Offshore and onshore are two english terms that apply to companies when it comes to their geographic locations. To avoid confusion, we will underline in this article the difference between an offshore and onshore company.
When we talk about offshore, we mean something that is “offshore”, or “off the coast”. Thus, the term “offshore”, when applied to a company, means that the company has been opened outside the country of residence of its holder (physically and fiscally).
Another fundamental characteristic: the offshore company cannot carry out any activity in the country of its registration. For example, an offshore company incorporated in Cyprus cannot execute business activities in the country in order to benefit from the offshore tax regime.
Thus, an offshore company is a non-resident company. The managers choose to relocate the head office to an offshore territory or a tax haven in order to benefit from:
- Tax advantages: exemption from VAT, no company taxes
- Asset protection: no inheritance tax on assets held by non-residents
- Anonymity and banking secrecy guaranteed: offshore jurisdictions offer a very high level of confidentiality
difference between offshore and onshore: definition of an onshore company
The English term “onshore” refers to something that is “on land”. A company is called onshore when its business activities take place on the territory.
Unlike an offshore company, an onshore company can carry out business activities in the country where it is registered. It is therefore a question of constituting this company in a country whose tax jurisdiction is advantageous (such as Scotland or Latvia). The onshore company, therefore, acts as a subsidiary while benefiting from the advantageous taxation of the chosen country.
In addition to this tax benefit, onshore companies offer advantages in terms of:
- Less restrictive accounting management than in the country of the parent company
- Free choice of location within the European Union for instance
- Tax reduction on profits
Conclusion
Whether we talk about offshore or onshore companies, it is always a question of relocation to a jurisdiction that offers the greatest benefits. However, it is essential to get help from professionals to know how to make the right choice between these two options when setting up your company. To do so, contact our team of experts.
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