights received ends up in the pocket of the business owner. Analysts believe that it was offshore zones that influenced the emergence of the global financial crisis, since today a third of the total wealth of millionaires in the world is hidden in offshore structures, excluding valuable real estate and shares, this is about 11.5 trillion dollars, that is one tenth of all the money on Earth.

History of the emergence and development of offshore zones

The first mention of offshore companies (from the English offshore - “offshore”, “outside borders”) was noticed in the middle of the last century in the United States, despite the fact that offshore schemes owe their appearance to the Greeks. From the history of Athens it is known that the cunning Phoenicians bypassed the city with high taxes and transported their goods to other islands, where they knew nothing about the duty. But in America in 1950 there was a major scandal related to tax fraud. One of the companies, in order to avoid tax payments, registered its activities in another country with lower taxation.

Where did offshore originate?

In Russia, the first offshore company was a Swiss company in the 90s. At the same time, the new product began to gain popularity. One got the impression that highly developed states simply cannot influence the development of offshore companies. And this lack of control is explained by the fact that the most influential people in the world began to actively use such services to increase their capital. And underdeveloped countries with a predominantly agricultural economy found their benefit in this and decided to become a so-called tax haven for businessmen. Since then, the sale of tax breaks has become the main source of income for small states with low populations.

Now small financial centers make money not from a set of deductions, but from contributions from company registrations. And this is quite enough to ensure a high standard of living in your country. Due to non-residents transferring their income and companies, new jobs are created for citizens of offshore zones. In total, the offshore zone includes 27 territories of the world. The most common of them are the countries of Latin America and Asia. They have a favorable investment climate and employ highly qualified investment professionals. Today there are up to 70 financial offshore centers in the world. In addition, about 100 more states would agree to become such.

Many states are against offshore zones

The governments of developed countries, no matter how much they would like to prohibit citizens from using the services of offshore zones, are trying to fence off this environment only systematically, which is completely unsuccessful. Attempts to introduce restrictions are fruitless, because during their existence, offshore centers have built a full-fledged legislative framework capable of protecting the rights of their clients. In addition, the emergence of the global web has aggravated the situation. The Internet makes it possible to remotely manage and conduct business, which is what residents of highly developed countries use.

For fifteen years now, Russian tax authorities have been trying to prove to domestic entrepreneurs that they should not work through offshore companies. But business persistently continues to use them. Why? Let's figure out what offshore companies are, what schemes exist for working with them, and what to consider in order to successfully use them.

Offshore or offshore?

The concept of “offshore” came to us from the English language. Offshore is literally translated as located far from the shore, outside the country. However, despite the double “f” in the English version, in Russian it is more correct to write a word with one letter f, that is, offshore.

Are offshore companies legal?

Firstly, no laws prohibit the use of offshore companies (or, more correctly, non-resident companies) in Russia. Yes, aggressive tax planning (i.e. not paying taxes at all) is discouraged. And transactions with counterparties from offshore zones themselves will, of course, attract additional attention from the tax authorities. But, of course, there is no ban on their use. Moreover, in the context of the latest sanctions against the largest Russian enterprises, the Government of the Russian Federation abandoned the idea of ​​forced “deoffshorization” of the Russian economy and no longer requires the return of business to Russian jurisdiction.

Secondly, in the old fashioned way in Russia it is customary to call almost any foreign company offshore. Especially if it dared to interact with the Russian one, for example, within the framework of trade schemes or when paying dividends. Remember the notorious case of Mechel and its Swiss subsidiary or, from the latter, the case of the Cherkizovo group and their parent Cyprus holding company. So, neither Cyprus nor Switzerland, of course, are offshore.

Offshores what are they?

Offshore companies are companies from relevant jurisdictions where:

1. It is permitted not to submit financial statements.
2. There are no requirements to pay taxes.
3. There are increased requirements for confidentiality of owners of local companies (that is, in state registers of companies there is no information even about directors and shareholders).

Among such jurisdictions we can note, for example: Belize, Seychelles, Saint Kitts and Nevis, Marshall Islands and others.

Low tax jurisdictions

In addition to classic offshore zones, there are jurisdictions where financial statements must be maintained and submitted, but there are significant tax benefits. For example, the territorial principle of taxation, when only income received within the country is taxed, and all foreign income is exempt from taxes. Such jurisdictions are usually called low-tax jurisdictions. These include: Hong Kong, Gibraltar, Singapore and others.

