Accounting & annual financial statements for offshore companies
International Business Companies (hereinafter referred to as IBC), also known as offshore companies, are often subject to 0% taxation in their country of domicile. Most of the offshore companies (based in tax havens such as Seychelles, Nevis, BVI, Belize, Marshall Islands, Dominica, etc.) are not subject to any tax liability.
The main principles of any IBC tax system can be defined as follows: There is no tax on capital gains, corporate income, dividends, interest or royalties.
Another fundamental aspect of IBCs resides in the financial reporting requirements that IBCs:
You do not have to submit annual returns to the local tax authorities; Do not submit annual accounts; Do not perform an audit on the annual financial statements. However, finance and accounting are the most important aspects of your company from a business perspective. The Confidus Solutions team consists of financial specialists and accountants who are familiar with international accounting standards and auditing. From accounts payable and accounts receivable to financial reporting, we are happy to help you improve your corporate structure and tax planning.
Preparation of annual financial statements for an offshore company If the government did not ask you to prepare and submit bookkeeping and annual reports, would you still do so voluntarily, and what would the quality of your company's bookkeeping be like? Nowadays, in many tax havens there are no requirements for filing annual or monthly tax returns and reports: Offshore companies have an autonomous freedom of choice to store the documents as they wish. However, an increasing number of offshore jurisdictions have started to modernize and update their legislation and gradually introduce a mandatory requirement to keep financial records and documents, as the beneficial owner of such a company will be the one who will benefit the most. This aspect can play a critical role, especially when an offshore company is owned and managed by multiple people, providing a more efficient system for monitoring assets and overseeing the decisions made.
For example, in the Seychelles, companies are required to keep drafts without submitting accounting records to government authorities, which then allow the economic status of the company to be monitored so that owners can keep updated information at all times. However, there is no obligation to publicly submit financial documents and no requirements for the annual audit. In theory, the local tax authority can ask the company to provide and / or improve their records. However, such a situation can arise in circumstances only provided by legal acts and it can normally be foreseen and avoided.
As we have just mentioned, tax havens (BVI, Panama, Seychelles, Nevis, Marshall Islands, Dominica, etc.,) do not require filing annual financial statements within the local authorities. However, nowadays many offshore companies choose to prepare annual financial statements for IBCs and tax haven companies voluntarily. The reasons for such actions are as follows.
Legal provisions of many offshores require keeping proper records of bookkeeping by the company. Profit & loss statements, general ledger and balance sheet of the company must always be available upon request by the registered agent. All bookkeeping documents confirming transactions must as well be kept by the company: invoices, contracts, transportation documents, bank statements, etc. Such provisions exist in (BVI, Seychelles, Nevis, Belize and many other offshore jurisdictions. Please note that financial records of International Business Companies are allowed to be stored in any location of the world, not necessarily within the registered office.
Your bank may ask for the financial statement of your offshore company. As banks toughen their requirements towards tax havens, one of the ways to keep your corporate banks account for such company is to present accounting statements upon request. Frequently, banks require the most basic accounting reports: profit & loss statement and balance sheet.
Your own control over financial operations are the most obvious reason to maintain account records for any business.