Similar to any other type of company incorporation, there are several potential disadvantages which might be associated with offshore companies. The exact list drawbacks will largely depend on specific circumstances of the persons considering the company registration.
Remitting Income to the UK
One of the main considerations pertaining to offshore companies is in the area of remittance and distribution of the assets and income. Those which are held within an offshore jurisdiction are not liable to UK taxation, but once monies are transferred to the United Kingdom they become subject to a charge.
Thus, in situations where it is probably that the majority or a significant part of the gains from an offshore company will be remitted to the UK, the benefits of the initial tax free environment are negated by the eventual tax charge which will be levied once the monies fall within the UK taxation system.
This suggests that smaller businesses such as contractor type entities, where essentially, their main source of income is equivalent to a salary, should not consider offshore company formation. As all income will enter the UK in order to pay for living expenses and so on, the earned amount in its entirety will be taxed.
Proving Ownership of an Offshore Company
The absence of detailed publicly maintained registers can make proving ownership of an offshore company difficult. Considering the position relating to UK companies, where lenders, banks and others can view the public records at Companies House, in many offshore jurisdictions no such stringent regime exists.
Whilst anonymity can be a benefit of offshore companies, when it becomes in the owner’s interests to declare themselves as the beneficial shareholder, this might be a difficult and time consuming exercise.
Stability within the Offshore Jurisdiction
Some offshore jurisdictions are more secure than others, whether in terms of political or economic stability. The physical distance, lack of knowledge of local customs, government, and social attributes can increase the risks of financial loss occurring in some countries.
Jurisdictional risks can to a large extent be negated by enregistering an offshore company and keeping the bank account in well known, established country.
We do not offer offshore company formations in every available jurisdiction in the world. We choose countries which we believe reducing some of the risks highlighted in this article.