It is worth noting that low-tax jurisdictions, as a rule, have agreements “On the avoidance of double taxation...” with other countries. This means that they are considered, at least in such partner countries, not offshore. For example, Hong Kong and Singapore have relevant Agreements with Russia and are not officially included in the “bad” lists of the Russian Federation.

Countries with special tax regimes

There is another type of jurisdiction that cannot be classified as offshore, but in which it is quite possible to work successfully. These jurisdictions have taxes that are far from zero, and are often even higher than in Russia; they require the submission of financial statements; they do not practice the territorial principle of taxation, but at the same time they encourage local companies with tax benefits to specialize in specific profiles of activity. For example, in the Netherlands (income tax rate up to 25%) there is an IP-BOX regime that stimulates IT development and innovation, under which the tax can be only 5%. Similar regimes exist in Luxembourg (where the basic income tax rate is 30%, but a special regime allows you to reduce taxes by 5 times) and in the UK (income tax is 20%, and under a special regime - 10%).

It’s hard to call such jurisdictions offshore, but the tax benefits there, as we see, are quite significant.

Thus, using companies from very respectable jurisdictions, you can, on the one hand, not irritate the Russian tax authorities and banks with your transactions, and on the other hand, achieve your goals for tax planning of transactions. That is, transactions with non-resident companies (and even with offshore companies) are not prohibited in Russia.

How much does it cost to set up a company offshore?

The exact cost of an offshore company depends on the jurisdiction and scope of services. But it is possible to identify the components and describe the price range. We analyzed popular jurisdictions and estimated prices. This will help you calculate the cost budget for creating an offshore company.

Offshores and CFC law

The absolute offshore “freedom” ended back in 2015, when Russia introduced its own Law on Controlled Foreign Companies (CFC).

Now, about your foreign companies you need to:

1. Report to the Federal Tax Service of the Russian Federation.
2. Submit reports on them.
3. Pay tax on undistributed profits of the CFC (under certain conditions). See also, .

Despite the fact that many psychologically do not want to report anything to the Federal Tax Service, nevertheless, it cannot be said that this law killed offshore schemes. Not at all! The most important component of this law is tax, which manifests itself only for “passive” companies (personal wallets), and even then, if the retained profit of such a CFC is more than 10 million rubles (before 2017, this benefit was 30–50 million rubles ).

Companies engaged in “primarily active activities,” for example, trading, are exempt from paying tax.

We will not dive into the details of the CFC law in this article. The main thing you should understand is that the Russian law on CFC does not at all put an end to the use of non-resident companies. It is quite possible to work with them successfully.

All solutions for working with offshore companies are based on the fact that the tax burden from a high-tax jurisdiction (for example, from Russia) is shifted to a jurisdiction where taxes are significantly lower

Offshore schemes

Let's look at the most common schemes for working with non-resident companies. Let's start with the types of trading schemes.

Trading schemes

The practical meaning of the above schemes is in various approaches to optimizing customs payments, VAT and income tax for a Russian company. In addition, under certain conditions, VAT savings can be achieved at the level of a European company.

Toll scheme

A tolling scheme will help solve similar problems within Russia.

Scheme for saving VAT and customs duties

Scheme for saving VAT and customs duties on equipment purchased for your own needs.

All of the above solutions for working with offshore companies are based on the fact that the tax burden from a high-tax jurisdiction (for example, from Russia) is shifted to a jurisdiction where taxes are significantly lower. At the same time, the Russian company interacts with a foreign company from a respectable jurisdiction (from the “white list”), which ensures a more adequate reaction to what is happening on the part of the Russian tax authorities and servicing banks.

Holding schemes

Schemes where foreign companies act as holding companies have also become widespread. In this case, the problems of confidential ownership of Russian assets are solved, and the tax burden when paying management services and dividends is reduced. Or when non-resident companies attract external financing abroad or acquire trademarks and patents.

But in this case, “just a non-resident company” is no longer enough. It is necessary to select a jurisdiction based on at least several criteria.

