What is an Offshore Company?
An offshore company often refers to one that is based in a different country than the one in which it conducts most of its business, often for tax reasons. Offshore locations are frequently island nations, such as Antigua and Barbuda, Belize, the British Virgin Islands, Bahamas, Mauritius, Malta, the Cayman Islands, Panama, Seychelles, and so on, where the ultimate beneficiaries are not residents. Offshore companies often benefit from tax exemptions or pay very minimal taxes in the country of incorporation and are subject to little or no accounting reports.
During my five-year experience of having an offshore company in Seychelles from 2016 until 2020, both the company and I enjoyed zero tax and no annual accounting obligations.
As we delve into the world of offshore companies, it’s intriguing to note that this practice seems to attract certain types of businesses and people—a bit shady, if I’m honest (I’ve been there too so no shame in admitting that). All have two things in common:
1. They have made, are making, or will make shitloads of money, and
2. They want to hide something
Look at major banks like Morgan Stanley USA, DBS Singapore, ING Netherlands, Deutsche Bank Germany, and UBS Switzerland, or prominent corporations like Google, Apple, Facebook, Tesla, and Microsoft. Why weren’t they incorporated or have established offices in such offshore havens?
However, If you’re into crypto, it’s not difficult for you to see that almost all companies have their registered office in one of those offshore islands.
FTX, one of the largest crypto exchanges, made waves and went bankrupt in 2022, originally incorporated in Antigua and Barbuda and headquartered in the Bahamas. ⚠️
Kucoin was incorporated in Mahe, Seychelles, the very location where I had my offshore company. ⚠️
Binance, the largest crypto exchange as of my post on February 22, 2022, had its origins in Shanghai but later moved to Japan, then Malta, and is now based in the Cayman Islands. ⚠️
While I cannot confirm whether these companies evade taxes in their primary business locations, it is undeniable that they benefit from zero or very low taxes in their chosen offshore.
What Is Considered to Be Tax Evasion?
According to Investopedia, Tax Evasion is an illegal activity in which a person or entity deliberately avoids paying a true tax liability. Examples of tax evasion include when a person files an incomplete or incorrect tax return. Or when a person or business pays too little tax or none at all, after deliberately providing incorrect information for this purpose.
Those caught evading taxes are generally subject to criminal charges and substantial penalties, with some even facing jail time.
** This chapter is part of a SIX-chapter series— don’t miss any part of the story! Stay updated and read more chapters from this series here:
Introduction: Offshore Companies & Tax Evasion (6 Chapters)
Part 1: What Is an Offshore Company? What Is Tax Evasion?
Part 2: List Of Known Offshore Countries And Territories
Part 3: Should You Open An Offshore Company?
Part 4: What Is The Best Offshore Structure?
Part 5: Where Should You Best Have Your Offshore Incorporated?
One Response