Singapore Offshore Company - A Full Guide 2024

Offshore companies have long been synonymous with strategic financial planning and international business expansion. These entities, registered and operated in jurisdictions distinct from the owner's domicile, offer a myriad of benefits ranging from tax optimization to enhanced asset protection. In an increasingly globalized economy, understanding the nuances of offshore incorporation can empower businesses and individuals alike to explore new markets, safeguard assets, and navigate complex regulatory landscapes with agility and efficiency.

This article provides a comprehensive overview of the strategic advantages and uses of offshore companies. We will discuss which business types are most suitable for offshore incorporation and share success stories of well-known companies that utilize offshore structures. And finally, we will highlight the key benefits and steps for incorporating an offshore company specifically in Singapore.

What Is an Offshore Company?
How Offshore Companies Acquired a Bad Reputation
Offshore Companies Reinvented
Reasons to Consider Offshore Companies
Businesses That May Benefit from Offshore Incorporation
When an Offshore Company Isn't the Best Option
Offshore Company - Case Studies
Why Consider Singapore for Your Offshore Company
Planning to Incorporate an Offshore Company in Singapore?
Frequently Asked Questions

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What Is an Offshore Company?

The term offshore refers to a location outside of one's home country. Therefore, in a broad sense an offshore company is defined as a company incorporated outside the country in which it primarily conducts its operating business or where its principals (directors, shareholders) are located. In other words, we can call any company that is incorporated in a foreign jurisdiction relative to the place of its business activities or the place of its key stakeholders an offshore company.

In the narrower sense, the terms offshore, offshore zone, or offshore jurisdiction is often used to refer to a country or territory that has special business regulations designed to invite foreign companies. Among them include a favorable tax regime, streamlined corporate reporting and governance rules, robust intellectual property rights protection, and an efficient legal system.

Offshore entities are governed by the laws and regulations of the jurisdiction in which they are registered, typically chosen for their favorable business climates. These laws provide the necessary legal infrastructure for the formation, operation, and governance of offshore entities. Given that an offshore company and its owners or related companies are located in different jurisdictions, their interactions are also subject to the regulations of the owner's or related company's domicile jurisdiction. Additionally, these relations are governed by international agreements between the relevant countries, such as Double Taxation Agreements (DTAs), bilateral or multilateral agreements on legal assistance, free trade agreements, etc.

Offshore strategies are not a modern phenomenon; they have been used since the time of ancient Athens, when a two percent import and export tax was introduced by the state. In order to avoid paying taxes, Greek and Phoenician merchants began to go around the territory of Athens and use the nearby small islands to store goods without paying duties and taxes. These islands were the first offshore 'tax havens'.

In the 1930s, Switzerland became the first prototype for a modern offshore jurisdiction. As part of its program to attract capital for its economy, the Swiss government created money exchange centers and institutions of finance and banking. A new law required bankers to maintain records of their clients' accounts in complete secrecy. These changes made Switzerland a haven for those with assets that they wished to keep secret; these development led the transformation of the country into a major offshore center.

The term offshore first appeared in the United States in the late 1950s. It was used to describe a financial institution that escaped government control through geographic selectivity. In other words, a company moved activities that the US government wanted to control and regulate to a territory where the arms of the US government did not reach. In the 1970s, many of the former British colonial territories turned their newfound freedom into an opportunity for offshore activities. By effectively creating safe havens for foreign assets, many were able to generate an influx of capital that was used for development of the newly independent country.

The late 1960s also saw Singapore's emergence as an offshore zone. After gaining independence in 1965, one of the Singapore government’s goals was securing investors to fund the country’s development. Due to a favorable tax regime and pro-business policies, by 1972 one-quarter of Singapore's manufacturing firms were either foreign-owned or joint-venture companies. Singapore also set up government incentives for branches of international banks to relocate to Singapore. As a result, asset growth in Singapore has been phenomenal, rising from $150 billion in 1998 to $1.173 trillion by the end of 2007. In 2020, the value of total Assets Under Management (AUM) reached approximately 4.6 trillion Singapore dollars.

How Offshore Companies Acquired a Bad Reputation

With time, due to the lack of regulations and with the help of clever lawyers, businesses and entrepreneurs started to incorporate offshore companies in zero tax offshore jurisdictions simply to avoid taxes and for no other business purpose. Entrepreneurs would register their companies in jurisdictions that imposed no or very low taxes for non-residents. In addition, such companies typically enjoyed secrecy in both administration and banking matters. Transactions and the ownership of corporations in these tax havens remained anonymous and confidential. Many so-called zero tax havens (such as Cayman Islands, Bermuda, the British Virgin Islands, etc.) became the primary vehicle for setting up offshore companies. Some of these structures were used for money-laundering and the term offshore company gradually started to acquire a negative reputation.

As revealed in a 2016 leak from the law firm Mossack Fonseca (also known as the Panama Papers), numerous world leaders and celebrities have used shell companies to avoid paying taxes. This sort of tax avoidance was also a common practice among a number of well-known U.S. companies, according to a report by Oxfam America. The country’s 50 largest corporations have stored more than a trillion dollars in offshore shell companies to lower their tax rate, the report says. The report analyzed Securities and Exchange Commission filings and determined that large corporations such as Pfizer, Walmart, IBM, and Apple have stashed billions of dollars via more than 1,500 subsidiaries in tax havens such as the British Virgin Islands and the Cayman Islands. Though this practice wasn’t illegal, keeping profits offshore lowered the taxes owed in the United States; Oxfam estimates that these offshore structures cost the U.S. government about $111 billion each year in lost revenue.

