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Frequently asked questions

What is a tax haven?

In everyday language a tax haven is a state or territory which provides a remarkably wide range of tax benefits for the offshore companies registered therein (the original English term - tax haven - means tax refuge). That is, an offshore company can operate under favourable tax conditions only if it is registered in a tax haven territory (in accordance with the principle outlined above, the company must, of course, operate outside the territory of registration).

On traditional tax haven territories the operation of companies is supported by a thoroughly-regulated legislative mechanism. This means that in the given country the legal code provides favourable taxation status for the offshore companies. It is necessary to stress this because it is not that the company pays no tax illegally, but, on the contrary, it is exempted from the payment of tax or a part thereof as provided by law.

What is the purpose of the establishment of an offshore company?

This is one of the most important issues concerning the establishment of companies. There may be a number of goals and objectives, in the same way that the business relations evolving in a market economy may involve an infinite number of combinations. Therefore, to a certain extent, the client himself should find the answer to the above question because nobody knows his business activities better than the client himself. We can only briefly outline the purposes for which offshore companies are most frequently used.

  • Offshore trading companies
  • Offshore investment companies
  • Offshore ship-owner companies
  • Offshore finance companies
  • Offshore holding companies
  • Offshore insurance companies
  • Offshore banking companies 
  • Offshore companies formed for owning a property
  • Offshore private funds

What are the advantages of using an offshore company?

We list the advantages related to offshore companies registered in tax havens in two distinct groups:

  1. Direct taxation advantages/benefits
  2. Additional benefits independent of the favourable tax status

Direct taxation advantages/benefits

These advantages do not require specific explanation. The amount of revenue generated is taxed in the country of the offshore company. Taking advantage of the fact that these countries provide a wide range of tax benefits for enterprises of this kind, we may secure considerable tax savings.

Additional benefits

This other group of advantages is composed of benefits independent of taxation which are not to be ignored by certain types of businesses in certain situations. Some of these benefits are listed below, though the list is by no means exhaustive:

  • Lack of bookkeeping obligation: In a number of tax havens offshore companies are not required to keep books. This, too, results in a considerable saving since, if we look at the data of a domestic (non-offshore) company of a similar size, the annual bookkeeping fee alone usually amounts to several hundred - or even thousand dollars.

  • Enforcement of prestige-related considerations: It may happen that in certain business situations a foreign company may offer more advantageous terms and conditions. The participation of a “foreign investor” in a domestic enterprise sometimes creates considerably more trust and confidence in a potential business partner, or it may even provide exemption from customs duties in certain cases, etc.

Where should you set up an offshore company?

At the moment, there are more than 40 locations in the world which offer considerable benefits for offshore companies as tax havens. Traditional tax havens are usually located on archipelagos (e.g. the British Virgin Islands), in island republics, or in small countries (e.g. Panama). The independent legislation of these countries and territories encourages foreign investors to establish companies on the given territory.

In most serious offshore zones the operation of the companies, the security of foreign investment and the protection of secrets are guaranteed by a code of laws. (For instance, the legislature of the British Virgin Islands passed such a code of laws under the name of the International Business Companies Ordinance in 1984.) When encountering this topic for the first time it appears extremely difficult to differentiate between the advantages and disadvantages offered by the many small and possibly unknown countries. There are, however, a few factors which may help you find orientation.

What is it that provides favourable taxation status for the company?

It is reasonable to ask the first question: In what respect is the taxation of the offshore company favourable? And in connection with this: Why is it worthwhile for these countries to offer benefits of such magnitude to foreign investors? (We shall answer this question in the next section.) On all serious tax haven territories, tax benefits have a legal basis and foundation. For instance, this benefit is provided for the companies registered in the above-mentioned British Virgin Islands by the code of laws originally adopted in 1984.

