Where Is the Best Place to Establish an Offshore Company? A Lawyer’s Guide to International Structuring
By Cal Evans, UK Lawyer and Managing Associate at Gresham International
Over the last decade working with international businesses, one of the questions I have probably been asked more than almost any other is where somebody should establish an offshore company. It sounds like a straightforward question, but the answer has changed considerably over the years. There was a time when international structuring was largely presented as a comparison of incorporation costs and headline tax rates. Today, banking, economic substance, beneficial ownership reporting, management and control, regulation, tax residency and the commercial reputation of a jurisdiction can be every bit as important as the corporate tax rate itself.
As a lawyer working with international companies through Gresham International, I have seen businesses approach this question from almost every direction. Some founders arrive convinced that they need a British Virgin Islands company because somebody told them it was the international standard. Others want a UAE company because they have heard about the tax environment in Dubai. Technology founders might automatically gravitate towards Cayman, while entrepreneurs looking for inexpensive structures often consider Seychelles. None of those jurisdictions is inherently the right or wrong answer. The important question is what the company will actually do once it has been established.
The first rule of offshore structuring is therefore remarkably simple: choose the structure around the business rather than choosing the business around the structure.
What Does “Offshore” Actually Mean?
The term “offshore company” is used incredibly loosely. Technically, it can simply mean that somebody establishes a company outside their home jurisdiction. In everyday usage, however, offshore generally refers to jurisdictions that have developed corporate regimes specifically suited to international business, investment, asset holding, private wealth or cross-border transactions. Places such as the British Virgin Islands, Cayman Islands, Seychelles and Nevis are obvious examples, although modern international structures increasingly incorporate jurisdictions such as the United Arab Emirates and Gibraltar as well.
What has changed is the idea that offshore automatically means anonymous or unregulated. That view is badly outdated. Beneficial ownership requirements, economic substance legislation, anti-money laundering rules, international information exchange and increasingly sophisticated banking compliance have fundamentally altered the industry. A modern international structure should therefore be designed as legitimate corporate architecture rather than as a mechanism for concealing ownership or income.
When we look at structures at Gresham International, the jurisdiction is consequently not the first question. The starting point is what the business needs to accomplish. Does the company trade directly with customers? Is it intended to hold intellectual property? Will it own shares in operating subsidiaries? Is it going to raise investment? Does it require conventional banking, payment processing or digital-asset infrastructure? Where will the directors actually make decisions? Where will employees work? Where are the customers? Is there a realistic possibility of the business being sold in the future? Once those questions have been answered, choosing the appropriate jurisdiction becomes considerably easier.
British Virgin Islands
The British Virgin Islands remains one of the most recognisable offshore jurisdictions in the world, and there is a good reason for that. The BVI has spent decades developing a corporate regime used in international transactions, joint ventures, investment structures and holding arrangements. Lawyers, banks, investors and professional advisers around the world are familiar with BVI companies, and that familiarity has considerable commercial value.
For a conventional international holding company, a BVI Business Company can therefore remain an attractive option. Its strength is not simply the tax environment but the enormous body of professional experience surrounding BVI corporate structures. If an international transaction involves sophisticated investors or advisers, there is a strong chance that those parties have encountered BVI entities before.
That does not mean the BVI should automatically be selected for every international business. Compliance obligations have increased significantly, and businesses need to consider economic substance, beneficial ownership, reporting requirements and banking before incorporating. A company that will conduct substantial day-to-day operations may also be better suited to a jurisdiction where genuine operational substance can be established more naturally. Nevertheless, as a holding jurisdiction and international corporate platform, BVI remains difficult to ignore.
Cayman Islands
Cayman occupies a particularly strong position in investment funds and institutional investment structures. If the objective is establishing a fund, pooled investment vehicle or structure designed to receive sophisticated international capital, Cayman will frequently appear on the shortlist.
