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What annual maintenance fees are involved in the operation of an offshore company, and why is it important to pay them?

It is very important here to dispel the widespread belief that offshore companies can be operated not only tax-free but also totally cost-free. Although exemption from the payment of taxes is usually granted, exemption from costs is not. The maintenance of the company as an organisation, even if it is only formal and nominee maintenance, does result in some costs, a fact which should be taken into consideration prior to incorporation. In this section we would like to look at the costs which are typically incurred in more detail.

  • Annual state duty / tax: this is either a fixed annual amount, a linear rate or a banded linear rate, depending on the method of taxation.

  • Fees payable for the registered office and the registered agent . In the offshore zones, almost without exception, it is a legal requirement that the company should have a seat registered in the given country and, in the majority of cases, also a so-called local representative (agent, secretary, etc.). In general, these two are not separated because the compulsory seat address is also the address of the local representative and is usually a law office. This law office provides the address (seat) for the companies registered by it and undertakes to represent them against the payment of a set annual fee. In fact, this representation is, in most locations, minimal. It is usually confined to the representative forwarding the amount of the annual tax, transferred to it by the registered company, to the state treasury once a year. (The country of registration is, through this single legal requirement, able to create several hundred or even thousand jobs, and provides a living for a proportion of the population for a number of years.) The maintenance fees are payable annually. If the offshore company does not pay this amount, the local representative renounces his right of representation and reports his resignation to the office of registration. As a result, the company violates the law concerning the compulsory employment of a local representative, and in a number of locations it is possible for the office of registration to delete the company from the companies register. As a result, a company not legally existing comes into being, all of whose transactions will be void following deletion.

  • Remuneration payable to the nominee directors and owners . Nominee directors and owners are used if the actual owners and directors of the venture do not wish to be named formally in the legal documents of the company. In return they receive a fixed annual fee, plus a small fee for each and every service performed on behalf of the company.

  • Mail forwarding costs . If the company requests its partners to send all mail to the address of registration, a fee is, of course, payable for the forwarding thereof to the actual place of operation. This amount may be a fee set annually or an actual fee per item.

  • Provision of office space, use of telephone and facsimile, costs of administration . The provision of a registered address does not mean that the offshore company is in fact entitled to use the office located at the address defined in the legal documents of the company. If the client does need office space, he should indicate his need in advance, and should separately order the provision of telephone and facsimile numbers, and the taking and forwarding of messages. A fee is also payable for the contracts signed by the nominee directors and the invoices compiled and sent to the location, etc.

  • Fees payable for the (re-)issue of various documents . For instance, if the company subsequently needs a new certificate of incorporation, or, e.g. if the documents of registration of the company are destroyed (burnt, lost etc.) and need to be re-issued.

Of the above costs, the first two items are compulsory in the case of every company, while the other items are optional (may be opted for as required).

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