Accordingly, offshore companies pay no taxes of any kind to the British Virgin Islands, other than the annual state duty of the usual amount of 350 US dollars, independent of turnover. In the case of the Seychelles and Belize, this annual duty is 100 US dollars, while in Panama it is 350 US dollars. It is obvious that these tax benefits are considerable, compared with the 10 to 35% tax on profit typically imposed in European countries.

Why is it advantageous for the country of registration to provide tax benefits?

These locations are usually situated in geographically small countries. The population is usually small. Tourism and various services play the most important role in their economies. Offshore businesses generate considerable revenue for them. On the one hand, concrete employment opportunities are created: various law offices, a state registration apparatus, representatives, banks registered on these territories, etc. are required. On the other hand, through the state duties (registration and re-registration fees) and taxes the population of the country obtains considerable revenue.

What principles of taxation are enforced in the place of registration?

As already mentioned above, one of the most important purposes of the registration of offshore companies in tax havens is to reduce high tax burdens and to take advantage of direct or indirect tax benefits. At the same time, we should stress that completely tax-free and cost-free companies do not legally exist in any part of the world, in spite of the fact that in a number of countries offshore companies are often referred to as tax-free companies. Fundamentally, the following principles of taxation may be enforced in the locations of registration of offshore companies:

  • In countries where the company may only derive revenues from abroad, these revenues will be completely free from the payment of any tax. In this case, the company is required to pay a fixed annual fee which is independent of the turnover and profit of the company. Such locations are the British Virgin Islands, the Bahamas, Belize, etc.

  • Tax exemption is granted only in respect of revenues derived from abroad . In such countries as, for example, Panama and Hong Kong, companies may pursue economic activities within the country, too, and the domestic revenues are taxed on the basis of a linear rate, while revenues derived from abroad are tax-free. In this case (Hong Kong), the company is required to indicate domestic revenues separately in its annual report.

  • Taxation on the basis of a linear tax rate . One of the best-known locations is Cyprus where offshore companies pay a 10 % tax on their net profits. (In these locations, without exception, the keeping of books and preparation of annual reports is compulsory.)

What requirements does the country of registration prescribe in respect of the directors and shareholders of an offshore company?

There are some offshore zones where there are no restrictions of any kind concerning either the directors or the shareholders. These include, for example, the Bahamas, the British Virgin Islands and Belize. Companies may be set up here with the participation of a single director and a single shareholder of any nationality who may even be one and the same person. Other offshore locations do prescribe certain restrictions in respect of the directors and shareholders of ventures. These restrictions may be divided into two main groups:

  • Quantity restrictions. This means that the minimum number of directors or shareholders is defined. For instance, in the case of Panama, a company must have at least three directors (natural person).

  • Nationality restrictions. This is a provision expressly applying to the directors, the main purpose of which is to create jobs for the citizens of a given country. For instance, in the case of companies registered in Liechtenstein, at least one of the directors must be a resident of Liechtenstein.

What kind of details are entered in the companies register?

This is an extremely important question since, in the course of a number of business transactions, the owners and directors of a company do not wish to reveal their identity. In countries with a continental legal system there is little scope for this because, for instance, in Hungary, Austria and Germany the details of a company are completely public and anybody may gain access to them at the office of company registration, referring to any alleged or real interests. From this respect, we can divide offshore companies into three categories:

  • Full anonymity. The details of neither the directors, nor the owners are available in the public company register since these details need not even be reported to the authorities in these countries. Countries of this kind are the Seychelles, the British Virgin Islands, Belize, etc.

  • Partial publicity. For instance, in the case of Panama, the owners of a company are not entered in the companies register, whereas all the details of the directors are public.

  • Wide publicity. A number of details concerning the company are accessible in the companies register. For instance, in the case of Cyprus, the details of the owners and directors are available (name, nationality, passport number, date of birth, residence, etc.).

What should the size of the company's registered capital be? How can or should it be paid up?

When analysing this requirement, the effects of the two types of legal systems (continental and British-American) on the different territories can be observed.