How to choose the right jurisdiction

There are at least 30 criteria for choosing the right jurisdiction for a specific tax decision. But you need to consider at least these four:

1. The presence of an agreement on the avoidance of double taxation (DTT) between Russia and the country chosen for work.
2. It is desirable that withholding taxes on these DTAs be lower than the basic Russian ones (20% and 15% on dividends), ideally that they generally tend to zero. see also step-by-step instructions for paying dividends .
3. It is desirable that the income received be taxed in the chosen jurisdiction at rates lower than Russian ones (ideally, zero).
4. The ability to withdraw money from this country without any restrictions (i.e. without additional taxes at source and exchange controls).

We deliberately do not dwell on the cost of registration and support of such solutions. The thing is that the basic price range for company registration between jurisdictions can differ significantly. But you should not pay attention to the cost and lean towards the cheapest or most expensive options. The economic effect of tax planning will still be significantly higher than the costs of registration and support of any decision. Therefore, it is this effect that should be correctly assessed, and based on which particular jurisdiction will provide it.

Everything that is known to the servicing bank may become known to the Russian regulatory authorities.

Choosing a bank to work with offshore

A well-drafted tax decision is half the battle. The main thing is to open an account in a normal bank and calmly make payments and work. However, there is a problem here. It is becoming increasingly difficult to open a bank account for classic offshore companies. And, if an offshore account has already been opened, it is not easy to maintain it. Especially, all this applies to transactions for which settlements are in US dollars.

Of course, there are still banks that open accounts for offshore companies and the choice among them is still quite wide. But every year it becomes more and more difficult to find some adequate option. And tariffs for offshore payments have increased significantly in absolutely all banks.

Therefore, if you need to be serviced by some respectable bank and not overpay for payments, then, apparently, you should think about registering a non-offshore company.

How will automatic exchange of information affect work with offshore companies?

We have already said above that you will have to report your foreign companies to the Federal Tax Service of the Russian Federation. But not everyone would like this. Therefore, many entrepreneurs are considering the option of “keeping quiet.” Such thrill-seekers should remember that from 2018, Russian tax authorities will receive information from some of their foreign counterparts, as part of the automatic exchange of information between countries. Therefore, in order to avoid getting into an unpleasant situation, you should clarify in advance whether your bank (or trustee, manager, broker, etc.) will send such information, within what time frame and what kind of information.

Of course, in general, automatic exchange of information is not a death sentence. And it is quite possible not to fall under such an exchange, even while being serviced by an “information-dangerous” bank. Another thing is that for this you need to take into account a much larger number of nuances than appears at first glance. But, basically, you should know that everything that is known to the servicing bank may, under certain circumstances, be known to the Russian regulatory authorities.

At the same time, there are still many banks that will not participate in such an exchange. But the situation in this regard is changing quite dynamically. Therefore, it is necessary to monitor any changes and sentiments in your jurisdiction on an ongoing basis.

If you need to be serviced by some respectable bank and not overpay for payments, then you should think about registering a non-offshore company.

Tax authorities have increasingly begun to investigate schemes involving non-resident companies, as a result of which money is transferred abroad without paying tax at source in Russia.

On the one hand, all such schemes are based on the provisions of the Agreements “On the Avoidance of...” between Russia and other countries. And according to such provisions, withholding taxes (on dividends, interest and royalties, for example) can indeed be reduced.

On the other hand, tax authorities question the possibility of applying such benefits, for example, because the ultimate owner of the “right to income” under the DTT is not a Cypriot company (for example), but some offshore company. And they prove their thesis very simply - with a bank statement, according to which all money in transit through Cyprus goes to the said offshore.

On the one hand, it seems impossible to argue with the position of the tax authorities. Bank statements speak for themselves. Although, there may be a temptation to open bank accounts in a jurisdiction that will not allow tax authorities to receive such statements.

But we will go a different way.

In fact, the main point of this scheme is to bring the money to the final beneficiary. Up to an individual. And the next stage, often, is the distribution of dividends from the offshore - to him. With payment of appropriate taxes.

So the tax authorities themselves suggested a much more profitable and risk-free way of such transit.

A Russian company, knowing before the date of payment of income, the real beneficiary, can pay money to a non-resident, withholding not tax at the source of payment (within the framework of SDT), but personal income tax (since the final beneficiary and recipient of income is a tax resident of Russia).

This method not only allows you to avoid tax claims, but also saves on taxes at the source of payment (after all, in fact, the money will still go abroad).

This approach is one of many that allows you to work completely legitimately and not be afraid of being “caught” by the Federal Tax Service, on the one hand, and practically not waste time and money on reconfiguring existing tax solutions, on the other.

