It’s tricky to stay ahead of the curve in today’s world. Businesses are using AI in their operations to increase efficiency and stay on top. Everyone is looking for an edge, and the margins for error are razor thin. That’s why many international entrepreneurs are looking to set up their businesses in offshore countries. They want to get as many advantages as possible, like favorable tax treatment, which can bring various benefits to businesses.
From tax benefits to gaining access to various financial services and payment processors, setting up an offshore company is the smartest call you can make as a business owner. Now, the question is, what is the best country to set up an offshore company?
In today’s article, we’ll talk about some of the best offshore countries in the world, and we’ll share with you what makes them attractive to entrepreneurs worldwide. But before we get into it, let’s go through the meaning of a couple of key phrases.
Offshore Business: Meaning of the Phrase
Many people get a bad vibe when they hear someone utter the phrase “an offshore business.” There are a lot of myths and negative connotations associated with the phrase, but what does it really mean?
An offshore business is a legal entity that you can form outside of your country of origin. For example, if you’re from Italy and you open an LLC in the US as a foreigner, you’ve just set up an offshore company.
Many entrepreneurs operating internationally use offshore companies to optimize their taxes, take advantage of favourable business environments, or generate more profit. There’s nothing illegal or nefarious about that. It just boils down to using the privileges of an increasingly Globalized world and enjoying the benefits of being a Global citizen. In fact, many of the biggest corporations in the world use offshore business models to help them stay competitive in the modern markets.
For example, we’ll talk about foreign US LLCs and UK and Canadian LPs. All three countries, the US, UK, and Canada, have a high reputation for business, but still offer amazing tax incentives to foreign entrepreneurs. The reason is simple — they want to attract foreign businesses and stay competitive with other countries. And the only way to do that in a modern world is to offer something that most people would think is “a bit shady”—the formation of legal tax-free business entities.
International Business Company (IBC): Meaning of the Phrase
International business companies, or IBCs, are offshore companies that usually don’t have operations in the country in which they’re registered. These entities are mostly created for the purposes of doing business internationally while making the most out of favorable tax environments that a lot of offshore countries offer.
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Best Country for Offshore Company: Parameters We’ve Considered
Before getting into our list of the best countries to set up an offshore company, let’s give you a brief overview of the criteria we’ve used to make the list.
1. Global Business Reputation
We first looked at the international reputation of a country that offers the creation of offshore companies and how that would affect a particular business.
Some countries allow you to set up an offshore company and offer amazing tax benefits, but they come with, basically, a negative global standing. Just having your company registered there will greatly and harmfully impact the reputation of your business.
On the other hand, opening an offshore company in a country with a high world reputation can have the opposite effect. And actually increase the credibility and trustworthiness of your business.
2. Currency
When you’re using offshore countries to set up a business, you’re essentially tying your company to the currency of said country. For example, if you open an LLC in Wyoming, US, your business there is going to operate with and use US dollars, the world’s most stable currency.
3. Yearly Operating Costs
Even the best country for offshore companies that allows you to minimize taxes and offers a high degree of privacy and protection from liability will still have certain annual costs. For example, offshore companies in the British Virgin Islands have to pay an annual fee, which is usually between $350 and $1,000, depending on the type of entity. In addition to that, in BVI, there are also registered agent and address fees that can range between $500 to $1,500 per year. In contrast, if you pick the right US state to set up an offshore company, you can have your yearly fees as low as $100.
4. Difficulty of Opening a Business Entity
The best offshore countries try to make the process of setting up an offshore company as easy and fast as possible. Unfortunately, not all of them succeed at that. For example, to open a company in the Cayman Islands, which many consider one of the best offshore tax havens, you’ll need to face a couple of hurdles. If you’re lucky and you know exactly what you’re doing, registering your company and getting a bank account can take a couple of weeks.
Another example would be forming an offshore company in Delaware, US, which can take just one business day. The process can be a bit tricky, but the upside is that it can all be done online. However, setting up a bank account and getting an EIN number without an SSN, so you can actually start doing business, can take between 2 and 3 weeks.
5. Access to Banks and Financial Services
An important parameter when picking the best country to set up an offshore company is the type of banks and financial services you can get access to. You should be looking for services based on the type of your business and the frequency of your transactions.
A lot of offshore countries, like the Cayman Islands, cater only to high-net-worth individuals, and their banking systems reflect that. This means that to get the most out of offshore companies in Cayman, you’ll need to be, at a minimum, a multi-millionaire.
In contrast to that, offshore countries like the US or Canada offer banking and financial services that cater to a more diverse group of international entrepreneurs. You can get a lot of value from these two countries, regardless of whether your net worth is in the tens of thousands or millions of dollars or even somewhere in between.
