Functions of offshore company

  1. General function – Tax exemption

  2. Tax reduction function

  3. Limited function abroad

  4. Non-term profit reservation function abroad

1. General function – Tax exemption

Tax-exemption Company is invested by almost of individuals and companies in the foreign countries account for 90% of the existing offshore companies. For example, Taiwan company often complete all account books from Offshore company, then repatriate to combine with books of Taiwan company to exercise tax accounting or financial accounting. Generally, offshore company types established by us are called IBC or LLC, typically classical offshore companies are known by many people like B.V.I, Panama, Bahamas, Brunei, Belize, Hong Kong, Cayman Island. Taiwan enterprises often employ offshore company to invest, establish the workshops and offices in China, to tax protection area to establish commercial company, international commercial company, employing in three, four side – import-export model.

2. Tax reduction function

Medium and large company or joint stock companies that have listed securities often employ such function. Because of involving in the great amount of money, however, it is obliged to disclosure books for investing in countries (including offshore companies). Only senior accountants or chiefs of accounting departments of large-scale companies may thoroughly understand structure and different matters of such function, help enterprise have more space of tax benefit. Because implementing books of majority of individuals and small and medium companies established abroad has many differences so that most of them use tax exemption function of offshore company to operate. For example, when Vietnamese enterprises use offshore company to invest in establishing workshops in China (or in Vietnam), selecting a nation with low tax rate (about 1-3%) as parent company or as a place providing invoices is really necessary for investors. The most typical nation among of such nations is Labuan island directly under Malaysia, Cyprus and Maderia (Portuga), because such places all have signed double taxation agreements DTT with China in order to enjoy preferential tax rates when repatriating profits to the local country, from 20% reducing to 10%, 5% or even 0%

3. Limited function abroad

If Vietnamese individuals or companies optionally sign memorandum of understanding in investment, workshop lease (offices, building), sales and purchase contracts or other agreements, then when there is any change in investment or individual interest is dramatically loss, such Vietnamese individuals and companies should completely bear proceedings responsibilities from foreign side. If contract is signed through an offshore company, it is not necessary to bear any particular economic responsibility, maybe bear loss of the company’s prestige to some extent. Or in the event where the adversary intentionally deceive, get round investor in the trap, at such time offshore company is properly an useful company that helps you escape from unforeseen tragic situation.

4. Non-term profit reservation function abroad

Almost 100% of offshore companies registering at nations that allows to establish offshore companies all have a common that is to have right to reserve non-term profit abroad and major nations in the world all employ policy in tax non-collection in the respect of reserved profit accounts of the offshore companies at the same time. For example, formerly, Taiwan stipulated that if local companies want to reserve profit abroad should pay 10% of tax and companies under offshore shall be exempted from tax. From 2006 and later, after Taiwan has officially exercised the lowest tax responsibility regime, tax rate of 10% shall be employed to the company (from January 1st, 2006) and the tax rate of 20% shall be applied to the individuals (from January 1st, 2009). Therefore, investors should use from 2 offshore companies and more to invest in China (or Vietnam, etc) or other countries in order to reserve non-term profit abroad.

For more information, please contact our hotline +84 911 60 22 44 (Multi line)

Copyright© AT Express Ltd. All rights reserved.