As a company is considered to be a distinct legal entity, residents of high tax countries may be able to reduce the tax they pay by arranging for profits to be attributed to a company which is subject to low or zero tax.
 
There are numerous ways in which an offshore company can be used to mitigate tax and below are some of the more common uses:

Property Owning Companies
There are often great advantages in using an offshore property holding company to own an overseas property. We offer specialist schemes which are specifically tailored for property investors in the various countries around the world; particularly Spain, Portugal and the UAE.

Advantages of offshore property ownership include avoidance of inheritance tax, avoidance of capital gains tax, ease of sale (which is achieved by transferring the shares in the company rather than transferring the property) and reduction of property purchase costs to the onward purchasers.

In the United Kingdom, holding property through an offshore company converts the UK asset - the property - to a non UK asset - the shares in the company - and so eliminates UK inheritance tax to which the non-domiciled investor would be subject if UK property was held in his personal name. Additionally, because the property is owned by a non-resident entity, its’ sale will not the subject to capital gains tax.

In Portugal even greater advantages result from owning a property through a company. On resale of Portuguese property capital gains tax of up to 20% together with sales costs of approximately 13% would be incurred. If a transfer was made on the death of the owner then inheritance tax at a rate of up to 50% would be payable. All these taxes may be avoided if the property is owned by a suitable company.

Trading Companies
An importing or exporting company can be established in a low tax area. The company would typically take orders directly from the customer but have the goods delivered directly to that customer from the manufacturer or place of purchase. The profits arising out of the difference between purchase price and sales price would then be accumulated.

Investment Companies
Funds accumulated through investment companies set up in offshore areas can be invested or deposited throughout the world. Generally returns or interest payable on those funds will be subject to local taxation but in most offshore areas funds may be placed either in tax free bonds or in banks where interest is paid gross and where no capital gains taxes are applicable.

Companies for the Avoidance of Probate and for Privacy
A high net worth individual with properties or other assets in a number of countries may wish to hold these through the medium of a personal holding company so that upon his demise the need to obtain probate in each country is avoided. This saves legal fees and avoids publicity.

Professional Service Companies
Individuals receiving substantial fee income can be employed by a company incorporated in a low or no tax jurisdiction. Fees they generate can flow into the company.

Though the individual would normally be taxed on any salary taken from the company, the surplus could be held by the company and re-invested free of tax. Additionally, the salary could be structured to minimise local tax, for example, by receiving housing benefit etc. at the expense of pure salary.

A further advantage of a professional services company is that liabilities, which might arise during the course of carrying out a contract, would fall upon the company, rather than the individual.