What is OFFSHORE COMPANY? What does OFFSHORE COMPANY mean? OFFSHORE COMPANY meaning & explanation

What is OFFSHORE COMPANY? What does OFFSHORE COMPANY mean? OFFSHORE COMPANY meaning - OFFSHORE COMPANY definition - OFFSHORE COMPANY explanation. Source: Wikipedia.org article, adapted under https://creativecommons.org/licenses/by-sa/3.0/ license. 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"; or 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. 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. Historically, offshore companies were broadly divided into two categories. On the one hand were companies which were statutorily exempt from taxation in their jurisdiction of registration provided that they did not undertake business with persons resident in that jurisdiction. Such companies were usually called International Business Companies, or IBCs. Such companies were largely popularized by the British Virgin Islands, but the model was copied widely. However, in the early 2000s the OECD launched a global initiative to prevent "ring fencing" of taxation in this manner, and many leading jurisdictions (including the British Virgin Islands and Gibraltar) repealed their International Business Companies legislation. But IBCs are still incorporated in a number of jurisdictions today including Anguilla and Panama. Separately from IBCs, there are countries which operate tax regimes which broadly achieve the same effect: so long as the company's activities are carried on overseas, and none of the profits are repatriated, the company is not subject to taxation in its home jurisdiction. Where the home jurisdiction is regarded as an offshore jurisdiction, such companies are commonly regarded as offshore companies. Examples of this include Hong Kong and Uruguay. However, these tax regimes are not limited to conventional offshore jurisdictions: the United Kingdom operates on broadly similar principles in relation to taxation of companies. Separately there are offshore jurisdictions which simply do not impose any form of taxation on companies, and so their companies are de facto tax exempt. Historically the best example of these countries were the Cayman Islands and Bermuda, although other countries such as the British Virgin Islands have now moved to this model. These could arguably fit into either of the previous two categories,depending on the fiscal point of view involved.