What Is Offshore Finance? What Is Off Shore Company?

Offshore finance

Offshore finance refers to the financing activities carried out within a country but not related to the financial system of the country and not controlled by the financial laws and regulations of the country.

For example, a trust investment company will be headquartered in Bahamian archipelago. Its business activities include absorbing dollars from European residents or other non US residents, and then putting these funds into European residents or non US residents. The company is engaged in offshore financial activities.

In a strict sense, offshore finance is not the financing of domestic banks under the control of domestic banks.

For example, the international banking facilities in the United States (IBF) and offshore financial market activities in Tokyo are offshore finance.

Offshore financial market is also known as offshore financial market.

The form of isolation from domestic financial markets enables non residents to raise funds and use funds without being affected by the tax collection and foreign exchange control and domestic financial laws and regulations.

The development of offshore financial business began in 1960s. At that time, some multinational banks began to operate other currencies' depositing business in specific international financial centers in order to avoid domestic restrictions on bank development and financing.

Offshore deposits in dollar terms increased sharply in 70s.

By 80s, with the establishment of international banking facilities and the offshore financial market in Tokyo, offshore financial business also included the currencies of the host countries.

The difference is that such money is restricted to non residents.

The main reason for the rapid development of offshore financial business is that offshore banks do not have to hold reserves, and their operating costs are lower than domestic banks. Offshore banks are not bound by interest rate ceilings, that is, the interest rates they pay to depositors are higher than the interest rates paid by banks to domestic depositors, and they can also pay interest on demand deposits, while offshore finance enjoys preferential tax treatment.

Offshore financial markets have been developing rapidly since 70s, expanding from Europe, including London, Paris, Frankfurt, Zurich and Luxemburg to Singapore, Panama, Bahamas, Nassau and other places.

Since 80s, new offshore financial centers have emerged in New York, Tokyo and other places. By 90s, offshore financial markets have spread all over the world.

Types are classified according to their nature, and offshore financial markets generally have

London type belongs to the "naturally formed" market.

The London offshore market began in the late 50s. It operates both banking and securities business.

In addition to obtaining foreign exchange and financial services, non residents do not have to pay statutory reserves for their deposits.

In the past, such market operations were completely separated from domestic business due to foreign exchange control and other restrictions. But since the cancellation of foreign exchange control in October 1979, the management of foreign exchange financial business has been treated equally with domestic financial businesses, and the meaning of "offshore" has changed. London's offshore market has actually become an internal and external financial market with both domestic and offshore businesses.

Since the abolition of foreign exchange control in 1972, Hongkong has gradually evolved into a major London type offshore market in the Asia Pacific region.

The biggest characteristic of New York type is "artificial creation" and "internal and external separation", and there is no securities trading.

In December 1981, after the US Federal Reserve agreed to set up an international banking facility (also called international bank convenience), offshore financial business in New York developed rapidly.

Its main trading target is non residents.

Fundraising can only absorb deposits from foreign residents, foreign banks and companies, but the establishment of international banking facilities is not limited to foreign banks. Any depository institution in the United States, "love treatment" companies and foreign banks can apply for start-up in the US branch.

Deposits are not subject to the restrictions of the domestic banking regulations on reserve ratio and deposit ratio.

Loans must be used outside the United States.

The "facility" can be priced in any currency including the US dollar.

Since the US dollar is the most important international currency and the main trading currency of the offshore market is also Eurodollar, the offshore market in New York regards domestic currency as the main trading currency.

The offshore market of Tokyo opened in 1986 is also of this type.

Bahamas is an offshore financial center that only accounts and does not have substantive business.

The development of offshore financial business and the rapid expansion of offshore financial markets have promoted the development of international banks and the growth of international credit and international financing. However, because offshore deposits are not subject to various domestic laws and regulations, they have a certain impact on the money supply, banking control and monetary policy implementation of the countries where the deposits are located.

Two. What is Off Shore Company?

The meaning of "Off Shore Company" means that the companies registered by investors are in the offshore law area, that is, the establishment of the company in the "Bahamas" offshore financial center, but investors do not have to go to the local area, and their business operations can be carried out directly anywhere in the world.

In some parts of the world or countries such as the British Virgin Islands (BVI), the CAYMAN, NIUE, Bahamian archipelago, BAHAMAS, Seychelles (SEYCHELLES), the Republic of Panama (PANAMA), the Republic of Mauritius (MAURITIUS) and Bermuda (BERMUDA), the international community is allowed to establish an international business company on its territory.

The local government has no tax on such companies, only a small amount of annual management fees, and all the major international banks have recognized such companies for the convenience of setting up bank accounts and financial operations.

Usually, these regions and countries have good trade relations with the developed countries in the world.

The overseas Off Shore Company, registered in any of these countries or regions, have three characteristics of high confidentiality, tax relief and no foreign exchange control, thus attracting many businessmen and investors to choose the development mode of overseas Off Shore Company.

In recent years, some countries and regions in the world (mostly island countries) have developed and cultivated some particularly loose economic zones by legal means, which are generally referred to as offshore law zones.

The so-called Off Shore Company refers to the limited liability company or Limited by Share Ltd established in the offshore law area.

Compared with general limited companies, Off Shore Company differs mainly from taxation.

Unlike the usual practice of levying taxes according to turnover or profit, the government of the offshore law zone only collects the annual management fee to the Off Shore Company and no longer levies any taxes.

Moreover, almost all offshore law zones stipulate that the company's shareholders' information, equity ratio, and income status enjoy the right of confidentiality.