Offshore Tax HavensYou’ve probably heard a lot about offshore outsourcing and company formation over the last several months. U.S. Presidential candidate Mitt Romney famously released his tax returns showing investments in offshore bank accounts. Or, perhaps you are merely interested in starting your own business overseas for other reasons. Nevertheless, there are numerous reasons many businesses create offshore companies or entities. Investors and entrepreneurs are naturally very interested in establishing tax havens, finding a cheap call center, avoiding strict regulations, or simply saving time.

1. Tax Savings

Companies can avoid the high taxes associated with doing business in the Western world by establishing an offshore corporation. Organizations can universally avoid these taxes so long as their company only does business in the offshore location. Developing countries typically bend over backwards and cut business taxes because of the level of investment and jobs created by large companies. However, this often isn’t the case, and businesses are taxed by their native governments. While some companies can get away with saving money by simply owning a post office box in the country in question, the level of taxation will depend on the countries in which you do business, and the way in which the corporation is structured.

2. Cost of Incorporation

Another advantage to starting your business in an offshore location is the reduced cost of incorporating. As is the case with taxes, developing countries see to it that business start-up costs remain relatively low.

3. Confidentiality

Offshore companies can conduct business privately. Directors and employees are protected by obscure ledgers that mask every transaction.

4. Reduced Wages and Cost of Labor

This advantage probably applies to the majority of offshore outsourcing today. If you haven’t noticed, when you call the call centers for companies like Expedia, Amazon, Sirius XM, or virtually any airline, you are connected with an offshore call center. The majority of offshore centers are located in the Philippines and India, and the Philippines took the lead in 2011 in terms of total number of agents employed. Agents in the Philippines are typically paid on a monthly basis at a U.S. equivalent of approximately $250-300 USD.

5. Lack of Regulation

Businesses in the U.S. and Europe face a stunning amount of new regulations on a seemingly regular basis. While financial institutions such as banks must abide by international regulations, most businesses face minimal reporting, accounting, and auditing regulations. The lack of the burden of compliance can help offshore businesses avoid heavy overhead and operational costs.