Whether you own a startup or a large company, setting up an offshore company can help your business grow and reach new markets.
Offshoring primarily focuses on saving money by moving operations to a cheaper location abroad. This lets you reinvest the saved money into growing your business.
But which is the best country to set up an offshore company?
In this article, we’ll answer that question.
This Article Contains:
(Click on the links below to jump to a specific section)
- Top 8 Countries for Offshore Companies
- 6 Key Factors to Consider When Choosing an Offshoring Destination
- How Do You Benefit From an Offshore Company?
- How to Manage Offshore and Remote Teams
Let’s get started.
Top 8 Countries for Offshore Companies
Offshoring is all about shifting or relocating part or all of your business operations to a different country.
The offshore business operations could remain within your company, or you could outsource these operations to a third-party company in that country (which is known as offshore outsourcing).
Here’s a list of eight potential countries for your offshore company formation:
1. The British Virgin Islands
There is a good reason why about 40% of the world’s offshore companies are registered in the British Virgin Islands (BVI). For starters, it only takes about three to five days to set up an offshore company in BVI.
However, most investors are attracted to BVI because it’s a tax haven. Additionally, it offers a 0% corporate tax rate, a flexible and modern banking system, and it’s politically stable.
It’s also considered a leading offshore banking center due to its strict company filing requirements.
2. Hong Kong
Apart from giving offshore business owners access to the lucrative Chinese market, Hong Kong is also a popular financial center with a business-friendly tax regime.
You get a 0% tax rate on capital gains, shareholder dividends, and foreign-sourced income.
Additionally, Hong Kong has about 40 double taxation avoidance treaties.
Singapore was ranked the second easiest place to do business in 2018 by the World Bank Group. Usually, you can set up your offshore business here in about one or two days.
It’s an excellent offshore jurisdiction for startups, investors, and entrepreneurs since it offers:
- Political stability.
- Skilled onshore labor force
- A great banking system.
- Partial tax exemption incentives for startups and investors.
Moreover, the corporate tax rate is capped at 17%, which is pretty low.
4. Cayman Islands
Located in the beautiful Caribbean Sea, the Cayman Islands is a popular offshore financial center and houses about 75% of the world’s offshore hedge funds.
If you’re looking to set up a hedge fund, the Cayman Islands could be the place to do it.
Additionally, the shareholders of offshore companies established here aren’t subject to taxes, not even on dividends. The Cayman Islands is also considered a tax haven since there are no capital gains tax, profit taxes, income tax, or withholding tax.
It also offers a lot of privacy to its companies. Documents like company accounts, meeting minutes, and more are kept private and don’t have to be registered with the government.
Another benefit of this offshore location is that English is the official language in the Cayman Islands. As all documents and legislations are in English, you won’t have to face language barriers.
In Seychelles, you only have to disclose the identity of the initial company director when you go about your offshore company registration. All information related to shareholders remains private.
Seychelles also has great tax benefits. Any income you earn outside the offshore country doesn’t get taxed, and there’s capital gains tax.
It’s also straightforward to set up a New International Business Company (IBC) — usually, you can set up a Seychelles IBC in just 24 hours.
Panama is well-known for its strict privacy laws — for example, your corporate books stay 100% private and confidential by law.
It also has great asset protection provisions that help businesses protect their assets against seizures and lawsuits.
Moreover, Panama has an excellent tax benefit system that includes:
- No tax reporting requirements.
- No income tax.
- No capital gains tax.
- No sales tax.
Belize is a great choice if you want to set up an offshore bank account or merchant account since it offers high interest rates.
Offshore companies in Belize aren’t subject to any taxes, no matter where the income is earned. And when you set up a Belize IBC, any information related to the identity of directors and shareholders is kept confidential.
Belize also has no public filing requirements apart from Memorandum and Articles of Association — so if you want to avoid paperwork, Belize is one of the best countries for it.
If you’ve got an online business that needs great asset protection, Nevis could be the country for you. There are provisions that’ll keep some assets in your company protected from seizure.
Nevis also has a secure banking system, so it’s a good option if you need to set up an offshore account.
Additionally, it’s difficult for people to file lawsuits against you here.
Nevis requires the claimant to post a bond when bringing a lawsuit against you. The person who wants to sue will have to file a suit and pay for all the court proceedings, which is expensive.
Moreover, it costs less than $2,000 (USD) to set up an offshore IBC in Nevis —making it one of the cheapest offshore company formation destinations.
Other Great Offshoring Locations:
- Malta: Benefits from being part of the European Union (EU).
- Switzerland: Home to the Swiss Bank — considered the safest offshore bank option.
- Bahamas: Offers 0% corporate tax rate.
- Bermuda: An offshore tax haven that’s close to the United States.
- Delaware: Considered America’s most popular state to form an LLC or Corporation.
