Offshore what is it and how does it work?

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Offshore what is it and how does it work?

by Team AllYourVideogames | Oct 18, 2022 | Entrepreneurship |


offshore what is it this term and how does it work?

Well known in the world of politics and economics, many people may not know what offshore and onshore mean.



Don't be surprised if you're watching or reading the newspaper, or just catching up on the daily news online and you come across this term at some point.

Therefore, it is important to know the meaning of each of these expressions. 

So that you can understand everything that is being reported about it, understand when someone talks about it in a conversation or just for self-interest, we have separated a simple but efficient explanation of what offshore is and how it works. 

Below, in addition to the definition of offshore and onshore, you will also know what offshore companies are, where they are located and if they are legal. 

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Onshore and Offshore What is it?

Offshore

In English, the term offshore can be loosely translated to “away from the coast”.

However, it also has a financial meaning.

Thus, offshore can also mean a company that has its accounting in a different country to the one in which it is active performing its activities.



There are also meanings of offshore related to oil activities and water sports.


However, they are not the focus of this article. 

Over time, the term offshore has been associated with white collar crimes and open accounts or companies used for profit.

Several companies often move their accounting headquarters to tax havens with the main objective of gaining greater competitiveness and increasing profits.

These places are called tax havens because they have some characteristics of their own, such as:

  • Tax exemption;
  • Low tax burden;
  • Political and legislative stability;
  • Absolute banking secrecy;
  • Business privacy and much more. 

onshore

The meaning of onshore is basically the opposite of offshore.

Thus, if the former literally means away from the coast, then onshore would mean something like “far from the coast”, located on dry land. 

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Offshore What is it?

As stated above, offshore companies are opened in locations other than the place of residence of their partners.

However, it is not just that.


This type of company has its differences compared to a multinational.

Usually, a multinational still has a headquarters in the owner's place of residence.

An offshore company does not have business in the owner's home country.

Another way of calling this type of company is an extraterritorial company or society.


Offshore companies also have protocols that serve as protection for their investors.

So they can even maintain their anonymity if they want to.

But if we are talking about onshore companies, they are those that maintain their activities and transactions “onshore”, that is, in their countries of origin.


In this way, the onshore company's tax obligations end up being governed by the country's internal policy. 

There are several types of companies you can meet to further encompass your expertise.

They are:


1. International Business Company (IBC):

This option is a complete international company, containing shareholders, directors and share capital that has an international scope;

2. Limited Liability Company (LLC):

LLC's, on the other hand, are American companies classified as limited liability companies. In them, the shares end up being divided. You can find this type of company more in real estate acquisitions;

3. Trust:

If you are looking for the most complex business model, then we have the Trust type. It works with a contract that serves to outsource the administration of settler rights and assets, or even granting to a trustee or trust.

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Where are offshore companies located?

Usually, places with some attractions are more sought after by offshore companies.


Among these attractions, we can mention:

  • Strong currencies such as Euros and US Dollars;
  • Safety;
  • Political and economic stability;
  • Tax exemption or lower tax rate;
  • Freedom of exchange etc.

These types of places are called tax havens, attracting capital and foreign investors from abroad, thus allowing non-residents to open bank accounts and even companies without bureaucracy and in an accelerated way.


Among the main tax haven locations that allow this, we can highlight Panama, the Bahamas and the Cayman Islands.


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As offshore companies são legais?

Having and opening an offshore company is not illegal in itself.

However, it needs to be declared with the Central Bank and the Internal Revenue Service as soon as it reaches a profit of US$100.

This serves to ensure the transparency of the business.

According to legal issues, avoiding the payment of taxes ends up not being a crime nor does it fit as tax evasion, and this is what attracts entrepreneurs to open offshore companies. 

But why are offshore companies related to evasion crimes in our country?

Many end up creating this type of company to serve as shell companies, not having any activity and only performing the function of money laundering.

In addition, they also end up having protocols that serve to protect the identity of beneficiaries, thus raising suspicions of money laundering and the printing of dirty money.

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