6. Types of Available Payment Processors
If your business requires you to deal with a high volume of international transactions, you’re probably going to need access to a good payment processor. Many popular offshore countries aren’t actually set up to deal with, let’s call them, regular businesses. For example, a popular payment processor, Stripe, does not support offshore companies registered in the British Virgin Islands. However, if you open an offshore company in Florida, US, you can easily get access to Stripe and other popular payment processors.
5 Best Offshore Countries to Form a Company
Using the above parameters, we’ve created a list of the best offshore countries in which to form a company. Here it is:
1. USA
Offshore companies in the United States can benefit from a 0% tax rate if they don’t generate US-source income.
Not many people know this, but the US is one of the best offshore tax havens in the world and is, in general, the best country to set up an offshore company in. Many people have heard about the tax benefits Wyoming or Delaware offer to foreign businesses. This is especially true for entrepreneurs who want to have an international business company that doesn’t operate in the US.
The US has a high reputation for business, and companies from there are highly regarded in most of the world. Having a business entity registered in the US will allow you to expand your operations into some of the richest markets in the world. The US also has one of the strongest and most stable currencies of all, the US dollar. Not to mention that the US dollar is also a reserve currency for many countries around the globe.
The country has one of the best offshore company formation processes. If you pick the right state, you can form a legal entity in less than a day. You’ll still have to wait a couple of weeks to get an EIN (company registration number) and open a bank account before you can start doing business.
Additionally, some US states have 0% taxes on income, allowing you to keep more of your profits. Annual fees are low, and if you do everything right and make the right choices, you can expect to pay just a couple of hundred dollars.
The US is famous for having the most diverse offerings when it comes to banking and financial services, making it one of the best offshore countries in the world. And, with a US bank account, you can get access to all the premium payment processors, allowing you to streamline international transactions to the max. These and many more benefits make America the best country to set up an offshore company.
The US also has minimal reporting requirements. Foreign business owners with US LLCs that don’t operate in the US can expect to file just one or two forms per year. For example, if you own a single-member LLC in the US that doesn’t generate income in the US, you’ll only need to file Form 5742. To learn more about tax reporting for offshore companies in the US, check out our article on the taxation of foreign-owned LLCs. We highly recommend it as it’s a great resource for anyone looking to learn more about US tax laws for foreign entities.
Set Up Offshore Company in the US: Benefits Checklist
✅ High reputation for business
✅ Strong and stable currency
✅ Low annual costs
✅ Quick offshore company formation times
✅ Access to the best financial services and banking
✅ Access to premium payment processors
✅ High privacy and protection from liability
✅ Minimal reporting requirements for international business companies
✅ 0% taxes for companies without US-based operations
Want to open a US LLC as a foreigner? Get in touch with US today to experience the best offshore company formation service in the US! Book a free call.
2. United Arab Emirates, Dubai
Dubai has seen a big increase in its reputation for international business in the last decade or so. However, it still has a long way to go before reaching America’s stature. As of now, it’s mostly associated with being one of the best offshore countries for the extremely rich, with minimal options for medium or small-sized businesses.
The United Arab Emirates dirham, or AED, is a good and relatively stable currency, but it pales in comparison to the US dollar. The country also has high annual costs compared to the United States. These yearly fees can range between $5,000 on the low end, all the way up to $20,000 and higher, depending on the business and its structure.
With that being said, the UAE has no corporate taxes for income less than AED 375,000 (around $100,000). For anything above that, the corporate tax rate is 9%. This new tax law was introduced in June 2023. And, even despite that and the high annual fees, Dubai is still one of the best offshore tax havens.
To set up offshore company in UAE, you’re looking at a wait period between 1 and 4 weeks. You can also do the entire incorporation process online, which is a great time-saver. As far as banking and financial services are concerned, Dubai is one of those offshore countries that mostly caters to high-end clientele. If you’re one of them, you won’t be disappointed. However, if you’re not, it leaves much to be desired.
Now, when it comes to privacy and protection, the UAE is a great place for international entrepreneurs. The names of company owners and shareholders are not listed publicly. The country also has low reporting requirements for businesses that operate outside it. All of that and much more make the UAE one of the best countries to set up an offshore company.
Set Up Offshore Company in the UAE: Benefits Checklist
❎ Medium reputation for business
❎ Good currency
❎ High annual costs
✅ Quick offshore company formation times
❎ Access to financial services and banking for high-net-worth individuals
✅ Access to premium payment processors
✅ High privacy and protection from liability
✅ Minimal reporting requirements
❎ Corporate tax of 9% for income above $100,000
3. The Canadian and UK Limited Liability Partnerships
For number 3 on our list, we have two offshore countries (for the price of one). We’ve coupled them together because both countries offer similar benefits if you incorporate your business as a Limited Liability Partnership or LLP. What does that mean?
