Offshore corporations can take many forms but are generally some form of company with limited liability. The most popular of these structures are the International Business Company (IBC), Limited Liability Company (LLC) or any structure which closely resembles one of these two types of offshore companies.
IBC (International Business Company)
The International Business Company is a product of special legislation in many jurisdictions such as Seychelles, Belize, Panama, Bahamas and the British Virgin Islands (BVI), to name a few. IBC entities are characterized by the following:
* no taxation on foreign earned income
* limited liability of its members
* exemption from local taxes and stamp duty
* privacy and confidentiality
* simple company formation
* limited or no ongoing filing requirements
* inability to trade within the country in which it is domiciled
Whether or not actually called an IBC, this type of company is the prevailing entity used by those setting up an offshore company.
The IBC is popular for holding offshore investments, international real estate and as a personal services company for expatriates working abroad. Most of the time these companies do not qualify as a tax resident for the purpose of accessing double taxation avoidance treaties.
LLP (Limited Liability Partnership) or LLC (Limited Liability Company)
The offshore LLC is very similar to the popular offshore IBC as both are limited liability companies. This company formation is popular in Nevis and the USA where the Delaware LLC is especially popular as an offshore company. Offshore LLCs are similar in some ways to IBCs in that that are tax transparent, provide the owners and managing parties limited liability and more; however, structurally they are a bit of a hybrid between a limited company and a limited partnership.
With tax competition ever increasing around the world, many traditionally “onshore” jurisdictions have enacted laws and tax codes that allow certain structures to be utilised in a similar fashion to the traditional offshore company. Many countries only tax on domestic sourced income allowing certain structures to be utilised within an overall structure to reduce or eliminated taxation. Utilising these “onshore” structures in conjunction with one or more offshore entities is an increasingly popular way of structuring for international trade and investment purposes.