Today we will look at 11 cost factors to consider for offshore development center (ODC) setup. The use of offshore territories as a place to register a company is a ubiquitous practice for business people worldwide. The foreign economic activity of many entrepreneurs from the CIS countries is also closely related to offshore banks and enterprises.
Russian, Belarusian, Ukrainian, Kazakhstani financial and industrial groups register their assets in non-resident structures in tax-free and low-tax jurisdictions. What is the popularity of such a solution?
11 Cost factors for Offshore Development Center (ODC) Setup
1. Tax advantages
Classic offshore havens usually offer entrepreneurs zero tax rates. What are offshore companies used for most often? It is to optimize the tax burden. The enterprise is registered in a jurisdiction where preferential terms for business in the form of no taxes are provided for non-resident firms.
Often, to remain a tax-free company, it is forbidden to conduct commercial activities in the offshore territory. Classic offshore territories are usually small, often island states with limited resources, for which attracting foreign investors is an essential source of income.
The advantages of an offshore development center include a high level of confidentiality. It, of course, cannot be called absolute, but in many classic offshore companies, registers of companies, business registers, trade registers are still closed to third parties. The global trend of deoffshorization is gradually affecting even the most remote island jurisdictions, forcing them to comply with international standards. Therefore, it is recommended here to use nominee directors and shareholders’ services, mainly if the offshore business is used to conduct business with the country of residence.
The low cost of registration and annual maintenance of most offshore development center can be considered an advantage.
For example, registration of an LLC company in Nevis will cost up to 2000 USD, quite slightly. Annual content will cost about the same (without nominal and additional services).
4. Speed of company formation
Sometimes an entrepreneur needs to conclude an agreement or complete a deal in a short time. For these purposes, offshore companies are often used, the term of creation of which in some cases may be equal to one day.
That is, in just 24 hours, a businessman has the opportunity to obtain a company registered offshore for his business purposes. When creating a company, a minimum package of documents is required, which is also advantageous.
5. Correspondence procedure for opening a company
In today’s digital age, the ability to remotely open a company or hire offshore developers is an undeniable advantage. To register an offshore development center, its owner often does not even need to leave his own home since all processes are carried out via the Internet.
Estonia, for example, offers to issue an electronic e-resident digital card, with which you can not only register a company via the Internet but also sign official documents using an electronic signature. And even if the country of the foundation of the company requires the founder’s presence, you can always use a notarized power of attorney by issuing it to an authorized representative.
6. Reporting and Auditing
Any enterprise should keep accounting and financial reporting. But if we are talking about some offshore companies, then one of the advantages of their establishment can be considered the absence of accounting and financial reporting requirements.
For example, an offshore company from Dominica may not keep accounting records and file annual reports. But at the same time, it must keep financial statements to reflect the company’s financial condition. An audit is not required in most cases.
A foreign company allows you to establish successful commercial relations. Contractors are more willing to cooperate with companies registered abroad, especially if these are low-tax jurisdictions from Europe and Asia. Offshore jurisdictions of high respectability offer entrepreneurs a loyal business environment and several other advantages. Local companies are well received in the business market.
States that are not full-fledged offshore companies, but offer specific tax incentives to legal entities (Great Britain, Cyprus), will bring business to a new level and take advantage of all the legislative advantages.
8. Lack of requirements for the payment of authorized capital
When a company is founded, it is usually assumed that a certain amount will be available, the authorized capital. It can be money, property, securities. Often, when organizing an offshore company, there are no requirements for the authorized capital.
There may be requirements regarding the authorized capital’s recommended size, but there are no deadlines for its mandatory payment, which is very convenient for a start-up enterprise.
9. Ability to open a foreign currency account in any country
After founding an offshore company, it is unnecessary to open a corporate account in the same country. The company can cooperate with almost any E-payment system and banks globally (the list of available options depends on the country of establishment).
An entrepreneur gets the opportunity to keep money in any convenient currency, diversify risks in this way, maintain confidentiality, and ensure his assets’ safety. The main thing, in this case, is to select a reliable financial institution successfully. One of the advantages of an offshore account is access to convenient financial instruments and services remotely.
10. Protection from political and economic instability
Often, an entrepreneur’s country of residence is shaken by financial crises, a change of government, and unfavorable changes in legislation. The advantage of registering a company offshore is the ability to protect your business from shocks and losses.
This decision is crucial for entrepreneurs from the CIS. Offshore territories are characterized by stability in economic and political terms. There are seldom crises, wars, and coups d’état.
11. Easy access to important global markets
Many foreign enterprises will not work with Russian companies due to sanctions and other factors. But with an offshore company registered, for example, in the BVI, they will already cooperate. Therefore, Russian entrepreneurs often use offshore companies to enter international markets and strengthen business ties. Access to markets and multi-million dollar potential clients from Europe and Asia can also be considered an advantage of a company abroad.
Hope these 11 cost factors to consider for offshore development center (ODC) setup will help you for further process.