Well, if you choose to open an LLP in Canada or the UK, you’ll get all the privileges of the best offshore tax havens with a 0% tax rate on any income made outside of those countries. This means that, as long as you don’t operate in either the UK or Canada and are not a resident of either country, you can expect to pay 0% in taxes.
The UK and Canada have low reporting requirements for LLPs that don’t operate and generate income in the country. For the UK, LLPs have to file the annual partnership tax returns (SA800) and, in some cases, each of the owners has to file an individual tax return. On the other hand, Canadian LLPs just have to file an information return (T5013).
Formation and annual costs are also low for both countries. For the UK, formation can cost you as little as $70, while in Canada, it can range between $70 and $220, depending on the province. Yearly costs are also minimal if you file all the forms yourself. These costs don’t include lawyers’ and other fees that you might need to cover if you want to hire professionals to help you. Basically, it’s cheap, but only if you do everything yourself.
These two countries also have one of the best offshore company formation times, with the whole process usually lasting between 1 and 3 weeks. And, if you register your company in the UK or Canada, you can expect to get access to a lot of great financial services and all of the premium payment processors.
However, the biggest downside for both the UK and Canada is privacy. General partners (those with actual control of the company and not just investors) of offshore companies have their names listed in a public record. This can be a problem for some international entrepreneurs who want to keep their professional and personal lives separate.
Set Up Offshore Company in the UK or Canada: Benefits Checklist
❎ Okay reputation for business
❎ Good and stable currencies
✅ Low annual costs
✅ Quick offshore company formation times
✅ Access to financial services and banking for all individuals
✅ Access to premium payment processors
❎ Low privacy and protection from liability
✅ Minimal reporting requirements
❎ Requires opening a Limited Liability Partnership
4. British Virgin Islands
The British Virgin Islands are known as one of the best offshore tax havens in the world, and for good reason. Corporate, income, capital, and sales taxes are all 0%. This means that if you want to set up offshore company here, you probably won’t have to worry about paying taxes. However, this benefit comes at a great cost to the business reputation. Companies registered in the British Virgin Islands are not considered the most reputable in the world. This is precisely why many payment processors (like Stripe) don’t support accounts from this territory of the UK.
This region has one of the best offshore company formations, with processing times being around 7-10 business days if everything is done correctly. However, the costs of setting up a company can be high, ranging between $2,000 and $4,000 on average.
The great thing about registering offshore companies in the British Virgin Islands is that the currency is the mighty US dollar. Annual costs are high, with government fees ranging between $350 and $1,200. There are also registered agent fees and address costs that can add around $500 to the overall yearly cost of maintaining an offshore company in the BVI.
Set Up Offshore Company in British Virgin Islands: Benefits Checklist
❎ Low reputation for business
✅ Good and stable currency
❎ High annual costs
✅ Quick offshore company formation times
❎ Limited access to financial services and banking
❎ Limited access to premium payment processors
✅ High privacy and protection from liability
✅ Minimal reporting requirements
✅ 0% taxes
5. Hong Kong
Hong Kong had an excellent business reputation when the British government ran it. However, since the Chinese Communist Party took over, that reputation has taken a nosedive. It’s still alright, but it’s nothing compared to what it was even just a decade ago.
Company formation times for offshore companies are quick. If everything is done correctly, the entire process can last between 2 and 7 business days. Formation fees are low, at around $300 total. Annual fees, however, can be high and range between $600 and $1,200.
Hong Kong doesn’t have capital gains or sales tax. And, in general, there are no taxes for international business companies that are registered in Hong Kong but do not operate there and only generate foreign-sourced income. Thanks to the city’s declining business reputation, certain payment processors offer limited access. For example, Stripe only allows businesses to register for their services.
As far as privacy levels, they are decent. The names of offshore companies’ directors are publicly available, but their addresses are not. However, it’s important to note that the Chinese Communist Party, more than likely, has access to all information about companies registered in Hong Kong and their owners. With that being said, this city is still one of the best offshore tax havens in the world.
Set Up Offshore Company in Hong Kong: Benefits Checklist
❎ Declining reputation for business
❎ Good currency
❎ High annual costs
✅ Quick offshore company formation times
❎ Limited access to financial services and banking
❎ Limited access to premium payment processors
❎ Low privacy levels
✅ Minimal reporting requirements
✅ 0% taxes for offshore companies with foreign-sourced income