How to master off-shore businesses

The gradual advancement of the world into a global village has spurred more investors to set up off-shore companies as vehicles for trading locally and internationally.

An offshore company is one registered in a country in which it does not primarily operate.

Interested in setting up off-shore? Prior to doing so, go through a checklist.

Firstly, it is important to identify the reasons for setting up off-shore and then identify the jurisdiction that best satisfies those reasons.

In doing so, it is important to sufficiently acquaint oneself with the company law and accounting obligations of the target country.

Choosing the right jurisdiction depends on one’s personal or business circumstances.

Ultimately, however, the aim should be to maximise a combined range of tax, legal and commercial advantages associated with incorporating offshore.

Minimisation of tax consequences is often a top-of-the-list consideration and it is important to take expert advice because taxation regimes are complicated.

Although many preferred off-shore jurisdictions are seen as “tax-havens”, it is essential to consider not only the tax laws of the off-shore jurisdiction in which one intends to set up, but also the tax obligations in other countries in which the company has operations.

In this regard, it is important to keep in mind that Kenya has double-tax treaties with less than ten countries.

Tax exemption for the off-shore company does not necessarily translate into exemption for the directors and employees on income received or used in the relevant off-shore jurisdiction.

Another key reason entrepreneurs opt to set up off-shore is privacy.

Many off-shore jurisdictions allow for nominee shareholders and directors and the ultimate beneficiaries of the companies can remain largely unknown.

Jurisdictions such as Marshall Islands are known to have strong confidentiality laws

It should be noted, however, that, in the future, confidentiality may diminish in a move by international organisations to minimise tax evasion, curb money laundering and track down terrorist financing, there is increasing pressure for jurisdictions to share information.