Home Working in Germany Self-Employment Offshore companies in Germany
Last update on November 07, 2019

Consider the benefits of setting up an offshore company by registering, establishing or incorporating your business outside your country of residence.

Offshore incorporation is a straightforward process in all of the popular offshore financial centres and tax havens and can provide a wide range of benefits to the company and company principal(s). Offshore company registration is undertaken by individuals primarily for the following reasons:

  • Privacy
  • Asset protection
  • Reduced tax liability
  • Protection against lawsuits
  • Flexible business laws
  • Ease of operation
  • Confidentiality

Advantages of offshore companies

Overseas company formation can provide a wealth of benefits: offshore asset protection, confidentiality, enhanced privacy, tax savings or simply grow your business outside of the European Union.

Conducting business and undertaking banking transactions in the name of a legal entity, such as an offshore corporation, provide significant privacy and confidentiality benefits. Most offshore financial centres will not divulge the responsible individuals within the offshore corporations to a third party or foreign government. However, exceptions will be made in the event that an act of terrorism or a criminal atrocity has taken place and is being investigated.

Asset protection

The placing of assets into offshore corporations and overseas legal structures can provide a strong layer of protection from future liabilities. By having trusts, investments or bank accounts and other assets owned by your offshore corporation, it makes tracking them down via an asset search difficult. Offshore companies provide highly effective asset protection and effectively screen your finances from public view.

Legal protection through incorporating offshore

If a legal opponent is pursuing a legal action against you, it typically involves an asset search to make sure there will be money to pay out in the event a judgment is awarded against you. Forming offshore companies and having assets held by the overseas company mean they are no longer associated with your name. Therefore your assets can be effectively shielded from legal opponents, judges and court rulings simply by incorporating offshore.

An additional benefit is simplicity and ease of operation. Most overseas jurisdictions make it simple for anyone who is interested in offshore incorporation. The statutory obligations in the running of the offshore entity have also been simplified.

Disadvantages of offshore companies

One of the main drawbacks is in the area of remittance and distribution of the assets and income of the offshore company. Once monies are transferred to the resident country, they become subject to taxation, which can negate the benefits of the initial tax-free environment.

Due to the absence of detailed, publicly maintained registers, proving ownership of a company registered offshore can be difficult. Whilst anonymity can be an advantage for overseas companies when it becomes in the owner’s interests to declare themselves as the beneficial shareholder, this might be a difficult exercise.

Risks related to an offshore company

Any structure that merely involves constructing conceptual models on paper will not satisfy the stringent requirements of German tax law. The particular danger for a German taxpayer lies in the fact that matters of relevance for tax purposes may not be examined until many years later in the course of a government tax audit. Companies existing merely as an accommodation address can later prove to be an extremely expensive investment.

It does not suffice to have the domicile in a foreign country in the Articles of a Company if the actual place of management is in Germany. Management, in this case, is the focal point of the company’s ultimate management i.e. the location of decision-making power that determines ongoing business management. The specific risk with a company registered offshore arises where the German principal behind the company makes the crucial decisions so that his German place of residence establishes unlimited tax liability for the foreign company.

Some offshore jurisdictions are more stable than others, whether from a political or economic perspective. Physical distance, lack of knowledge of local customers, government and social attributes can increase the risks of financial loss occurring in some countries.

Renowned offshore locations

The following locations are well-known offshore locations:

  • Belize
  • The Caribbean
  • Nevis
  • Bahamas
  • The British Virgin Islands