Conclusion

So, what should you know when working with non-resident companies?

1. It is not prohibited to use foreign companies in tax decisions with Russian companies.
2. There are some restrictions that may arise when using companies from offshore blacklists.
3. Using companies from respectable jurisdictions still allows you to achieve significant tax savings.
4. Most often, foreign companies are used in trade schemes.
5. For non-trade schemes and cross-border transfers, when taxes arise at the source of payment, it is fundamentally important to use companies from jurisdictions with which Russia has a valid Double Taxation Avoidance Agreement...
6. To choose the right jurisdiction for a company, the cost of its registration and support are secondary. Ideally, about thirty other factors and indicators should be assessed.
7. Fundamentally important for any tax decision is opening an account in an adequate foreign bank.
8. Working NOT in US dollars will allow you to significantly reduce the time and cost of opening an account and maintaining transactions.
9. Opening a US dollar account offshore is becoming increasingly difficult.
10. You should choose a servicing bank, among other things, based on the prospects for exchanging information with Russia (including automatically).
11. The constructed tax solutions should be tested, including on the basis of the assumptions that the exchange of information between Russia and the country of the servicing bank did take place.

Thus, even taking into account the course towards “deoffshorization”, working with non-resident companies in 2019 may remain profitable and legitimate.

Interested in what offshore is and what are its benefits for entrepreneurs? In the article you will find a detailed explanation.

Offshore is, in simple terms, a state in which there is either no taxation at all, or deductions are very minimal.

So this concept must be considered, first of all, as an economic-geographical one.

And not as a mandatory element of fraudulent schemes and scams.

Offshore companies have several features:

• they are easier to administer;
• provide an increased level of confidentiality;
• exempted from the need to provide reports to government agencies about tax and accounting matters;
• are still required to pay taxes in the country where the business is actually conducted.

To understand this in more detail, let's start with the origins of the concept of offshore.

What is offshore and how did this concept appear?

Now offshore is a concept closely related to the desire to avoid tax payments.

However, this phenomenon is deeper and more serious.

Even in antiquity, people could choose some suburban areas for trade if high trade duties were imposed in the city itself.

After all, even if you translate the word “offshore”, it will turn out to be “outside the border”.

An example is the wool merchants who did business in Flanders, rather than the more familiar and convenient England.

Indeed, due to the size of tax payments in the latter, the proceeds from the goods sold were given to the state to the last gold.

And residents of North America completely took their business to Latin American towns.

These are just a few of the many large-scale cases of withdrawal of trade for the sake of saving on taxes - the first analogues of offshores.

But then there was no separate concept; these were simply forced trading decisions.

The term “offshore” appeared only in the 20th century in one American newspaper.

They identified a company that moved its actual work to a place where tax deductions were not so high.

In general, the existence of offshore companies ensures the difference in the taxation systems of different countries.

For the Russian Federation, the opportunity to use offshore companies appeared relatively recently - in 1991.

Close to the Russian mentality, this opportunity immediately gained popularity among Russians.

The most important thing is that the way to reduce taxes is absolutely legal.

In the nineties, one could confidently say about the enormous popularity of using offshore companies.

When seeking advice from private tax specialists, businessmen most often received advice to optimize their activities with the help of offshore companies.

Moreover, such options for using various schemes together were selected that this made it possible to apply offshore companies to almost any business.

But gradually the pressure on such zones increased, which led to a decrease in the popularity of offshore companies.

However, it is still a profitable and attractive way to optimize taxation for a private entrepreneur.

First of all, due to the fact that it is considered the best method for withdrawing funds abroad.

That is why offshore companies often appear in various political scandals.

As you understand, withdrawing money from your country for the sake of personal savings is not something that politicians can boast about.

Are offshore companies really legal?

To answer the question specifically: “yes, but only if the entrepreneur does not violate any laws of the Russian Federation when using offshore jurisdictions.”

Having considered the advantages and disadvantages of offshore companies listed below, you yourself can draw an obvious conclusion: offshore companies are not a panacea for “extra” spending.

It is simply a financial instrument that can either benefit your business or harm it.

The question of the legality or illegality of offshore companies is rather inspired by the sometimes arising scandals due to information leakage.

If you work honestly and use offshore companies correctly, Russian law will not interfere with this.