The jurisdiction benefits from something that cannot easily be created through legislation alone: familiarity. Major law firms, investment managers, administrators and institutional investors have extensive experience dealing with Cayman structures. When significant capital is involved, that familiarity can outweigh relatively small differences in incorporation or annual maintenance costs.
Where I think entrepreneurs sometimes go wrong is assuming that because Cayman is widely used by investment funds, it must also be the best location for an ordinary operating company. That is not necessarily true. A small consulting business or early-stage software company may gain very little from incorporating in Cayman. The jurisdiction becomes much more compelling where the characteristics that made Cayman internationally successful — investment structures, sophisticated professional services and investor familiarity — actually matter to the business.
Seychelles
Seychelles occupies a different part of the international corporate market. It has historically appealed to entrepreneurs looking for relatively straightforward and cost-effective international business companies. For certain holding structures, special-purpose vehicles and international businesses, that simplicity can be attractive.
The important consideration is whether the company needs more than incorporation. An inexpensive company can become remarkably expensive if it subsequently struggles to obtain appropriate banking, payment processing or commercial relationships. Before using Seychelles, I would therefore want to know where the company intends to bank, what currencies it requires, what countries its customers are located in and how important institutional reputation will be to its business model.
This illustrates one of the recurring themes in offshore work. Incorporating the company is usually the easiest part of the process. The real test is whether that company can function effectively for the next five or ten years.
Nevis
Nevis is particularly interesting where asset protection forms part of the objective. Its LLC regime has helped the jurisdiction develop an international reputation in asset-protection planning, and it can be useful as one element of a wider private-client or corporate structure.
However, simply establishing a Nevis LLC should not be confused with comprehensive asset protection. Proper asset-protection planning involves understanding ownership, control, succession, existing liabilities, trusts or foundations, the location of assets and the laws that may apply to the individual establishing the structure. The timing of the structure is also critically important. Moving assets after a liability or creditor issue has already arisen is fundamentally different from legitimate prospective planning undertaken well before any dispute exists.
For the right circumstances, Nevis can therefore be a useful tool. Like every jurisdiction discussed here, however, it needs to be selected because its legal characteristics match the objective rather than because somebody has labelled it the “best offshore jurisdiction.”
The United Arab Emirates
The UAE has become one of the most interesting jurisdictions in international corporate structuring because it is no longer sensible to view it purely through the traditional offshore lens. The country now offers mainland companies, numerous specialist free zones, financial centres and international corporate structures. More importantly, it provides something that many traditional offshore jurisdictions cannot easily replicate: the ability to combine international structuring with genuine operational substance.
A founder can live in the UAE, maintain an office, employ staff, establish banking relationships and genuinely manage a business from the country. That makes the UAE particularly attractive to entrepreneurs who are not merely looking for a company registration but are prepared to establish real commercial operations.
There are also significant differences between the available UAE structures. An operating company established in a free zone serves a very different purpose from an international holding company or foundation. DIFC and ADGM structures may be relevant in sophisticated financial, investment and private-wealth arrangements, while other free zones can be more appropriate for conventional consulting, technology or trading businesses. The correct answer depends heavily on the activity.
The UAE’s tax environment also needs to be understood properly. The introduction of federal corporate tax means that simply describing the UAE as a “zero-tax jurisdiction” is no longer accurate. There remain potentially valuable reliefs and specific free-zone treatments, but their application depends on the company, its activities, its income and compliance with the applicable rules. Tax planning should therefore be based on the legislation actually applicable to the business rather than outdated assumptions about the UAE.
For founders who genuinely intend to operate from the Middle East, however, I believe the UAE deserves serious consideration. The combination of infrastructure, residency options, international connectivity, corporate flexibility and the ability to demonstrate genuine commercial substance gives it characteristics that many conventional offshore jurisdictions simply cannot offer.
Gibraltar
Gibraltar is another jurisdiction that I think is sometimes overlooked in discussions about international structuring. It is small, but it has a sophisticated professional-services industry and a legal system strongly influenced by English common-law principles. It has also developed considerable expertise in areas such as financial services, gaming and digital assets.
