Foreign Companies

The reasons for the establishment of foreign companies can be very similar to those for forming offshore companies given that foreign companies are usually established in order to obtain some form of benefit that a particular country, territory or region has.

These reasons can be tax related, in consideration of access to larger markets, cheaper labour costs, more economic activity, political and social stability, the availability of trained professionals, technical skills, and modernized infrastructure. Another includes greater access to financing, more investment opportunities and possibilities for doing business. Foreign companies are thus established with a particular view or intent in mind that often ultimately has to do with positioning oneself in a way that enhances business and profits.

Being able to register foreign companies is important to investors internationally. In countries where they exist, foreign companies carry out fundamental infrastructural development and development function. Owners of foreign companies who have second passports benefit largely as they enjoy the benefits of different countries, one of which includes greater real estate options and the ability to undertake jurisdictional tax planning. This is so especially if they are producers of goods and services and can sell their products in new markets in the Caribbean or elsewhere. Freedom of movement becomes a major player in various contexts where business owners with dual nationality are concerned and financial services create the platform for organizations, offshore corporations and agencies to wire and receive money from one country to another.

Although they are companies that operate overseas, foreign companies are differentiated from offshore companies in that foreign companies are only registered overseas and are considered to be a local or domestic companies from the perspective of the jurisdiction in which they are incorporated, whereas offshore companies are incorporated overseas, do not operate in the jurisdiction of incorporation and are not considered as local companies of the jurisdiction. Offshore companies are a class of their own and are separated from domestic or any other company that operates in a jurisdiction by way of registration (such as a foreign company) or incorporation (local company). This leads to the clear distinction that offshore companies are prohibited from operating in the country in which they are incorporated, whereas foreign companies operate both where they are incorporated and registered. Here, incorporation must be clearly distinguished from registration given that the two words are often loosely used to have the same meaning. Incorporation thus refers to the entire process of forming or creating a company, whereas registration refers to having the company’s name written down in the register of companies that operate in a jurisdiction.

The requirements for the registration of foreign companies differ from one jurisdiction to the other, some requirements being more flexible and straightforward than others. Foreign companies are also required to meet certain criteria in order to qualify as such and may operate under certain terms and conditions. In some jurisdictions, foreign companies that are incorporated in specific countries or regions could qualify for special tax treatment such as exemptions from import and export duties and charges or exemptions on withholding tax on incoming or outgoing dividends, interests, royalties and repatriated funds. More friendly investment and tax regimes tend to allot deductions or very low tax rates on income and corporate tax, and may even provide tax holidays which encourage foreign companies to move in locally and operate profitably. Such incentives for foreign companies are usually geared with job creation and infrastructural development in mind on the part of local government, so as long as a certain number of jobs are provided and foreign exchange or economic benefits are obtained, providing an environment that attract investors and foreign companies is viewed as a wise strategy for encouraging foreign direct investment. In the absence of tax and other benefits, foreign companies would tend to settle in a jurisdiction because of its reputation, reputable institutions, closeness to a target market and raw materials, so that in the absence of tax breaks or other incentives, there are advantages that neutralize the cons of being established under conditions that are not readily investor friendly.

Like the offshore company, foreign companies can be used to do business more privately, since this type of operation creates an offshore environment which takes away business form being done ‘at home’. Along with operations, general business transactions and banking are taken offshore as well and therefore away from the eye of the local public, making it possible to protect assets which are now international. Careful planning and strategizing when using a foreign company can lead to considerable tax savings, increase knowledge on international tax and trade issues, tax treaty networks and strategies that can be used to create efficient trade and commercial operations internationally. This, however, requires that the necessary advice is sought and that professional services in the areas of tax, accounting and planning are used in order to ensure that business is well managed and conducted legally compliant to various regulatory frameworks found in different countries.

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