The prospect of setting up an offshore company in a tax-friendly jurisdiction may raise many questions, particularly since the Panama Papers case.
One key point should be reiterated: setting up an offshore company can be entirely legal, provided that the applicable rules and reporting obligations in the country of residence are complied with.
Setting up an offshore company is entirely legal
A legal structure when used correctly
It is important to clearly distinguish the offshore company itself from the fraudulent uses that may be made of it. The structure is not inherently illegal.
Comply with the obligations of the country of residence
It is recommended to check your tax and reporting status in your country of residence to remain compliant.
Get support from a tax lawyer
Consult a tax attorney in your country of residence to verify your filing obligations and the structure’s compliance.
Why do offshore companies have such a negative image?
This bad reputation mainly stems from associating offshore companies with tax evasion, money laundering, and concealing the true ownership.
The Panama Papers and other document leaks have reinforced this perception by revealing cases in which certain offshore companies had been used for illegal purposes.
However, this does not mean that all offshore companies are fraudulent. An offshore company may be established for perfectly legal and legitimate reasons.
Tax optimization and fraud: don’t confuse them
Tax optimization
Tax optimization is the use of legal means to structure one’s taxes and benefit from a more favorable tax regime.
Tax fraud
Tax fraud involves using illegal means to conceal income, circumvent the rules, or artificially reduce the tax owed.
The Panama Papers have intensified the confusion
The media coverage of the Panama Papers and blacklists has contributed to associating, sometimes incorrectly, every offshore structure with illegal practices.
Tax haven: the blacklist
When deciding to launch your offshore company in a tax haven, it is important to choose the territory or country of registration carefully.
Several lists identify jurisdictions considered non-cooperative. The French blacklist and the list drawn up by the European Commission in 2015 make it possible, in particular, to identify the territories listed below.
The jurisdictions listed on these lists
French list
Panama
Botswana
Guatemala
Brunei
British Virgin Islands
Marshall Islands
Niue
Nauru
Montserrat
2015 European Commission list
Andorra
Anguilla
Antigua and Barbuda
Bahamas
Barbados
Belize
Bermuda
British Virgin Islands
Brunei
Cayman Islands
Cook Islands
Grenada
Guernsey
Hong Kong
Liberia
Liechtenstein
Maldives
Marshall Islands
Mauritius
Monaco
Montserrat
Nauru
Niue
Panama
Saint Kitts and Nevis
Saint Vincent and the Grenadines
Seychelles
Turks and Caicos
US Virgin Islands
Vanuatu
And what about Dubai in all this?
Dubai, in the United Arab Emirates, is not included in the blacklists detailed above. It is therefore possible to establish an offshore company there legally, provided that the applicable rules and reporting obligations are complied with.
Learn everything about offshore companies too
What is an offshore company?
Understanding the definition and operation of an offshore company.
What are the advantages of an offshore company?
Explore the main advantages and limitations of the offshore model.
How do I open an offshore account?
Understanding the constraints related to opening a bank account.