  • In countries where legislation is based upon British roots, the system of requirements is much more flexible. This is particularly true of the offshore zones situated in the Caribbean Sea region. For instance, in the Bahamas, the standard registered capital of the company is USD 5,000. In respect of the laws of that territory, this is the so-called nominee registered capital which need not be made available for the company through payment to a special bank account. The same applies to the British Virgin Islands where the standard registered capital is USD 50,000 but the payment thereof is not compulsory either. This means that these companies can be formally set up with a few thousand dollars' worth of capital without actually possessing a single cent on foundation.

  • In the countries of the second group (as a consequence of the effect of continental law) both the rate and the method of payment of the registered capital are defined precisely. This is the case, for instance, in Switzerland, Liechtenstein and Hungary where the registered capital must not only be subscribed by the owners but is also required to be paid into a special bank account of the company, and any non-cash contribution is required to be made available for the company.

Where is it practical to direct an offshore company from?

Most offshore companies must have some kind of managing body, which is usually the board of directors. The directors must be residents of the given country. For this reason in particular, the way the laws of a given country deal with this topic should be taken into special consideration. For instance, in accordance with German tax laws, if the director of a company based in the Bahamas is a resident in Germany, the company in the Bahamas can also be taxed in Germany. What logical element does German tax law rely on when it prescribes this rule? As a result of the fact that the German director lives in Germany, the tax law assumes that the company based in the Bahamas is directed from Germany; consequently, the company has premises in Germany and any revenues related to such premises are taxable. It is important to understand the cause and effect correlation of the tax laws.

For instance, according to the conventions concluded between different states for the avoidance of double taxation, the basis of which is the model created by the OECD, the definition of premises begins with this question immediately: "premises are, in particular, the place of management..."

Why is it practical to use the services of the management centre? If we want to over-simplify the matter, we could say that such a territory may serve this purpose; the citizens of the territory may not be afflicted by the obligation of taxation because a foreign company is directed from the given territory. For instance, if a US company is managed by a director living on the Island of Sark, the director in Sark need not pay tax on these grounds (according to the laws of Sark, local residents are not required to pay personal income tax, for instance).

Summing up the above, it can be established that in general it results in a substantially more favourable tax law situation if the company is officially managed by a resident of a tax-exempt territory or a territory enjoying tax benefits (Sark, United Arab Emirates, etc.).

Is it necessary to travel to the place of incorporation when establishing a company?

Contrary to popular belief, it is not necessary to travel to the offshore jurisdiction when establishing a company; it is sufficient for our clients to visit one of the offices of LAVECO Ltd. Here we provide both old and new clients with incorporation and consultation services, as well as answers to questions which may arise regarding the everyday operation of offshore companies. In fact, at the moment it is not even necessary to travel to our offices, as the necessary papers can be completed and returned to us by fax or post (unfortunately, orders can not be accepted by email).

What are the most important foundation documents?

In this section we are going to describe the documentation involved in companies incorporated in the most frequently used, traditional offshore jurisdictions (the Bahamas, the British Virgin Islands, Delaware, Panama etc.):

  • Certificate of incorporation: This deed is issued by the office of registration, and certifies that the company has been entered (under the given name) by the office of registration in the companies register on the given day. A so-called "Apostille" is usually attached to the certificate of registration (usually referred to as "the Certificate of Incorporation") which is a certificate issued by the central authority (usually the Registrar) whereby the certificate of registration has indeed been issued by the office of registration. This is an internationally recognised and accepted deed regulated by the Hague Convention of October 5, 1961.

  • Articles of Association / By-laws: This document contains the basic regulations relating to the operation of the company. It is for the most part a standard format document, usually drawn up on the basis of the text of the legislation of the given location. Of course, as in all by-laws, here too, the by-laws may be freely amended by the owners and directors of the company. The following items, among others, are defined in the by-laws: activities, registered capital, name of the company, order of the appointment of the directors, rights of the directors, rules relating to the issue of shares, etc.

  • Appointment of the first director(s): After signing the deeds and documents of foundation, the founder will appoint the first director(s) and will delegate the rights related to the company to them.