- Estonia: Provides benefits for startups in the tech industry.
- Ireland: Has one of the lowest corporation tax rates in Europe (12.5%).
- Cyprus: Offers real estate investment opportunities, and you don’t have to share any bank account information.
- India: Great for hiring skilled talent at a lower cost.
- UAE: Provides tax benefits like exemptions from paying corporate tax.
6 Key Factors to Consider When Choosing an Offshoring Destination
Here are six factors to consider before going about your offshore company setup:
1. Financial Feasibility
This is probably the most crucial aspect to consider when setting up an offshore corporation.
While it can help you save money, setting up a business in a foreign country can be initially costly and can drive your company to bankruptcy if not done right. To avoid this, you should determine the financial risks. Additionally, take into account the initial set-up and running costs.
2. Political and Economic Stability
Doing in-depth research of the region you have chosen will help your business remain sustainable.
You need to dive deeper into that country’s political and economic climate to determine if it’s suited for offshore incorporation.
A stable economic environment means that you won’t have to worry about fluctuating exchange rates, which is important when moving money between countries.
3. Tax Implications and Treaties
Tax rates determine how much of your business income can be sent back to your home country. For this reason, many business owners look for low or zero tax rates destinations.
Another tax-related aspect to consider is double taxation treaties between two countries. It prevents income from being taxed twice in the two countries, and you may not be taxed on business income, dividends, or royalties.
4. Offshore Administration
Before selecting a region for your offshore company, you need to consider the company registration paperwork, legal and accounting requirements you’ll need to fulfill.
Learn about the local laws and accounting practices. You should also research which regulatory documents (company filings) are required in that specific country, like annual reports and quarterly reports.
To make the most informed decision, you should consult an offshore company formation service provider.
5. Residency Requirements
Some countries have residency requirements for founders of businesses, and some don’t. This will tell you about your required immigration status.
You should also consider the tax residency requirements in that country. Because once you become a citizen of a second country or a tax resident of another country, you get access to increased security, more business opportunities, and tax reductions.
6. Human Resources (HR)
Sometimes, your current employees can’t move to another country due to familial obligations and other circumstances. That’s why you’ll need to consider the costs of recruiting offshore employees and how to manage them.
Conducting HR research is important since different countries have different employment regulations, and this could change the way you plan to grow your offshore company.
Once you get familiar with all these regulations, you’ll know what to expect.
How Do You Benefit From an Offshore Company?
Now that you’re familiar with what to look out for, let’s take a look at the two major benefits you get from setting up an offshore company:
1. Low Tax
As a business owner, you’re probably looking for a way to reduce your taxes. Fortunately, most non-resident companies have to pay little to no tax in the country of incorporation.
But what does it mean to “incorporate” your business?
Incorporation is when your business becomes a separate legal entity under the eyes of the law. Basically, your business turns into a Limited Liability Company (LLC) or Corporation.
An offshore LLC ensures that your business gets the same rights and responsibilities as an individual citizen. This means that you and your business are considered two separate entities under the law.
How does this benefit offshore companies?
Most offshore zones (tax haven) have tax laws that offer special tax rates to any non resident company incorporated in that country. They also provide foreign investors little to no tax liability and other business and financial services.
2. The Offshore Corporate Structure
As an offshore business owner, you can use the offshore business structure to keep yourself separate from your business, assets, and liabilities.
So if your company does run into trouble, you won’t be affected.
Additionally, the offshore structure favors business privacy. This means that there are certain information and documents that you don’t have to disclose to the government.
How to Manage Offshore and Remote Teams
Sure, offshore companies offer several benefits.
But if you don’t have a way to keep track of your offshore teams, those benefits will fall short.
You’ll need some way to monitor your offshore teams’ performance.
Fortunately, a productivity tracker like Time Doctor can help you monitor and analyze your offshore team’s performance — even if they are on the other side of the world.
Time Doctor is an employee productivity management software used by large companies as well as by small and medium-sized businesses to boost workplace productivity,
Here’s a quick look at some of Time Doctor’s key features:
- Interactive and automatic time tracking modes to track how much time your offshore team spends on projects and tasks.
- Accurate reports to help project managers identify high-performing team members.
- Distraction alerts help employees to stay focused during working hours.
- Payrolling integrations help you pay your offshore team directly from Time Doctor based on hours tracked.
Check out other features of Time Doctor.
From the British Virgin Islands to Nevis, every country listed in this article offers something different for your offshore company.
The country you choose depends on your business requirements, customer base, budget, and goals. Use this guide to help you make an informed decision about which country is right to set up your offshore company.
Lauren Soucy is the VP of Marketing for Time Doctor, the world’s leading time tracking and productivity software. She has 15+ years of experience in marketing at fast-paced companies. Her first passion is SEO, she can’t start her day without coffee, and she enjoys spending time at the beach with her two boys and her husband.