Why is offshore profitable?

1. The main advantage of offshore companies is the ability to simplify the system of tax deductions for your company or avoid it altogether.
2. Another reason, for some more important than the first, is the confidentiality of data about the business owner.
3. To register your company offshore you do not need to pay a lot.
4. The registration process will only take a day, and if you buy a ready-made solution, you can complete it even in a few hours!

Do not forget that registration in offshore companies for Russian entrepreneurs is an opportunity to gain the image of a foreign company.

And, as you know, this gives many pleasant bonuses.

5. You accept another person as the nominal director of your offshore company and can calmly increase the distance between yourself and the business.

Bank instability is a particularly hot topic at the moment.

One by one they lose their license or declare themselves bankrupt.

An offshore company allows you to open accounts anywhere in the world.

What are the disadvantages of offshore companies?

You understand perfectly well that if offshore companies did not have any shortcomings, all entrepreneurs would switch to them.

But there really are downsides.

And for most they seem too weighty:

“If you register offshore, it means you want to hide something.”

Most likely, this is not about you.

But it seems that this is exactly what certain international structures think.

They will closely monitor your actions and check them whenever possible.

Even when a person works offshore honestly and has no intention of hiding anything, doing business “under the hood” is uncomfortable.

The global crisis also affected the activities of offshore companies.

Even those that were considered stable and reliable are losing ground.

No one can guarantee that information about your offshore affairs will not come to light sooner or later.

And, again, even if your conscience is clear, the fact about doing business offshore can greatly tarnish your reputation.

In some countries, various economic obstacles for business are created using “blacklists”.

If your business is related to offshore companies, any tax benefits may be canceled.

How many offshore companies are there?

As a rule, offshore companies are some developing countries or even individual parts of them.

They participate in this scheme because it is beneficial for them to attract money from foreign entrepreneurs to the state.

Thanks to the presence of offshore zones, the country provides part of the local population with work and receives a stable flow of money from third-party sources.

Offshore companies make a profit thanks to a fixed fee, which in no way correlates with the results of the company’s work.

Therefore, it is enough to submit tax reporting in offshore companies in a simplified form, or you can do without it altogether.

There is no single accurate list of all offshore companies.

But some of them are often mentioned, therefore they are familiar even to people far from economics and business.

For example, the Dominican Republic, the Caribbean, Hong Kong, Uruguay.

But few people know that there is an offshore zone even in Russia - this is the Kaliningrad region, where there is the possibility of taxation on preferential terms.

Of course, not everyone likes the existence of such zones as offshores.

Therefore, some offshore companies have to reconsider their conditions.

However, companies that use the opportunity to simplify taxation through offshore companies are in no hurry to abandon it.

A few more words about offshore companies and their benefits for entrepreneurs,

you will hear in the video:

How to register a company offshore?

Unlike registering an individual entrepreneur or LLC in Russia, registering a company offshore is absolutely impossible on your own.

To do this, you will definitely need to contact specialists - registered agents.

That is, the process is as simple as possible for an entrepreneur: contact an agent with an offshore license, outline your vision of the business and pay the established fee.

The intermediary will do the rest himself and eventually issue a ready-made package of documents.

The entire process from start to finish takes up to two weeks.

There is an even simpler and faster option - buy a ready-made offshore company.

Since the entrepreneur does not have to be present during registration, it has become possible to register “shelf” companies.

These are, in simple words, blanks/templates ready for use.

It is enough to contact a law firm that deals with offshore companies, buy a “shelf” company and change the director.

At the same time, clients can have guarantees that this company has not previously conducted activities, that is, it is completely “empty”.

Offshores are interesting financial instrument.

In the right hands, it can be used in a dozen situations: by stockbrokers, as holding companies, even to finance their own business.

Whether you use it or not is up to you.

The main thing is not to do this for fraudulent purposes.

After all, the retribution may be too serious.

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Hello! Probably every person has heard the word “offshore”. But many have no idea what it really is. Therefore, today we decided to tell ordinary people what is hidden under this concept, who uses offshore accounts and how our state treats this.

What is "offshore"

Each country's budget is formed differently. Countries with rich industries fill their treasuries with the help of tax contributions from large enterprises, while states with developed tourism function through contributions from the tourism sector. But some countries survive at the expense of foreign entrepreneurs. We are talking about offshore companies.