  • Minutes of the first meeting: The minutes of the first meeting of the directors usually contain the first steps to be taken by the company, in particular, the fact of foundation, and approval of the seat and the dry seal of the company.

  • Minutes concerning the issue of shares: These contain the details of the owners subscribing and buying the shares, as well as details of the shares or share certificates issued.

  • Subscriber's resignation letter: In this document, the founder, who is usually the legal representative of the company, transfers all the rights related to the operation of the company to the company and its beneficiaries.

  • Corporate seal: The use of seals in the countries concerned is different from the way in which they are used here. It is usually a legal requirement that the company should have a so-called dry seal which is to be approved at the company's meeting of foundation. However, this stamp is not used for stamping contracts and invoices (a simple signature is enough there) but for sealing the share notes issued by the company, as well as the regulations and minutes of the company.

What is a Certificate of Good Standing?

This is a well-established document in the case of companies registered in America and the UK and its former territories. It is usually issued by the company registrar in the given jurisdiction. This is the document which confirms that the company has not been struck off, and does not owe any tax or duties. The content varies from jurisdiction to jurisdiction, depending on the information which is available to the public in the jurisdiction of incorporation.

The banks generally ask for proof of existence of the company when the formation documents are not fresh, which means that the company was formed 1, 3, 6 or 12 months earlier. Obviously a company which has not paid its annual fees, fees for its registered office and agent and its annual tax/duty cannot receive a Certificate of Good Standing.

What is meant by the term flow-through taxation?

Flow-through taxation is a method of taxation used in the American and British tax systems, whereby a company is not taxed as a proportion of its income, but instead the part of the income accruing to each owner of the company "flows through" to them, and the owners then declare this in their annual tax returns. This type of taxation is generally used in the taxation of partnerships, in the USA in the form of LLCs and in England in the form of LLPs. The partnership, or rather the company's members, decide upon the rate of the company's income which will be apportioned to each member.

From time to time the income is divided in the agreed proportions, and the members then include this income in their own tax or income returns. The members of partnerships, LLCs and LLPs can be either private individuals or companies. Further taxation of the income generated by partnerships depends primarily on where the members are resident for tax purposes, and where they have to file tax returns.

Which is the best offshore jurisdiction?

The jurisdiction of incorporation is a key question from the point of view of the future operation of the company. Generally speaking there is no one simple best solution. There are always several alternatives to choose from when selecting a suitable company for a given type of financial activity. As many jurisdictions offer almost identical solutions for particular activities, in many cases several jurisdictions may be suitable. In this case, the deciding factors tend to be the cost, the prestige of the jurisdiction, and the ease with which the company can be administered.

Why should I pay for the registered office and agent if I don't even use them?

A registered office and agent are legal requirements for the maintenance of a company. It may be that the company will never actually use the office address, but it still needs it, as the corporate law in almost all jurisdictions requires that a company must have, throughout its active life and without interruption, a registered local office; in most jurisdictions a registered local agent or secretary is also a requirement.

If the agent who provides the registered office address resigns, then the company is breaking one of the laws on the maintenance of companies, and the company registrar will suspend the legal activity of the company or strike it off the company register. In most jurisdictions, the annual tax or duty can only be paid through the local agent. Therefore, it is very important for the company to pay its annual fees each year and on time.

Why are agreements for the avoidance of double taxation beneficial?

Bilateral agreements for the avoidance of double taxation (and for the obstruction of tax evasion) can be beneficial because for certain types of income they apply tax rules which are more attractive than those which would be applied if the income was taxed in just one, or both, of the countries involved. The types of income applicable are typically incomes from interest, dividends and royalties. Generally speaking, the laws of most countries allow for the taxation of such income types being paid abroad to take place before they are transferred out of the country.

