There is no universal definition of an "offshore" company, but in its most basic form it is merely a company established in any jurisdiction other than your place of residence or domicile. Offshore companies are broadly broken down into three different categories:
- The most popular option is the completely tax neutral structure such as an international business companies (IBC) such as the Seychelles IBC, BVIBC or Belize IBC. Another popular tax neutral structure is the limited liability company (LLC) such as the Delaware (USA) LLC and Florida (USA) LLC. In order to achieve the tax neutral benefit, the offshore company or offshore LLC generally cannot trade within the country of domicile of the entity.
- Another option is a company which pays tax in the jurisdiction if deemed resident there or if income is brought back into the country (territorial tax system), but if operating outside the jurisdiction is not taxed there. Popular examples of these are the Panama Company, Hong Kong company and Singapore company. In this case it is possible to use these companies for global business and investment without them attracting tax in the jurisdiction of incorporation.
- A third option is a low tax company that is able to operate from the jurisdiction of incorporation where it only attracts a low rate of business tax and has access to the network of Double Tax Avoidance Agreements entered into by the country of incorporation and other countries. One example of this is the Seychelles Special License Company (CSL) which is fully tax resident in Seychelles and pays a low 1.5% business tax.