Offshores is a financial zone where residents (citizens of another country) register on preferential terms.

In simple terms, offshore is an activity that is only registered by a foreigner in a certain country. In fact, the entrepreneur works in his own country.

Certain countries allow in their country on preferential terms in terms of paying taxes and anonymity of the founders. Thanks to this, owners who create offshore companies legally avoid paying large taxes, and countries with offshore zones replenish the budget thanks to minimal taxes.

To make it more clear why to do all this and how offshore companies work, consider the following example:

The owner of a large business that is registered in the Russian Federation is required to pay a monthly tax in the amount of 15% of his income. If he makes his company offshore, he will pay 5% to the country where it is registered (for example, Panama). In fact, he has worked and will continue to work in the vastness of our homeland, but according to the documents, his company will be foreign. Tax figures are approximate.

Why is this necessary?

This is done in order to increase profits by reducing tax deductions. If we consider our example, the net income of a businessman will increase by 10%.

If the concept "company" interpreted from the perspective of international law - this is a subject that pays taxes to the country where the company is registered.

This is also beneficial for a number of countries, and especially for island states where there is no developed industry. It is through offshore companies that their budget is filled.

According to financial experts, 10% of all funds on our planet are located in offshore companies.

Tax rate is the main reason for moving a business offshore

Due to low tax rates, more and more people are moving their companies offshore. It is there that it is minimal or absent altogether.

Most often, the tax is a flat rate that does not depend on the income of the enterprise.

In this combination, everyone is happy, except for the state in which the owner of the company works. After all, the budget is missing quite a large amount of money. Some financial experts blame offshore companies for the global crisis, because... The economy is destabilizing.

Categories of offshore zones

Offshore zones exist not only in island countries. You can register an offshore company and enjoy preferential taxation in developed countries such as the USA, Great Britain, Switzerland, etc.

But it is worth remembering that the conditions for registering and operating such a business are very different from each other. For example, the islands may have no taxes at all and no reporting required. In developed countries, conditions are not so attractive; the activities of offshore companies are closely monitored by authorities. But at the same time, the risk of being left with nothing and losing the company is lower than in countries with a low reputation.

Depending on the operating conditions of such enterprises, offshore zones are divided into 3 categories:

1. The white list is offshore zones where the jurisprudence of the state is as close as possible to or corresponds to international standards of taxation and business activities.
2. The gray list is offshore zones where they gather or try to implement global business standards.
3. The blacklist is offshore zones in which there are not even attempts to introduce global standards of taxation and business management. activities.

Thus, offshore whitelist zones are more reliable, but their conditions are less attractive. And blacklist zones are more risky, but profitable.

How to choose an offshore zone

Choosing an offshore zone is quite difficult. Here you need to proceed from the specifics of the company and type of activity.

If you are planning buy property , then it is better to choose a country where information about the owner of the property is not disclosed, for example, Seychelles.

In case you need hide investment related activities , then it is rational to create an offshore network, and distribute all assets among different companies with an intricate management system.

If necessary, reduce the amount of taxes associated with export and import , then it is better to choose an area where there is no double taxation (for example, Cyprus).

If it is needed withdraw a large sum abroad , then the choice of zone should depend on the legality of receiving money.

The most popular offshore zones

A large number of businessmen use offshore companies. Based on their preferences, we have compiled the top 5 most popular offshore zones:

• 5th place– Asian countries;
• 4th place– Switzerland and Luxembourg;
• 3rd place– Gibraltar and Cyprus;
• 2nd place– island countries of the European zone (for example, Maine or Jersey);
• 1 place- Caribbean countries.

All of these offshore zones have their own advantages and disadvantages, so it is impossible to say for sure which country is better.

Schemes for working with offshore companies

Companies with different types of activities use different offshore schemes. Now we will look at the main ones.

Transfer pricing scheme

Its meaning is as follows. Let's say there is an exporter who sells a product and an importer who buys it. In order to reduce taxes, the exporter first sells the entire volume of products to a third party (an offshore company), and the latter, in turn, transfers it to the importer. Thus, the exporter can significantly increase his income through minimal taxes.

For example, a supplier sold goods to an offshore company for 200 thousand rubles, although the cost of the entire shipment was 1 million rubles. In this case, he will pay tax on 200 thousand, and he will receive the rest of the amount when the offshore company transfers the goods to the importer. That is, not the entire part of the amount is taxed, but only a fifth of it.

