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Offshore trading companies: Trading companies may be used to reduce the profit of parent companies located in high taxation areas and to pass those profits on to an offshore company. Having registered an offshore company the parent company presents it with an invoice for the sale of goods at a uniform, minimum price, for example. Then the offshore company concludes contracts for the sale of the goods at a higher price. In this case the parent company derives a much smaller profit based on the minimum price of the goods sold and as a result its taxes on profits are reduced considerably. The offshore company, as a result of the transactions, earns a healthy profit after selling the goods at the higher price.
Offshore investment companies: The use of offshore investment companies makes it possible to have more options for choosing objects for investments, which enables the investor to concentrate on the most advantageous projects or to select areas that offer potentially high incomes. Moreover, it makes it easier for transactions concluded between the company and its clients to be kept in confidence. Making investments on terms advantageous for an offshore company merely provides an opportunity to transfer spare currency resources abroad without violating currency and tax legislation.
Offshore finance companies: The ownership of an offshore finance company gives an opportunity to pursue the most advantageous credit policy considering organization of taxes on granted credit and borrowed funds, and improves the ability to offer different financial and credit services to clients. Besides, granting credit to a firm located in a higher taxation area through an offshore company at a high rate of interest provides an opportunity to transfer currency resources to a third country without violating the currency and tax legislation, and to greatly reduce or even acquire exemption from tax on profits made in a country where taxation is higher. Offshore companies may be very conveniently used for the organization of taxes related to joint-venture activities. In this case the same citizens own and manage both the domestic and foreign (offshore) companies which set up the joint venture. It makes it possible to transfer to a third country the share of the profit which belongs to he foreign company in the form of non – taxable dividends. At a later date the money (in the form of privileged investments or credits) may be returned to the country in which the joint venture is registered.
Offshore holding companies may be used for financing the activities of their subsidiary enterprises under different jurisdictions by offering them the opportunity to reduce taxes due to interest payments on loans granted to them by parent companies. In this case a holding company is formed in an offshore area, in which neither tax on profit, nor other types of corporate taxes are collected from it; all the profit made by the above-mentioned method may be used for financing further activities of a holding group or for reinvestment for other purposes.
Offshore insurance companies formed by a company registered in a high taxation country or by a group of such companies may be used for insuring risks of a parent company or a group of parent companies on more advantageous terms than those traditionally offered by insurance companies. The form of an offshore reinsurance company may be used by insurance companies for insuring their own risks.
Offshore banking companies that have licenses of a limited or unlimited type may be formed by banks for the purpose of accumulating profit in countries with reduced or so-called “zero” taxation as well as by groups of companies for a pooling of financial resources and a facilitation of money flow within a group. An offshore bank may also be used to finance the international operations of its founders in order to avoid problems of currency limitation.
Offshore companies formed for owning a property give an opportunity to reduce – or even eliminate – inheritance taxes and capital gains tax. Besides, if the owner of any property is a company, it is possible to simplify considerably a process of this property’s sale: in this case only the shares of the company are sold and transferred to another owner, but the company remains the owner of the property. In this way it is not necessary to pay the state duties imposed when a property is sold or given as a gift.
Offshore companies engaged in rendering services (in advertisement, management, marketing, consulting etc.): People and companies gaining large incomes conducting activities in the field of service provision may reduce taxes greatly by assigning the rights to obtain remuneration for their activities to an offshore company. In the future the remuneration, or a part of it, will be paid to an adviser by an offshore company, but payments will be structured in such a manner that taxes will be minimalised.
Offshore companies dealing with personnel recruitment are used by employers actively for the purpose of reducing taxes on their employees’ salaries. In this case the money to be used for the employees’ salaries is transferred to accounts of the offshore company, in which the employees actually work and its sum may be considerably greater than that paid to the personnel in the country of residence. The difference is accumulated in the employees’ offshore accounts and therefore no tax is imposed on their real income.
Offshore companies formed to hold intellectual property (patents, trademarks, copyrights, techniques etc.): Such companies may acquire any property from its original owner. An offshore company may patent a property or conclude contracts for transferring it into use, thus getting a non-taxable profit by using it.
Offshore ship-owner companies may be formed to reduce taxes on ship-owner and shipping activities by means of the purchase or rent of ships, and the profit earned from their activities may be accumulated in areas of reduced taxation.
Offshore private funds for the ownership and confidential management of private property may be formed in Liechtenstein and Panama. The use of funds provides for either partial or total reduction in taxes on incomes, capital and inheritance. Furthermore, it guarantees that the distribution of income earned by the property or by its inheritance be carried out according to the will of the property owner.
Offshore investment funds are fully recognised by the international investment community. Usually they pay neither taxes on profit nor extremely high organizational and legal duties. Besides, dividends and interest are either taxed at a decreased level or are exempt from taxes in general. The pooling of small investors of capital in a fund makes it possible to participate in more expensive projects, and means savings on research of the market, commission and managerial expenses. A founder (manager) enjoys the greatest advantage; he has the flexibility to carry on activities abroad, since it makes it possible to attract investors from a huge number of jurisdictions by means of an unrestricted sale of shares; he can also make investments in many jurisdictions without taxation and can conduct foreign trade activities.