The term offshore company or offshore corporation is used in at least two distinct and different ways. An offshore company may be a reference to:
- a corporation or (sometimes) other type of legal entity which is incorporated or registered in an offshore financial centre or "tax haven"
- a company or corporate group (or sometimes a division thereof) which engages in offshoring manufacturing or business services
The former use (companies formed in offshore jurisdictions) is probably the more common usage of the term. In isolated instances the term can also be used in reference to companies with offshore oil and gas operations.
Companies from offshore jurisdictions
In relation to companies and similar entities which are incorporated in offshore jurisdictions, the use of both the words "offshore" and "company" can be varied in application.
The extent to which a jurisdiction is regarded as offshore is often a question of perception and degree. Classic tax haven countries such as Bermuda, British Virgin Islands and the Cayman Islands are quintessentially offshore jurisdictions, and companies incorporated in those jurisdictions are invariably labelled as offshore companies. Thereafter there are certain small intermediate countries or areas such as Hong Kong and Singapore (sometimes referred to as "mid-shore" jurisdictions) which, whilst having oversized financial centres, are not zero tax regimes. Finally, there are classes of industrialised economies which can be used as part of tax mitigation structures, including countries like Ireland, the Netherlands and even the United Kingdom, particularly in commentary relating to corporate inversion. Furthermore, in Federal systems, states which operate like a classic offshore centre can result in corporations formed there being labelled as offshore, even if they form part of the largest economy in the world (for example, Delaware in the United States).
Similarly, the term "company" is used loosely, and at its widest can be taken to refer to any type of artificial entity, including not just corporations and companies, but potentially also LLCs, LPs, LLPs, and sometimes partnerships or even offshore trusts.
Characteristics of offshore companies
Although all offshore companies differ to a degree depending upon the corporate law in the relevant jurisdiction, all offshore companies tend to enjoy certain core characteristics.
- They are broadly not subject to taxation in their home jurisdiction.
- The corporate regime will be designed to promote business flexibility.
- Regulation of corporate activities will normally be lighter than in a developed country.
Another common characteristic of offshore companies is the limited amount of information available to the public. This varies from jurisdiction to jurisdiction. At one end of the scale, in the Cayman Islands and Delaware, there is virtually no publicly available information. But at the other end of the scale, in Hong Kong companies file annual returns with particulars of directors, shareholders and annual accounts. However, even in jurisdictions where there is relatively little information available to the public as of right, most jurisdictions have laws which permit law enforcement authorities (either locally or from overseas) to have access to relevant information, and in some cases, private individuals.