Myths About Offshore Business

Setting up your business as an offshore company may bring several advantages. Laws and regulations from any country are not as strict as they can be for local businesses or even international companies. Offshore companies also can address their concerns by themselves as long as the company itself understands the due process and the legitimacy surrounding each contract or dealings.

On the other hand, there are some common misconceptions about setting up an offshore company and all that surrounds them and their business. The type of company may be popular among business-minded people because of its various benefits; some still disregard the idea of creating an offshore company based on hearsay. If you want to create an offshore business, you need to get legal advice from a law company that has expertise in international business law.

Myth: Offshore business only benefits the rich and powerful.

Reality: The Cayman Islands and other offshore financial centers compete aggressively with each other every day to offer the most cost-efficient environment for international capital flow. This competitive market allows companies to raise financing and package financial risk more economically. These efficiencies benefit businesses, consumers of goods and services sold by these companies around the world, and shareholders, which include such venerable clientèle as non-profit endowments and public-sector pension funds.

Myth: Companies and investors doing business in offshore financial centers are driven by a need for secrecy.

Reality: Today's successful offshore financial centers have a long history of promoting commercial certainty for global clients. For the Cayman Islands, this has meant adherence to recognized and relevant international standards--not the absence of regulation--which has helped fuel sustainable growth of the sector. Since the early- to mid-1980s, the Cayman Islands has progressively reinforced its international cooperation channels in law enforcement, regulation, and exchange of information on tax matters. These channels include a tax information exchange agreement that was signed with the U.S. in 2001 and is in force, as well as a mutual legal assistance treaty with the U.S. on criminal matters in effect since 1990 and under which the Cayman Islands and the U.S. have cooperated in some 230 requests for assistance.

Myth: Offshore businesses prey upon other countries' tax codes, fostering illegal tax shelters.

Reality: It is true that tax reduction is one major benefit of an offshore structure since most offshore jurisdictions offer no income tax, VAT, capital gain tax, dividends tax, or withholding tax. However, there are a number of other benefits.

First, setting up an offshore company is a good way to diversify economic, and litigation risks and protect assets. An offshore vehicle is commonly used as a holding company for intellectual property or investments.

Secondly, it is usually cheaper to set up and maintain an offshore company. For example, if you are a U.S citizen wishing to trade with Chinese partners, it might be better to incorporate an offshore trading company in Hong Kong instead of waiting for a few months to get approval from the Chinese government. This is also a great way to reach customers from across the globe.

In addition, most offshore jurisdictions have lower minimum capital, as well as simpler filing requirements, which further reduces your operation costs. This is extremely relevant to small start-ups and individually owned companies.

Myth: Offshore businesses foster illicit activity and are unregulated.

Reality: The Cayman Islands has a strong track record of effectively regulating a full spectrum of financial services that measure up with standards found anywhere in the world. Effective oversight of complex financial activity--where literally billions of dollars trade hands every day--can only be accomplished by regulating services typically unregulated in other global regimes, such as company formation services, trust-services providers, and fund administration. In addition, the Cayman Islands government invests significantly back into regulation and combating cross-border financial crime.

Over the past 15 years, the Cayman Islands' financial regulation and prevention of financial crime regimes have been evaluated, "road-tested" and recognized by many third-party organizations such as the IMF, FATF, and OECD. The Cayman Islands continues to participate in these valuable "health checks" to help ensure the integrity of its regimes.

Due to necessity and market expectations, offshore financial centers must be mature, sophisticated, and specialized providers of financial services with sound legal frameworks and modern infrastructure in order to succeed. The "Big Four" accounting and auditing firms, most of the world's fund-service providers, and substantially all of the world's top global banks have a presence in the Cayman Islands.

Conclusion: 

Tetra Consultants is an internationally recognized business consulting firm providing assistance to clients with respect to setting up an offshore company, corporate bank account opening, accounting and tax obligations, and much more. 

Contact us to find out more on how to set up offshore company. Our team will revert within 24 hours.