In recent years, companies, or investors, have registered offshore companies in offshore territories, such as Hong Kong, the British Virgin Islands (BVI), the Cayman Islands, and the Bermuda Islands, and then return to mainland China to set up foreign-invested enterprises through offshore companies, in a bid to capitalize on taxation advantages for foreign-owned entities.
The source of foreign investment in China is mainly Hong Kong companies, amazingly while the Cayman Islands takes third place as a foreign investment source, followed by other offshore territories such as the Cayman Islands. THIS MEANS THAT INVESTORS HAVE LONG USED OFFSHORE COMPANIES TO OPERATE IN CHINA GIVEN A VARIETY OF REASONS.
Many Chinese enterprises, such as China Netcom, PetroChina, China Mobile, China Unicom, CNOOC, all of which have offshore vehicles operating out of BVI. Foreign companies, meanwhile, including venture capital and private equity M&A funds, such as IDG, Softbank, HSBC, SAIF, Sequoia, Morgan Stanley, Walden International, Goldman Sachs, Morgan Stanley, have operated offshore for many years, some of their roots date back to more than 50 years.
The use of offshore companies is intended to facilitate cross-border trade mergers and acquisitions. It is also aimed at planning taxes and covering the true identity of business owners.
Here we have summarised the advantages of owning a Cayman vehicle for your business.
(1) Filing for an IPO: By registering an overseas offshore company and conducting overseas financing and listing in the name of the company, the operation procedures for overseas listing can be greatly simplified, especially for listing on the Hong Kong Stock Exchange, where they require the company to be incorporated in China, Hong Kong, the Cayman Islands, and the British Virgin Islands.
(2) The registration procedure is simple and easy. The registration of a BVI company without any business activity costs a few thousand pounds, a trivial amount to a business owner. It can be completed by a professional business service agency, without the need for the applicant to visit the island in person.
(3) Legal tax reduction and exemption: All offshore legal entities enjoy a certain amount of tax reduction or even tax exemption. No income tax is payable in the Cayman Islands for individuals and unincorporated entities. The operating income and profits obtained by offshore companies are exempt from local taxes or paid at very low tax rates in some countries, which is much more important with countries that the government of the Cayman Islands has double taxation treaty agreements with.
(4) Simple company management: Offshore companies do not need to hold annual shareholders’ meetings and board of directors. Even if they are held, their locations can be randomly chosen. In addition, entrusting a company secretary offshore ensures that the company’s day-to-day operations are not in conflict with local laws where your business is operated in.
(5) Confidentiality of company registration information: The information on the shareholder status, income status, directors’ register, and the equity ratio of overseas offshore companies are protected by law and kept confidential, and cannot be accessed by the public. Only the trust management company that legally obtains the supervision qualification for the offshore company can check the background information of the company. At the same time, the law prohibits the trust management company from arbitrarily leaking relevant materials.
(6) Asset protection: Stashing assets offshore has proven that this is the most effective means to protect various assets, such as equity, intellectual property, and real estate.
(7) Simplify international trade: If the company owns an offshore company, the company can directly export products to the offshore company, which is more convenient for overseas trade, which in turn can claim tax rebate from the Chinese government if you operate in China for exports.
(8) There is no restriction on the scope of business: except for special restrictive industries such as banking, insurance, military, etc., there are almost no restrictions on other business scopes.
(9) Going international Today’s world economy is becoming more and more integrated, and business is increasingly showing a trend of cross-border development. The establishment of an overseas offshore company is a shortcut for companies to go global, develop multinational businesses, and enhance their international image.
(10) There is no restriction on the identity of investors, shareholders, and directors: there are no restrictions on the nationality, age, and assets of shareholders and directors. Most offshore jurisdictions can accept legal persons as directors of the company.
(11) Brand promotion: After registering an overseas offshore company, you can apply for an international trademark in the name of the company, which is protected by law.
(12) Open an offshore bank account: You can open an offshore foreign currency account in all parts of the world, and you can apply for a letter of credit.
(13) Stable offshore policy: The company renews its operation offshore in a timely fashion and can adjust its trading strategy accordingly if it needs to adhere to the policy of the company you operate in the home country.
(14) filing for annual accounts and the tax return is required but no audit is required: saving time, effort and money. However, Hong Kong companies need to file confirmation statements, annual accounts and auditing per annum.
(15) Free choice of company name: The company name is not limited to “trust company” or “bank” or other words that are considered to be similar. Words such as China, international, associations, and societies that cannot be used in China can be used.
(16) It is possible to hold property capital: when the property or capital is transferred, it is only necessary to transfer the company’s equity and simply exempt it from tax.
(17) Use of trust: Offshore trusts can be used to reduce the payment of personal income tax and inheritance tax.
(18) Confidence Guaranteed: Overseas offshore companies are internationally recognized ed and protected by the corresponding international laws.
(19) The cost of owning an offshore company helps to finance. This is especially helpful for businesses operating in China, were applying for a business loan is much more expensive than those in Hong Kong or Singapore.
(20)Intellectual Property: Intellectual property has become valuable in the form of a brand, or a logo, that has been widely recognised amongst a section of the consumer. When an intellectual property has the value to sell on the market for commercialism or even re-branding, deliberations should be considered whether or not the transaction should be done offshore, possibly in the Cayman Islands, given its efficient tax structure and the well-known English Common Law. This is especially important for Intellectual property holders.
some of the information excerpted from Phoenix Network http://wemedia.ifeng.com/73063392/wemedia.shtml
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