Generally, a tax haven is referred to as a place or country with low effective tax rates, especially for foreigners and foreign investors. Making investments in an offshore opportunity or in a country that is also a tax haven or setting up a different company offshore to enjoy tax-benefits of that tax haven is a common practice. Setting up an offshore company is considered synonymous with tax havens. These tax havens draw benefit from the capital investments that they attract by being a tax haven and through the opportunities of economic development that are created.
Usually, a second citizenship by investment requires a substantial amount of financial investment. Also, people looking for second citizenship are already tax-residents of their original country. While looking for second citizenship, often individuals, entrepreneurs, and companies prefer a country that is also a tax haven, so as to save whatever money they can through the tax practices of that country. If you plan to set up an offshore business, it is usually beneficial to also get a second citizenship by investment in the same country to avoid visa hassles every time you travel for business and to avail the other benefits that come with holding a second passport.
Setting up offshore companies
Setting up a company offshore is a big decision for any business as it means taking the business to a global level and establishing an international identity. Often a lot of people think that setting up an offshore business is only to hide from the government and for the purpose of tax evasion. However, that is a misconception. There are ways to legitimately and legally set-up an offshore business and derive benefits from the viewpoint of asset protection and tax saving.
Why set up an offshore company
Setting up an offshore business is not an easy decision as it involves huge investments. It required meticulous planning and strategy making. Only after taking all factors into consideration a decision should be taken which offers maximum benefits to the company.
Following benefits and factors should be taken into account while finalizing the details:
Tax saving- One of the basic benefits of setting up an offshore company in a tax haven is to strategically save or defer tax payments. Understanding which tax haven follows the taxation system that will strategically complement the company is important. In this context, find out about the Beckham law in Spain, which has made the country a tax haven for foreign workers and entrepreneurs.
Second Citizenship by investment program– If the owner of the company is considering getting a second citizenship by investment, it is advisable to set up the company in the same country as it increases investment and makes it easier to operate without any hassle.
Diversifying market risk- Every market reacts differently to different scenarios. Setting an offshore business helps you diversify and minimize that risk. At one particular time, if the primary market reacts negatively, the risk of the company is reduced if the scenario is opposite or unaffected in the secondary market.
Expanding market- Sometimes primary markets get saturated and the only way to grow is to expand the geographical location of the business operations. Starting an offshore business helps in expanding the customer base and providing a global reach to businesses.
Legal risk diversification- Every country has different legal disclosure and documentation policies. Setting up a business offshore also gives an opportunity to take advantage of and diversify the legal risk.
Political and Economic stability- There is only so much political and economic instability a business can withstand. If a business in its primary country is facing some instability, it might be important to decide and set up offshore business in a country that is not only a tax haven but also comparatively more stable.
How do you set up an offshore company
Setting up an offshore company is a straightforward procedure if the right information and guidance are available. In fact, sometimes it is easier and faster than setting up an onshore company itself. Following are the basic steps in the process:
- Choose a country- This is one of the most difficult steps in the process. Deciding the country depends on a lot of factors.
- Providing documents for due diligence- Apart from basic company and personal identity documents some countries need special documents to be collated for the purpose of setting up an offshore company branch.
- Submit order forms with the help of experts- There are expert companies with professional experience in the field. Filling an order form usually takes time because a lot of information is required. Necessary payments are also to be made with the order form.
It is completely legal to want to set up an offshore company in a tax haven to maximize benefits for the individual and the related company. However, the necessary benefits and factors should be kept in mind. Having a second citizenship in the same country is always an added benefit before actually setting up the company. It provides more reliability and significantly increases the investment level of an individual in the country.
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