Uses of Offshore companies
Offshore companies are most suitable as personal holding companies to hold investments made in a number of different markets and countries. In turn personal holding companies can then provide privacy and avoid unnecessary costs associated with establishing and running vehicles in a number of different structures. In this connection offshore companies are regularly used for inheritance planning and to reduce the costs and time delays associated with probate. Using a trust to own the shares in the offshore company can give rise to additional tax advantages in the client's country of residence and simplifies procedures in the event of the client's death.

One of the most popular uses of a company incorporated in a low tax area is for international trading. Another common use of an offshore entity is for bulk purchasing. Such a structure is typically established by a group of associated or un-associated companies to benefit from economies of scale and reduced administrative costs. Moreover, such a structure may be more tax efficient than an onshore arrangement.

TRADING COMPANIES
An importing or exporting company might establish itself in an offshore centre, so that it could accept orders directly from the customer, yet deliver merchandise directly from the manufacturer or place of purchase. Profits arising from the difference between purchase price and sales price would then be accumulated in a tax free or low tax area. In such a scenario, it is imperative to choose a jurisdiction which has well established telecommunications and travel routes as this will determine the day to day functioning of the arrangement.

HOLDING COMPANIES
One can use an offshore holding company to 'park' assets, and also to fund the operation of subsidiaries in other jurisdictions thus enabling the subsidiaries to benefit from tax deductions on interest paid. Once situated in a jurisdiction free from income and corporation taxes plus no legal obligation to declare dividends, profits 'parked' in the tax free base can fund the needs of subsidiaries or otherwise re-channeled according to individual business plans.

INTERNATIONAL TRADING AND PURCHASING COMPANIES
There are considerable gains to be made by housing an international transaction within an offshore company. Typically an offshore company would order merchandise from another jurisdiction, and then sell the goods to a third country, thus achieving the necessary sales route while creating a legitimate offshore 'pool' for international transaction profits free from taxation in the offshore jurisdiction. In addition, to move funds from a high to a low tax jurisdiction, one may structure business operations so that trading debts of a company in a high tax jurisdiction are processed via a company in a low tax jurisdiction.

CONFIRMING HOUSE
An offshore structure is indispensable for high volume import export trade, since it is a means to channel such transactions via a confirming house seated in a low tax area. By combining this mechanism with the use of double taxation agreements, one is able to buy from high tax countries of origins and then sell via a confirming house in an offshore jurisdiction so that profits accumulate therein, with little or no taxation.

FACTORING COMPANY
One can achieve the transfer of funds from a high tax jurisdiction to a low tax jurisdiction by factoring trading debts of a company resident in a high tax jurisdiction through a factoring company established in a low tax jurisdiction. The factoring charge can be constructed so as to qualify for treatment as a deductible expense in the relevant high tax jurisdiction.

INVESTMENT COMPANIES
Funds accumulated through investment companies set up in offshore centres, then invested or deposited throughout the world. The returns or interest payable on these funds although subject to local taxation, may be placed either in tax free bonds or as bank deposits where interest is paid gross. Moreover in many offshore areas no capital gains taxes are applicable, thus an offshore company incorporated therein creates the opportunity of investing tax into a high tax country offering a concessionary tax treaty relating to investments made by companies incorporated in that jurisdiction.

INTERNATIONAL INVESTMENT
Individuals as well as corporations, regularly make use of offshore companies as vehicles to hold investment portfolios. Such portfolios may consist of stock, bonds, cash and a broad range of other investment products, whilst cash assets held by offshore companies may earn deposit interest free of tax.

The selection of a politically and economically stable corporate domicile may reduce risks that both corporations and individuals may face in either their home or third party countries. Many large corporations and companies wishing to invest into countries where a Double Taxation Agreement does not exist between the investor's country and the country where the investment is to be made will establish an intermediary company in a jurisdiction where there is a suitable treaty.

Offshore corporations and trusts are often used to hold investments in subsidiary and/or associated companies, publicly quoted and private companies and joint venture projects. In many cases capital gains, arising from the disposal of particular investments, can be made without the encumbrance of taxation. In the case of dividend payments, reduced levels of withholding taxes can be achieved by the utilization of a company incorporated in a zero or low tax jurisdiction that has double taxation agreements with the contracting state.