If, however, there is an agreement for the avoidance of double taxation, and the agreement prescribes a lower rate of taxation for the type of income in question, then this lower rate will prevail as the international agreement is a higher form of legal regulation than the tax laws of one given country. Many factors have to be taken into account when applying the terms of agreements for the avoidance of double taxation, which is why it is always advisable to consult experts from the country of source to establish the exact conditions which apply in the tax practice of that country.

What is a Certificate of Tax Residence?

A Certificate of Tax Residence, as the name suggests, is a document which proves the tax residency of a company. Although the name and content of the document may vary from country to country, the essence is always the same: the tax authorities, or similar body, of a given country certify that a given company or branch incorporated in that country appears in the records of the tax authorities, has a tax number and, where appropriate, pays tax.

This document is necessary when a company wants to take advantage of the benefits offered by an agreement for the avoidance of double taxation, and has to file with the tax authorities of the country of source certification from the country of destination not only that the company is registered in that country, but also that the tax rules of that country apply and that the company pays tax in the country of destination.

Can offshore companies only be used for money laundering?

It goes without saying that the answer is obviously no. However, given the generally pejorative public opinion with regard to offshore companies, a broader explanation is called for. The explanation has to start a little further away, with some philosophical thoughts. Does a person who has the intention of doing business have the right to establish a company? Obviously the answer is yes. Nowadays this has to be a basic right, in the same light as the freedom of conscience and religion.

If I have the intention, and the necessary capital, expertise and business contacts, then I can start a business in a given country in accordance with the prevalent legal conditions of the country in question. If I am in business, then do I have the right to establish an offshore company and take advantage of the benefits offered, be they tax, currency or other benefits? Again the answer is yes. One of the basic principles of economics is making the best possible use of the resources available and maximising profits. Of the available resources, perhaps money plays the most important part. The circulation of capital is more effective and the profit greater if the business can be operated under more advantageous fiscal conditions.

One of the ways of achieving this may be an offshore company. It is not by chance that today more than 50% of the financial turnover from daily transactions is carried out through the 4 million or so registered offshore companies. These companies have been established completely legally, taking advantage of the beneficial tax, customs, exchange and other regulations. In many jurisdictions, the state does not exert as much control over these companies as in the case of so-called onshore companies. The more relaxed regulation may lead people to believe that here it is possible to remain anonymous and to break the rules, and that the laws need not be adhered to. This is definitely not the case. Offshore companies are established to pursue financial activities in the same way as non-offshore companies. If, in the pursuit of illegal intentions, an offshore company is not used for strictly legal financial activities, then it can be said that it is not the company which is at fault or guilty, but the actions and intentions of the people who do not use the company for the purposes for which it was intended.

And this is where the third question arises: is it necessary for someone to have an offshore company in order to break the law? The answer to this question is obviously no. Numerous crimes covered by the penal code can be committed by non-offshore companies too. In fact, if we consider the majority of crimes of a financial nature, then normal onshore companies are involved in more than 90% of the criminal cases. Typical cases include false invoices, unlawful VAT claims, and unlawful applications for state support, to name but a few. Furthermore, there is the act of returning such funds to circulation. We could go on discussing this question at great length, but it is already clear that if a person wants to launder money, they do not need an offshore company, and the primary purpose of offshore companies is not money-laundering.

What is the essence of trusts?

The institution of the trust has a tradition dating back over 800 years in Anglo-Saxon law. The essence is that the person establishing the trust (the settlor or grantor) transfers the assets in his possession to a trustee, who nowadays tends to be a company specialising in this area, in such a way that the assets now become the property of the trustee. They set down in the Trust Deed (the official agreement they enter) how the trustee should handle the assets, the fees he will receive for doing so, and who the beneficiaries of the assets should be. The settlor himself can also be the beneficiary - for as long as he lives - or he can name other people (usually a spouse, children, brother etc.). After the death of the settlor, the assets are distributed according to the stipulations of the Trust Deed, and the trust is wound up, unless the settlor stipulated otherwise in the Trust Deed or the beneficiaries decide to enter a new agreement with the trustee.

