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In the CIS, the process of using offshore schemes is only beginning to gain popularity and will continue to develop for a long time.
What are offshore schemes, who needs them and how are they used by offshore companies?
To carry out transactions in which it may be used offshore company, it is necessary to register an offshore company, which then most often creates a branch in the country from which the transaction was originally planned.
A great many offshore schemes are known today; they relate to different fields and bring their own positive aspects for business.
The first effect that can be obtained with the help of an offshore company is an improvement in reputation and creation of a new image. For example, a company is engaged in investment activity, and people trust Ukrainian companies less than foreign companies. Therefore the firm “Vasya Pupkin Invest” registers an offshore company in another country and creates its branch in Europe. People then begin to treat the company as a foreign representative because they now see “Vasya Pupkin invest international group” — an international company.
Another popular offshore scheme is concealment of a company’s income. This scheme is carried out in several ways, for example through clearing centres. In this case, the clearing centre acts as an intermediary in the offshore scheme. For example, “Vasya Pupkin Invest” wants to install plastic windows in its office using the services of the company “Okna Prosto”. Instead of a direct settlement, a complex operation takes place between these companies. The investment company transfers money through its offshore company to a clearing centre, and the clearing centre transfers the money to the offshore company of the window supplier. Officially, the companies in Europe settle at one set of prices, while all the money passes through the offshore company, and it is extremely difficult for fiscal authorities to trace the chain of transfers because those countries do not disclose information about company owners and maintain high confidentiality.
Another very popular purpose of registering an offshore company is saving money during import and export. In this case, offshore companies act as intermediaries between a domestic and a foreign company. For example, the firm “Okna Prosto” intends to buy PVC profile from a foreign company for one hundred thousand dollars. Instead of a direct sale, an offshore company enters the transaction and buys the profile in its own name. It then sells it to “Okna Prosto” for 400 thousand dollars. As a result, “Okna Prosto” has higher expenses and pays less tax. Such schemes can also help reduce customs duties. The offshore company buys goods from a foreign partner and sells them to the Ukrainian company at a reduced price. As a result, the Ukrainian company saves significantly on customs charges. These schemes fall within the concept of tax planning, and their main purpose is to reduce the income of the Ukrainian company (to reduce taxes) and retain funds in an offshore company located in a country with low or zero taxation.
Many investment companies successfully use the services of offshore companies. Through various combinations of special financial schemes, taxation can be reduced, making investment activity more profitable and promising.
In addition, during the last several years offshore companies have become very popular and necessary for many banks and leasing companies. Today, almost all major banks have an offshore company.
Offshore structures have also entered the insurance sector. In insurance activity, creating offshore companies makes it possible to carry out reinsurance independently. In addition, an offshore company makes it easier to conclude agreements with reinsurance companies. An offshore company in insurance also makes it possible to accumulate and transfer funds to foreign banks.
Offshore companies accredited in Europe have some additional advantages. For example, when such a company arranges rental of premises, it is exempt from VAT payments on the amount spent on the rental.
Thus, offshore companies and special schemes can provide significant assistance to modern companies. Therefore, the creation of offshore companies and the use of different schemes will always remain popular both in Europe and in other countries.