TRIANGULATION
This is the procedure whereby clients from third countries can select a 'base jurisdiction' from which to exploit its treaties as beneficial treatment in that company's dealings with the base country's treaty partners where the third country does not itself have a treaty with the base country's treaty partner.

PERSONAL SERVICE COMPANIES
Self employed Professionals as well as independent workers in the construction, engineering, aviation, finance, computer, film and entertainment industries can achieve considerable tax saving benefits through the establishment of a personal service company, based offshore. The offshore company can contract to supply the services of the individual outside the country in which he/she is normally resident and the fees earned can accumulate offshore, free from taxation in the offshore centre. Payments to the individual can then be structured in such a way to minimize income tax. Several famous stars, actresses, pop groups, sportsmen, oil engineers and financial consultants, on entering into contracts with independent employment companies, incorporate in appropriate jurisdictions so that they may sell their services outside the individual's country of residence.

PROPERTY AND LAND OWNERSHIP
There are significant tax savings to be made from owning real property and land via an offshore company, most notably, the legal avoidance of capital gains, inheritance and property transfer taxes. If for example, an offshore company owned a property in a European Union country for investment purposes and the property was later sold on to a third party, the capital gain arising from the transaction would not be subject to capital gains taxation. Furthermore by structuring the financing on a back-to-back loan facility, the offshore company could reduce the effective level of any withholding taxes on rental income that may apply. In fact there are often great advantages in using an offshore property holding company for the purchase of overseas property, and the costs of doing this are not significant in relation to the benefits that arise.

EMPLOYMENT COMPANIES
Offshore companies are frequently used for the employment of staff working on overseas assignments, thus reducing costs associated with payroll and travel expense administration, plus providing tax and social security saving benefits for employees.

INTELLECTUAL PROPERTY LICENSING AND FRANCHISING
Intellectual property, including computer software, technical know-how, patents, trademarks and copyrights can be owned by or assigned to an offshore company. Upon the acquisition of the rights, the offshore company can then enter into license or franchise agreements with companies interested in the exploitation of such rights around the world. The income arising from such arrangements can be accumulated offshore and by the careful selection of an appropriate jurisdiction, withholding taxes on royalty payments can be reduced by the commercial application of double taxation treaties. We recommend the UK, Netherlands, Malta, Cyprus and Mauritius as excellent jurisdictions for holding intellectual property.

MIXING VECHICLES
Several of the major multinational operations have established their own offshore Mixing Companies to mix dividends from their subsidiaries, to take maximum advantage of tax credits. High tax credit jurisdictions, including, for example, the UK which treats overseas dividend income on a source by source basis, create situations where a dividend from one source has an underlying foreign tax credit which exceeds the domestic tax payable, there being no facility in domestic law to set the excessive tax credit on the first dividend against the domestic tax liability on the second dividend. The solution is for the domestic company to form a subsidiary normally located in a territory which has favorable double tax treaty arrangements and use that, effectively mixing the foreign underlying tax credits allowing "set off' for excess tax credits against dividends from low tax sources. The "mixed" dividend is then paid on to the domestic parent with the underlying rate averaged out.

STOCK MARKET LISTINGS AND CAPITAL RAISING EXERCISES
With political and economic uncertainty in some countries, many large corporations have sought to mitigate risk by moving ownership of assets and bases of operations offshore. Luxembourg and Bermuda have been host to many companies wishing to re-domicile their operations. Offshore companies are regularly employed to raise money through loan or bond issues. Such a structure may reduce withholding tax on interest payments as, for example, countries such as the UK raise a withholding tax on interest paid on non-quoted bonds to non-residents. Double taxation avoidance planning is vital in cases such as these.

FINANCE
Offshore finance companies can be established to fulfill an inter-group treasury management function. Interest payments from group companies may be subject to withholding taxes, but often these taxes are different to the normal rates of corporation taxes that are levied. The interest paid would be a deductible charge, for taxation purposes, and so consolidating interest payments in an offshore finance company may provide a tax saving benefit. In many countries foreign exchange losses are not deductible for tax purposes. If an offshore finance subsidiary was formed, then made a foreign exchange loss, and was then liquidated, the investment could be a tax deductible item for the parent company.

