An offshore company is an enterprise which only carries out economic activities outside the country in which it is registered. So, an offshore company can be any enterprise which doesn't operate "at home". At the same time, according to public opinion, an offshore company is any enterprise which enjoys tax-free or low-tax status in the country of registration. In the USA, the term offshore company is also used as a synonym for any overseas activities.
The offshore company existed in ancient Greek times, when Greek merchants offered their wares from nearby islands in order to escape the taxes in Athens. The format of the modern offshore company, however, is undeniably linked to the United Kingdom, and it was the British who developed the offshore company as we know it today. It was English corporate law, adopted in one form or another by just about every British territory, which provided the basis for the establishment of the laws necessary for the incorporation of offshore companies.
If we examine the most significant tax havens where it is possible to incorporate offshore companies, then the British legislative roots can be discovered almost everywhere. And here it is not just the everyday transplantation of offshore companies as is the practice in common law which we are talking about, but the legislation itself, based on the English law, specifically allows for the establishment of the offshore company, often through a separate law. For example, numerous jurisdictions have copied one of the most popular laws regarding offshore companies of the last 25 years, the British Virgin Islands IBC Act, which replaced the BC Act, though the rules for the formation of an offshore company hardly changed under the new law.
The only real change in the British Virgin Islands is that while it was possible earlier to form an offshore company with bearer shares, this possibility has now been very tightly restricted. It is still possible today for an offshore company in the BVI to issue bearer shares, but such an offshore company will pay a minimum of 1100 USD in annual tax as opposed to 350 USD, and an offshore company formed this way has to deposit the issued shares with a person specifically authorised for the purpose.read more