Gibraltar can therefore be particularly interesting where a business wants a smaller jurisdiction with an established professional and regulatory environment. It should not, however, be selected merely because somebody has heard that foreign income is automatically tax free. Gibraltar taxation requires a proper analysis of the source of income, the activities performed within Gibraltar and the circumstances of the company. As with every jurisdiction, the facts matter.
From my experience working through Gresham International, Gibraltar can be particularly effective when it is selected for a specific commercial reason. It is not necessarily the cheapest jurisdiction and it will not be appropriate for every structure, but where its corporate, legal or regulatory characteristics fit the business, it can provide an effective base.
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Panama
Panama has been involved in international corporate structuring for generations and remains relevant, particularly for businesses and individuals with connections to Latin America. Its corporate regime is well established and the country has a substantial international business and professional-services community.
Where Panama requires more thought is international perception and banking. Modern financial institutions conduct considerably more extensive jurisdictional risk assessments than they once did, and businesses need to think beyond whether a company can legally be established. They need to consider how banks, payment providers, investors and counterparties will react to the structure.
This does not make Panama a bad jurisdiction. It demonstrates why offshore structuring cannot be reduced to a league table. A jurisdiction that works extremely well for one business can create unnecessary friction for another.
So, Where Is the Best Place to Establish an Offshore Company?
If somebody asked me as a lawyer to identify the single best offshore jurisdiction, I would not give them one. There simply is not a universally correct answer. If I were looking at an investment fund, Cayman would immediately deserve consideration. For a conventional international holding company, BVI might be extremely attractive. For a straightforward and cost-conscious vehicle, Seychelles could make sense. For certain asset-protection arrangements, Nevis becomes interesting. For an entrepreneur who genuinely wants to establish operations in the Middle East, the UAE may be considerably more suitable than any traditional offshore jurisdiction. Gibraltar can work exceptionally well for particular international, financial-services or digital-asset businesses.
Sometimes the best answer is not offshore at all. A UK limited company, US LLC, Singapore company, Hong Kong company or another conventional domestic structure can be far more effective where banking, investors, customers or regulatory considerations make that jurisdiction commercially sensible.
The mistake is starting with the country. Start with the objective.
Tax Is Only One Part of the Structure
Tax is obviously an important consideration in international corporate planning, but it should not be the sole reason for establishing a structure. A company incorporated in a jurisdiction advertising a zero per cent corporate tax rate does not necessarily mean that its profits will ultimately be taxed at zero.
Management and control, permanent establishment rules, controlled foreign company legislation, transfer pricing, economic substance, withholding taxes, the residence of shareholders and directors and the source of the company’s income can all influence the ultimate tax position. The personal tax residence of the owner can sometimes be more important than the tax rate applying in the jurisdiction where the company was incorporated.
This is why the phrase “tax-free offshore company” should immediately lead to more questions. Which income is tax free? Where is the company managed? Where does the owner live? Where is the work actually performed? Where are the customers? Is the company conducting regulated activities? Are there reporting requirements elsewhere? Once those questions are asked, the headline corporate tax rate becomes only one component of a much larger analysis.
Banking Should Be Considered Before Incorporation
One of the most practical pieces of advice I can give after years of dealing with international businesses is to think about banking before incorporating the company. Creating companies is relatively easy. Creating a company that can reliably receive money from customers, pay suppliers, access appropriate currencies and satisfy banking compliance requirements can be much harder.
This is particularly important for businesses involved with cryptocurrency, fintech, gaming, international payments and other sectors that financial institutions may classify as higher risk. A jurisdiction might have excellent company legislation while being a poor choice for the banking requirements of a particular business.
Before selecting the jurisdiction, I therefore like to understand the anticipated flow of funds. Where will customers send money from? In what currencies? Will the business require card processing? Does it need cryptocurrency settlement? Will it receive large institutional transfers? Which banks and payment providers are likely to support the activity? These questions can materially alter the choice of jurisdiction.
