Offshore Company Services Offshore Company Services

Offshore company services include a variety of company formation and support services for offshore...

Offshore Countries for Offshore Holding Offshore Countries for Offshore Holding

To register or form an offshore holding in a given location, various conditions should exist to...

Offshore Holding Company Offshore Holding Company

An offshore holding company can be a firm or company that owns shares in other companies. These...

Offshore Holdings Uses

Offshore companies can be used for multiple purposes. In particular, an offshore company that is used as a holding is established with specific objectives in mind which revolve around operating within a tax efficient framework, segregating liabilities and overall legal and asset protection.

In addition to using offshore holdings for the sole purpose of ‘holding’, as an offshore company capable of engaging in a broad range of businesses, a few other offshore holdings uses include operating as manufacturing companies, trading, shipping, online sales, advertising and service companies.

With respect to holding per se, an offshore holding use for the collection and receipt of interests, dividends and royalties can generate considerable financial benefits in that these revenues become housed in a structure that makes it possible to remove a large portion of tax liability from subsidiaries and haven them transferred to a single company. This offshore holdings use reduces the tax burden of single subsidiaries, thus ensuring that profits are maximized as a result of decreased tax obligations, while tax liabilities are further reduced at the level of the parent company because of its tax exempt status as an offshore company. Offshore holding use in this way creates a highly tax efficient environment, especially with regard to withholding tax.

Secondly, one can in turn use offshore holdings to fund investments and operating costs of subsidiaries. This relieves the need for subsidiaries to source funding which could come along with obligations that are not financially viable, and secure a main source for financing under favorable terms and conditions that are beneficial to the whole.

These offshore holdings uses generate positive results for the parent company in terms of ownership, in that management and control are centralized in a way that there can be more efficient control and ownership of the offshore holding with all its subsidiaries, despite the activities in which they may be involved, be they customized service or products customized or separate in areas such as manufacturing, distribution or marketing.

The tax benefits presented by the use of offshore holdings can be further enhanced by establishing a system by which subsidiaries operate in countries with anti-double taxation treaties that offer exemptions, low tax rates or preferential treatment to the goods and remissions within a certain group of countries, region or international network. In this way, for example, a subsidiary that operates in Spain can trade within Latin America under beneficial terms and not be overburdened by high taxes, port charges or very restrictive trading conditions that reduce the profitability of the company. Even if operating with countries or territories where tax treaties do not exist, having this setup creates the possibility of offsetting losses or reduced profits generated from operating under unfavorable conditions.

Ensuring that these offshore holdings uses are maneuvered and managed properly requires adequate planning and analysis of various factors like the fiscal regimes and conditions of certain territories and countries, accessibility, availability and cost of labor, raw materials, infrastructure and government policy/friendliness towards foreign investors. Countries usually have specific regulations and standards for offshore holdings as per the prerequisites that a company must possess in order to be considered a holding. In the US and Cyprus, for example, holding companies must hold a minimum of 80% and 75% respectively of shares in subsidiaries to qualify as holdings.

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