The trust institution was originally devised for cases where, for one reason or another, the settlor was unable to manage his wealth (for example, when accompanying the king to the Holy Land in the times of the Crusades). The most common form of trust agreements nowadays is where, for reasons of security, inheritance or asset protection, the trustee is a person or company who is resident in an a jurisdiction offering tax benefits, as a result of which tax burdens arising from the proceeds or growth of the assets are not incurred.

Is it possible to organise private offshore foundations?

Private offshore foundations can be established, usually for reasons of asset protection. Today the two most popular jurisdictions for the registration of private foundations are Liechtenstein and Panama. The main point of the foundation is that the foundation itself is the owner of the assets under its charge, but the foundation does not have owners, just beneficiaries. Thus, the assets placed in the foundation in no way form part of the personal wealth of the people forming the foundation. The foundation, as with the trust, has beneficiaries, who may be, either in part or in full, the same people who form the foundation. The major advantage of the private offshore foundation over the trust is that the foundation is considered to be a legal entity, whereas the trust is not.

Is it possible to change the directors of an offshore company?

Offshore companies are companies just like non-offshore companies anywhere in the world. Therefore, the owners of the company can freely remove or replace the officers of the company, and, in cases where the director(s) resign, the members or shareholders can appoint new ones in their place. Similarly, if a director passes away, the members appoint a replacement. The documents issued regarding a change in directors vary from jurisdiction to jurisdiction, and the actual procedure may also vary, depending on whether or not the details of the directors are available to the public.

Can an offshore company buy property?

Generally speaking, according to the laws of the jurisdiction of incorporation, an offshore company can buy property on territories outside the jurisdiction of incorporation. In the case of most jurisdictions the only property a company may have in the jurisdiction in which it is incorporated is the registered office. The question is more complicated from the point of view of the laws of the country in which the property is situated. These laws may place restrictions on the purchase of property by foreigners, or may impose special conditions (for example, they may not be able to buy listed buildings or agricultural land). It is worth investigating the question thoroughly and consulting experts and lawyers in the country in which the property is situated before making a decision.

Can an offshore company buy cars?

According to the laws of the jurisdiction of incorporation, an offshore company can buy cars. However, if we examine the laws of the country in which the car is to be maintained, the question becomes much more diverse. Generally, the car bought on behalf of the offshore company will not be used in the country in which the company is registered, but a totally independent territory. This means that it is necessary to examine the laws of the country in question, to see under what conditions a foreign entity can legally maintain a car in that country, and what tax, customs or other financial requirements are involved in the running of a car. It is necessary to check whether a foreigner has the right to maintain a car in the given country without being registered locally. As with the case of property, it is important to discuss the matter with local customs and tax consultants before deciding to buy a car.

Can offshore companies give loans?

Offshore companies can give loans both to companies and private individuals. The company is also free to agree the concrete terms of the loan with the borrower. Thus typically the terms of repayment, collateral on the loan and the interest rates all form part of the agreement between the parties. It can generally be said that the laws of the jurisdiction in which the offshore company is incorporated do not place restrictions on this type of agreement. The situation for the borrower, however, may be different if the laws of the country in which the borrower is resident prescribe special rules relating to, for example, the payment of interest abroad. It is also necessary to examine the case of "thin capitalisation", where the amount of the outstanding loan can not exceed a certain percentage of the borrower's personal capital.

Can an offshore company establish other companies?

An offshore company can be the member or shareholder in other companies, and therefore can establish both offshore and onshore companies in most parts of the world (obviously taking into consideration and in accordance with local laws).

Who can sign on behalf of the offshore company?

It is usually the directors or managers of the company who sign as generally they are the ones with signatory right in the company's operational affairs. Those people who have been given power of attorney by the director (either for a certain types of work or for specific transactions) may also sign. The directors can even issue very wide-ranging powers of attorney (often with full power), which give the attorney(s) signatory rights and the right to act in the name of the company in accordance with the instructions set down in the document. Naturally the attorneys sign in the name of the company, and their own names must appear on documents they sign.

