Setting up an offshore company may seem simple enough. Offshore means companies that do business in a country other than the one in which they are registered. This is the primary requirement for setting up an offshore company. The offshore system itself is based on taxation, the more favourable tax conditions offered by "tax havens", simpler administration and a special data protection regime.
The word offshore literally refers to a location offshore, far from the coast. The term offshore is used in shipping, for oil rigs and classically in business. In business, it refers to companies that do not operate in the country of incorporation.
Offshore companies are companies that are registered in a country with a more favourable tax regime, legal framework and business environment than if the company were registered elsewhere, provided that it does not carry out any business activities in that country.
Offshore companies also often seek tax optimisation, which allows the company to have a lower tax burden than in a higher tax jurisdiction. It is often used for tax reasons, to cut red tape, for anonymity or for asset protection. These companies are usually registered under a separate law, usually an international business company (IBC) law.
Setting up and operating offshore is legal and lawful. The legal basis is the Anglo-Saxon legal system, although in some cases there are minor differences in offshore companies due to differences in state legislation. Offshore companies are treated well in most countries and their legal systems are designed to ensure maximum discretion and legal freedom for offshore owners.
There are also "offshore companies" that can operate in the country where they are established, so we do not run into the problem of where the company operates, why it does not operate in the country where it is established, and if not where, where and why it does not pay tax there.
Many people don't know it, but Hungary, for example, is a popular country for those who want to do business with a foreign company at a low tax rate. For many French and German companies, our country is an optimal solution for tax optimisation. Many Hungarian experts help foreign entrepreneurs to take advantage of the tax advantages and avoid illegal solutions.
Bulgaria, Cyprus, Malta, Slovakia and Hungary offer similar opportunities. Some offer low tax rates, others offer total tax exemptions.
The meaning of offshore is very often confused and conflated with tax evasion and money laundering, which is not true at all. Multinational banks and corporations also use offshore companies to optimise their tax or processes.
Offshore companies are registered for many purposes. The main reasons for setting up a company abroad can be economic, legal or even administrative. Importantly, companies registered in tax havens can generally carry out any kind of activity. An important reason for setting up an international company may be, even in the case of international expansion, a better reputation than the domestic one.
Offshore companies are established to carry out the following activities:
It is important to know that offshore companies undoubtedly have disadvantages. Thus, consulting a professional is much more important nowadays than in the past.
Governments print money, everyone spends more than they get. This means that not only at home, but also foreign governments are trying to put every obstacle in the way of entrepreneurs trying to optimise taxes... For subsidiaries, the question is who the real owners are and what the source of capital is. It is possible that a subsidiary may be squeezed out in certain public procurement procedures.
Opening a bank account used to be quick and easy. Today it's not quick and easy. One of the most important parts of the pre-incorporation consultation is the operation of the offshore company, as the financial operation of the company will largely determine the stability of the company. For example, some companies find it almost impossible to open a bank account.
There are fixed annual costs, such as the annual fee for the operating licence, the head office fee, the remuneration of nominal officials, optionally virtual office services or the cost of occasional authenticated company documents or powers of attorney.
Offshore company formation is basically an industry and in these countries where such companies can be set up, there is no serious industry. Tourism and some agriculture are typical of traditional tax haven countries. Because of tourism, the English language is fully known and commonly used.
On the one hand, since these international businesses pay the government a few hundred usd per year in government fees, and pay local businesses who provide the headquarters, the additional administrative activities, the nominal services, all of these generate a separate tax revenue, since they are carried out by local, licensed, taxable companies in the state.
Overall, the industry contributes to the economic situation of a country in both direct and indirect ways.
There is no law prohibiting a Hungarian person from setting up a foreign company. In itself, a company cannot be illegal. Of course, there are rules that can be followed and bypassed. It is therefore worth seeking the help of a professional to guide you through the world of tax havens, as breaking a rule can be very costly.