The Rise of Multi-Jurisdictional Structures
Increasingly, the answer is not choosing one jurisdiction at all. Modern international businesses frequently operate through several companies, each performing a genuine function within the group. A holding company may sit in one jurisdiction, an operating company in another, intellectual property may be held separately and regional subsidiaries may deal with particular markets.
There can be entirely legitimate reasons for doing this. A holding jurisdiction might be familiar to investors, while an operating jurisdiction provides access to employees and infrastructure. A separate entity might own intellectual property because it licenses that technology throughout the group. Another company may exist because a particular country requires a locally licensed entity to conduct regulated activities.
The critical issue is ensuring that the structure reflects reality. Intercompany agreements, intellectual-property licences, management arrangements, transfer-pricing policies, accounting records and corporate governance should correspond with what the respective companies genuinely do. Creating six companies and inventing their commercial rationale afterwards is the wrong way around.
A good international structure should tell a coherent story. An accountant, bank, investor, regulator or lawyer looking at the structure should be able to understand why each entity exists and what it contributes to the group.
The Future of Offshore Structuring
The offshore industry is not disappearing. It is evolving. The days when offshore structures were primarily marketed around secrecy are being replaced by a much more sophisticated international corporate environment. Beneficial ownership reporting, automatic information exchange, economic substance and increasingly sophisticated banking compliance mean that legitimate structures need genuine commercial rationale.
I actually think that is positive for the industry. Jurisdictions are increasingly competing on the quality of their legislation, courts, professional services, regulatory frameworks and corporate flexibility rather than simply their ability to offer secrecy. Cayman has built an extraordinary position in investment funds. BVI remains deeply embedded in international corporate transactions. The UAE is rapidly developing as an operational, investment and private-wealth centre. Gibraltar continues to specialise in particular international industries, while jurisdictions such as Nevis and Seychelles retain their own niches.
For lawyers working with international businesses, this has made structuring considerably more interesting. The objective is not simply to establish a company somewhere with a low headline tax rate. It is to construct a structure capable of functioning across multiple legal systems while remaining commercially practical, bankable and compliant.
Final Thoughts
After working with international businesses for more than a decade, my view is that there is no such thing as the “best offshore jurisdiction.” There is only the jurisdiction, or combination of jurisdictions, that best suits what somebody is actually trying to accomplish.
The best structures are often not particularly exotic. They are structures where every company has a purpose, every relationship can be explained and the legal architecture reflects the commercial reality of the business. They work with banks rather than against them, anticipate tax and regulatory issues before they arise and remain capable of evolving as the underlying business grows.
For anyone considering establishing an offshore company, that is where the analysis should begin. Do not ask where you can establish the cheapest company or where the headline corporate tax rate is lowest. Ask where the company can operate effectively, where it can bank, where it can satisfy its regulatory obligations and whether the structure will still make sense several years from now.
That is ultimately the difference between simply owning an offshore company and having a properly designed international corporate structure.
About Cal Evans
Cal Evans is a UK Lawyer and Managing Associate at Gresham International. His work focuses on international corporate structuring, digital assets, emerging technologies and cross-border business matters. Through Gresham International, Cal Evans has worked with entrepreneurs and international businesses on corporate structures spanning multiple jurisdictions and has written and spoken extensively on cryptocurrency, blockchain technology and the legal issues surrounding emerging markets.
Gresham International
https://www.gresham-international.com/
Disclaimer
This article is provided for general informational and educational purposes only. It does not constitute legal, tax, financial, investment or regulatory advice and should not be relied upon as a substitute for professional advice tailored to individual circumstances. Laws, tax rules, regulatory requirements and the treatment of international corporate structures vary between jurisdictions and change over time. References to particular jurisdictions, companies or structures should not be interpreted as a recommendation or solicitation to establish, relocate or conduct business in any particular jurisdiction. Independent legal, tax and accounting advice should be obtained before establishing, restructuring or transferring assets to any international corporate structure. Gresham International is not a law firm in every location it has offices.