It is also possible for the director to issue power of attorney for certain specific transactions (for example the purchase of a property) or for the carrying out of certain functions (for example the opening and running of a bank account).In this case the attorneys are only authorised to perform the specific tasks set down in the document, and may not carry out other actions in the name of the company. In the majority of cases powers of attorney issued by the director are valid for a specific period of time, for example for one year from the date of issue. It is also generally the case that the person to whom the director has issued a power of attorney is not authorised to issue further powers of attorney - this would lead to an endless chain, and make it virtually impossible to keep track of who has what rights and powers within the company.

Do the owners of an offshore company have to sign the documents of foundation?

Sometimes yes, sometimes no. In jurisdictions where the details of the owners are registered in the Companies Register, it is typical for the owners to have to sign the foundation documents as well as the Articles of Association. Cyprus, where the details of the owners are publicly available, is an example of this type of jurisdiction. Even in this case though, it is possible for the owners to issue the local incorporation agent or lawyer power of attorney to sign these documents on their behalf.

In the majority of offshore jurisdictions, however, it is a local office which incorporates companies, and it is the employees of these offices who sign the foundation documents as the founders. Typically, they also appoint the first board of directors, who then issue the company's shares and interest certificates. In this case, therefore, the owners do not have to sign the foundation documents, as this was done at the time of incorporation by the employees of the local office.

Can offshore companies invest on the stock exchange?

An offshore company can buy securities (shares, bonds, futures), and can also freely sell them. If we look at the turnover of the major stock exchanges of the world (New York, London etc.), we can see that the majority of the shares in circulation are in the hands of offshore companies, and change hands between these companies. Offshore companies are the major ownership players in developed capital markets. Offshore companies are also present in the commodities markets, where they are active in foreign currency transactions, as well as deals in the related futures markets. They also deal in the various raw materials and fuels markets.

Can offshore companies own patents and licences?

Generally, offshore companies can be the owner or holder of any object, material or immaterial. Immaterial goods include various patents and similar rights, which can be assigned to an author or composer. In general these can be referred to as intellectual property, which may or may not be due as a result of legal protection (such as application for patent, copyright or industrial design patent), but they may also be other types. It can be seen, therefore, that offshore companies can own and make profit from intellectual properties.

How long will it be possible to incorporate offshore companies around the world?

Today this is a very frequently asked question, just as it was five, and even ten years ago. The very fact of asking the question suggests some kind of negative attitude, as if we were talking about some kind of harmful, criminal topic, which should be done away with. But why should the offshore companies operating around the world be abolished, and indeed, is it possible to abolish them? Those who judge offshore companies do not usually give answers backed up by concrete reasons when answering the first part of this question. Instead, they usually just repeat that offshore companies make it possible to launder money and provide a screen to hide behind. At the same time, it should be borne in mind that here it is not the tool (that is, the offshore company) which is the problem, but the human intentions which lie hidden behind certain actions. And from this point of view, there is no difference between offshore and non-offshore companies.

It is just as possible, if not more so, to launder money through and hide behind non-offshore companies. Statistics show that significantly more non-offshore companies are involved in crimes of a financial nature, with only a tiny fraction being carried out by offshore companies. If we return to the original question, or to that part of the question concerning the possibility of abolishing offshore companies, the answer is extremely complex. In theory, it would be possible to take such administrative steps as would block the establishment of offshore companies in the future. But what would happen to the multitude of offshore companies (some experts put the figure at three million, while others say it is closer to four) which are already in existence and operating around the world? It is impossible to imagine the functioning of the world economy with out these companies.

Today the majority of day-to-day financial transactions are performed by these offshore companies. The placing of restrictions on already existing and functional offshore companies could bring chaos to the operation of the world economy, and could lead to instability. It is virtually inconceivable, therefore, that these several million offshore companies will have to face profound changes as a result of serious restrictions.

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