Agency scheme

A company is opened that officially hires a company in a country with an unfavorable tax climate. In this case, the company that was hired will only pay for hiring services, which is 1-2% of the cost of goods and services.

Scheme in the construction industry

A company that will act as a contractor is registered offshore. In fact, this company will not perform any construction work. She will hire a company that will actually do all the work. At the same time, all purchases, payments for services, etc. will go through an offshore organization.

Product production scheme

The offshore organization pays for raw materials, materials and production of goods. After which, for a certain fee, she hires an intermediary who sells the products. All profits go offshore.

Transportation scheme

Royalty scheme

An offshore company is opened that creates and registers a trademark in the country where the activity actually takes place. After this, a license to use such a mark is sold and the offshore company receives royalties.

Offshore accounts

In offshores you can not only register your business. This is a great place to store your savings.

Offshore account – this is a bank account of a resident of another country.

In order for everyone to understand the meaning of this definition, we will give an example: A Russian citizen invests money in a Swiss bank. This account will be considered offshore.

Offshore banks do not work with the local population. They do not distribute information about their investors, even at the request of legal and judicial authorities.

Most often, money is taken offshore by people who want to hide their income (for example, deputies). Offshore accounts are not recorded in tax returns, and the amount of tax deductions is reduced accordingly. In this case, maintaining audit reporting is simplified, and the account can be managed from anywhere in the world.

The nuances of opening an account in offshore companies

The conditions for opening offshore accounts differ in each state. In some places they require the personal presence of the depositor, in some banks you can send an authorized representative, and some financial organizations themselves send their employees to the depositors.

When opening an account, you will need to pay the cost of the account opening service and make all necessary payments.

The choice of a bank and an offshore zone must be approached with special responsibility, because You could lose your hard earned money.

How to register a company offshore

There are two ways to register a business in an offshore zone:

1. Find a company that specializes in providing such services. They help you collect the necessary package of documents, analyze the most suitable offshore zones and register the company within a few days.
2. Do the registration yourself. To do this you will need to do the following:

• Analyze all states suitable for your type of activity;
• Decide on an offshore zone;
• Rent premises in the country where you are going to register the company. This is necessary in order to obtain a legal address;
• Hire a local resident. He will represent the interests of your company;
• In order to ensure your confidentiality, you can hire an employee who will be the nominal owner;
• Pay all registration fees.

You can open a company offshore without leaving your country. But in this case, you will have to entrust the preparation of some documents to other persons, and this is a certain risk.

In addition to registration, you can buy a ready-made company in any offshore zone. Such services are provided by specialized companies.

Pros and cons of offshore companies

Today, offshore companies are very popular. Offshore companies are opened by owners of large and medium-sized businesses, because... It is for them that this is most beneficial. There are more positive qualities for each side than negative ones.

Advantages of offshore companies:

• Simplified taxation. Most often, the tax is a fixed amount that does not depend on the amount of income. In some countries, offshore companies may not be subject to taxes at all.
• International growth of the company. By working in the market of another country, there is an opportunity for the company to grow.
• Business management can be entrusted to a trusted person. Most offshore company owners manage their business through proxies. That is, a certain person deals with all financial and legal issues while being in an offshore zone.
• Accumulation of funds abroad. Many residents open accounts in other countries. They have the right to use their funds at any time.
• Easy registration. Offshore companies register quickly and easily, unlike similar operations in our country. The collection of documents and registration itself may take up to 7 days.
• Preferential operating conditions. Some countries do not require any reporting.
• Confidentiality. No one has the right to disseminate information about the owners and activities of offshore companies.

Disadvantages of offshore companies:

• Special attention to offshore companies from representatives of international law.
• Considerable risks. It is necessary to choose an offshore zone especially carefully, because you can lose your business and all your savings.
• Negative image. There is an opinion that illegal and shadow businesses are registered in offshore areas. It is because of this that many enterprises do not want to cooperate with offshore companies.
• Inability to obtain large loans.

Conclusion

An offshore zone is a financial zone with favorable tax conditions where foreign capital is attracted. The withdrawal of companies and savings is beneficial to business owners and the offshore states themselves.

But the economies of countries that receive less taxes suffer greatly from this. There will be an outflow of money until all countries have equal tax conditions. And this is unlikely.