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Possible risks of owning an offshore company

Article image: Possible risks of owning an offshore company

For any type of business, when is it about investing and receiving income, certain risks are applicable, and offshore companies are no exception. That is why it is very important to assess all possible risks and to take the necessary measures for their elimination before the registration of an offshore company.

The ownership of an offshore company can be associated with the following types of risks:

  • Financial – property losses;
  • Administrative — facing administrative responsibility;
  • Criminal — criminal liability (rather rare).

These risks may occur separately or in conjunction.

The financial risks of owning an offshore company

  • Unforeseen taxes are due in case when a taxation system in a selected offshore area and your state is not checked sufficiently. In spite of the fact that the place of registration is tax-free, in some countries there are such methods of collecting taxes from foreign companies as an income tax collected at source, representative office taxation, etc.
  • Void transaction occurs in case of violation of the rule of compulsory provision of information on the ownership structure.
  • Unforeseen Taxable Subjects - usually take place if an offshore company cooperates with legal or natural persons from high-tax jurisdictions (e.g., the UK, the USA, etc.).

The purchase of the ready-made offshore company is also worth mentioning. If you purchase it on your own, not utilizing the services of the specialized companies, such as Dubai free zone, you may encounter the so-called "anniversary customer" risk. Dishonest brokers may sell the same offshore company to several persons simultaneously. This occurs rarely, however, you should act with reasonable care — check all documents very carefully before purchasing a company.

Clarify the cost of opening company, corporate or personal bank account, obtaining a residence visa, or another question regarding business in Dubai, UAE:

Administrative risks

Administrative liability usually occurs when an offshore company is factually present on the territory of a state to which its owners belong. Let us take UK as an example. In this case, by the actual presence we mean the existence of an office, staff, production capacity etc. on the territory of the UK.

The potential risks here arise if:

  • The company violated the terms of registration;
  • Has not filed a tax declaration;
  • Has not provided the information necessary to proceed with tax control.

Tax liability occurs as the result of a non-payment of taxes by an offshore company (if there is a representative office in the country of residence of the company owner), if the shareholder and beneficiary have not declared their income.

Despite all risks mentioned above, an offshore company ownership with the right approach is definitely advantages. Please contact us and we will help you open an offshore company quickly and according to applicable UAE legalities.

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