Offshore companies are often utilized as part of mechanisms and structures for acquiring foreign entities, international restructuring of corporations, real estate and other investments and other corporate finance related projects. There are a number of high tax jurisdiction that grant fairly high capital allowances or give investment grants to companies within their jurisdiction which purchase capital equipment. Although it is generally not advantageous to use a low tax area from which to lease capital assets, there are, however, a number of circumstances in which using a low tax area as a leasing base can be advantageous. Typically these concern situations where there is a desire to move international group funds into a high tax area, which would otherwise result in their treatment as taxable income, either as a real or deemed dividend receipt. In these circumstances the use of a low tax company as a conduit for funds can achieve the two fold benefit of meeting the need for capital expenditure in a high tax jurisdiction in a form which does not give rise to tax as the funds cross frontiers and then enables the further extraction of subsequent profits from a high tax area in the form of lease payment at arms length rates. There can also be exchange control benefits.

SHIPPING COMPANIES
The use of offshore shipping companies can eliminate direct or indirect taxation on shipping. Shipping companies may own or charter ships, the profits from which activities can be accumulated tax free. Tax and legal requirements generally dictate that the offshore company owning a shipping vessel should be incorporated in the jurisdiction whose flag the ship flies.

The more sophisticated offshore jurisdictions have modern ship and pleasure craft registration facilities that provide low cost registration fees and tax exemption on income derived from shipping and chartering activities. These jurisdictions include the Isle of Man, Malta Jersey, Gibraltar, Cyprus, Bahamas, Belize and Mauritius.

It should be noted that pleasure vessels being operated within European Union waters for extended periods of time require specialized advice in relation to Value Added Tax. Low tax jurisdictions are used to house shipping companies thereby eliminating taxation on profits earned from chartering and other ancillary activities. There are several advantages in flying the Malta Flag, and these advantages can be obtained, together with substantial tax benefits. The need for specialist skills in this field is provided by expert advice on the Malta shipping Register in particular and international ship management generally. Malta can offer many advantages to existing or potential ship owners and managers. Vessels registered in Malta sail under the Malta flag or can be bareboat registered to a second flag, according to market needs.

RESIDENCY & IMMIGRATION (Malta)
It is no secret that anti-avoidance legislation of most high tax jurisdictions targets long term residents of that jurisdiction or those wishing to change tax residency. This has created the need for careful planning catering for the movement when an individual is physically moving between high tax countries, whether for business purposes or retirement, for periods of anything between one year and the indefinite future.

PROBATE AND PRIVACY
A high net worth individual with properties or other assets in a number of countries may wish to hold these through the medium of a personal holding company so that upon his demise probate would be applied for in the country in which his company was incorporated rather than in each of the countries in which he might hold assets. This saves legal fees and avoids publicity.

PROPERTY OWNING COMPANIES
There are often great advantages in using an offshore property holding company for the purpose of holding an overseas property. Indeed, there are even low cost specialist schemes, operated in conjunction with lawyers in France, Geneva, and Malta.

Advantages of offshore property ownership include avoidance of inheritance tax, avoidance of capital gains tax, ease of sale which is achieved by transferring the shares in the company rather than transferring the property owned by the company and reduction of property purchase costs to the onward purchasers.

PROFESSIONAL SERVICES
Individuals who receive substantial fees in respect of their professional services in capacities such as designers, consultants, authors or entertainers, may assign or contract with an offshore company the right to receive those fees. The offshore employment company may not have to pay tax on its profits which can be reinvested in a tax free climate to generate further income from the offshore company. Payments to the individuals concerned can be structured in such a way as to minimize their tax liabilities. One example in this regard in respect of an overseas employment is to increase subsistence expenses as against fees as such which would be paid to the individual.

PATENT COPYRIGHT AND ROYALTY COMPANIES
An offshore company can purchase or be assigned the right to use a copyright, patent, trademark or know-how by its original holders with a power to sub-license. Upon acquisition of the intellectual property right the offshore company can then enter into agreement with licensees around the world who would be able to exploit the intellectual property right in various countries. It is thought preferable to acquire, for example, a patent at the patent pending stage before it becomes very valuable so that the capital payment for the acquisition of the patent can be set at a lower amount. Often royalties paid out of a high tax area attract withholding taxes at source. In many cases an interposing holding company may allow a reduction in the rate of tax withheld at source.