24 OFFSHORE BUSINESS

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Starting and operating a business offshore is much like doing the

same domestically, except that if you are not leaving your country

to accomplish the task, you will be doing it through long distance

or electronic communications. More than anything, this will

require personal confidence in yourself, and trust in your chosen offshore

professionals.

The discussion and mechanics of establishing a business presence

were covered in Chapters 17 and 18. With the legal requirements accomplished,

such as incorporating in the best jurisdiction for your intended

purpose and selecting the offshore professional management

who can handle the necessary tasks, opening the financial accounts as

needed with stable institutions will be the next critical step.

Once these are properly established and the company can function

on a day-to-day basis per your instructions, then when ready, you can

consider your options on establishing a physical presence, if necessary.

Some business, such as for investment purposes, or e-commerce activity,

may not require a physical office. This is particularly true if most of

the business activity is purely financial transactions of some kind.

Today, establishing a physical presence anywhere in the world has

become relatively easy. Executive office services abound. For example,

HQ Business Centers is a network of over 750 office services

worldwide, where you can arrange anything from a business presence

of the most basic kind with an answered telephone and fax numbers,

to the leasing of a small office or even an entire suite. If creating a

permanent presence is the object, a lease would be wise. Sometimes

with even the simplest of services, as in the case of an accommodation

relationship with one of these companies, they will provide you with,

or require, a minimal lease. With these serviced offices, you can become

a transnational corporation overnight, albeit, maybe one of the

world’s smallest.

Almost any business, even those that seem typically domestic, can

be operated from offshore, thereby availing you of its benefits. Offshore

business is conducive for international activities and even for

conducting business with your home country.

Services are easy to provide through an offshore business structure.

Where goods and manufacturing are concerned and a physical

warehouse or plant would generally be required to operate the business,

there are tax-free trade zones to locate such operations. Often,

services can be contracted in these favorable tax locales that specialize

in providing the necessary facilities without having to staff them.

They can also be located in jurisdictions other than where the company

is incorporated, but in any case, it would be best to situate this

activity in a tax-free economic zone.

Perhaps the most ideal business to take offshore is a cyberbusiness.

It is the perfect marriage between e-commerce and offshore

business, a natural means to conduct business 24/7 worldwide. Location

is the least important aspect. Any entirely virtual business operating

domestically can just as easily operate offshore.

Aside from the previously discussed legal, financial, and tax aspects

of any offshore-operated enterprise, a cyberbusiness also brings

special tax aspects into consideration. The business entity is always

subject to the taxes of the jurisdiction where it is incorporated, but in

the case of a cyberbusiness, if a significant part of the business is conducted

through a server, it is likely that the server’s location will be

considered a permanent establishment (PE) of the business, and subject

the business to the tax structure of the country where the server is

located.

Thus, if you are considering operating an offshore cyberbusiness,

the jurisdiction where you incorporated and the location of your business’s

Internet server will both have a potentially direct effect on

taxes it will have to pay. A local offshore professional can give you

guidance in pinpointing their jurisdiction.

Guidelines known as the Framework Conditions have been established

by the Organisation for Economic Co-operation and Development

(OECD) and are being widely accepted by member and

nonmember countries for determining taxation of e-commerce

business.

Should you incorporate in a tax haven for the tax benefits, however,

and in one that promotes e-commerce business, you are likely

to get around this problem. Many offshore jurisdictions have

adopted e-commerce legislation and have the technological support

to service these businesses. In other words, the server could be located

in the same tax-advantaged jurisdiction where you incorporate

the company, so that the tax implications as a result of the location

of the server make it a neutral issue. By having the server and your ecommerce

business outside your home country, and particularly in a

tax haven, you will gain privacy from domestic government snoops

from back home, and others. An example of the availability of this

dynamic combination would be Belize.