Offshore Companies Reinvented

To address the issue of tax evasion, developed countries have started to implement anti–tax haven measures. Such measures include strategies and rules that empower countries to not recognize or admit investments made through offshore havens by their residents. Many international organizations and governments have proposed a series of measures aimed at preventing unfair tax competition between countries. Since 2009, the Organization for Economic Co-operation and Development (OECD) has been at the forefront of this movement to address tax avoidance by multinational corporations. Those countries that still implement dubious tax practices are included in blacklists, and are ostracized by the majority of companies with genuine business activities.

In the current context, tax benefits are not sufficient to attract firms to an offshore jurisdiction. It must offer more — a regulatory regime that is favorable for business, financial, and personal purposes. It is regulatory system that:

Encourages foreign investments and ensures that the regulatory framework for investment is anchored on sound, stable, predictable and transparent principles
Offers an attractive tax regime including an extensive network of international tax treaties to avoid double-taxation. Such a tax system must achieve best value for the taxpayer and at the same time contribute to the country's economic growth and employment
Enables flourishing of world-class banking system and a stable currency
Provides an efficient legal system and protection of intellectual property rights
Stands out for ease of doing business along with outstanding business infrastructure and skilled workforce

Traditional tax haven countries with no tax reporting, no accounting, no audits, and no other regulatory requirements are not suitable any more. The OECD regulations have made such countries pariahs in the international financial system. Some may still be useful for select situations or hybrid structures, but for the most part, they are no longer the best option. Transparency is the new norm. Incorporating your company in a jurisdiction that is even minimally opaque or has few to no KYC requirements may shut out your company completely from the international financial system. Before setting up your offshore company, it’s worth looking through “offshore blacklists” drawn up by reputable international institutions. Here are two of them:

In 2017, the European Union drew up what was then a rather extensive blacklist of "non-cooperative countries and territories," comprising 19 states considered to be tax havens. As of 2022, this list has shrunk to 9 jurisdictions.
The Financial Action Task Force on Money Laundering (FATF) is an intergovernmental organization founded in 1989 to develop policies to combat money laundering and terrorism financing. The FATF's black and gray list is one of the most internationally recognized and has the highest weight alongside the EU list.

Choosing a country that is on either of the above lists is a risky idea. Alongside avoiding countries that appear on the blacklists, it’s worth taking into account political risks in the country where you are going to incorporate. For example, Hong Kong is constantly under political and economic threat from China. If Hong Kong ceases to be autonomous and comes fully under the domain of China’s political and legal system, it will lose its business freedoms and status as a global financial center.

Reasons to Consider Opening Offshore Companies

Offshore companies provide numerous strategic advantages for businesses, making them a popular choice for those looking to optimize their financial and operational strategies. Here are the primary reasons to consider establishing an offshore company:

Offshore jurisdictions often have strong legal frameworks for the protection of Intellectual Property (IP). By registering IP assets offshore, companies can safeguard their valuable IP from infringement. Besides, by holding IP rights in an offshore company, businesses can benefit from favorable tax regimes on royalties and other IP-related income, optimizing the overall tax impact on their revenues.

Many offshore jurisdictions are strategically located in key international trade routes or financial centers, providing logistical and commercial advantages for global business activities. By leveraging the jurisdiction's favorable trade agreements, infrastructure, and business-friendly policies, companies can efficiently enter new markets, reach a broader customer base, and enhance their global footprint.

Businesses That May Benefit from Offshore Incorporation

The following types of businesses can leverage the benefits associated with offshore companies:

Online Businesses

Online businesses like e-commerce, digital marketing, online courses, etc., particularly those with a global customer base are excellent candidates for operating through an offshore company.

Startups

Startups looking for funding, mentorship, and a supportive entrepreneurial ecosystem often incorporate in countries with vibrant startup scenes that offer access to venture capital, incubators, accelerators, and strong R&D incentives.

Financial Services

Financial services firms, including banks, investment firms, and fintech companies, benefit from incorporating in global financial centers with Singapore being at the forefront. These locations offer advanced financial infrastructure, regulatory clarity, and access to a wide network of financial institutions and markets.

Overseas Expansion

Companies looking to expand in and establish a local presence in foreign markets often set up a parent company in Singapore and then establish subsidiary companies in other countries. This allows them to navigate local regulations more effectively and build stronger relationships with local customers and suppliers.

Technology and Software Companies

Technology and software companies predominantly often seek incorporation in innovation hubs such as Singapore with robust intellectual property protection, access to skilled talent, favorable tax regimes, and supportive ecosystems for tech businesses.

Family Offices

Family offices managing the wealth of high-net-worth families often incorporate in jurisdictions that offer privacy, asset protection, and favorable tax regimes. Such countries are also popular choices due to their stability and financial services expertise.

Holding Companies

Holding companies, which hold equity in other companies, real estate, intellectual property, and other assets, are often incorporated in jurisdictions with favorable tax treaties, low withholding taxes, and strong legal systems. This strategic choice helps in efficiently managing and protecting assets while minimizing tax liabilities. When properly structured and administered, a holding company that, for instance, receives dividend income from subsidiaries can benefit from reduced, deferred, or even completely eliminated tax burdens.

International Trading

For companies involved in international trading, importing and exporting goods, incorporating an offshore company can provide significant advantages. Jurisdictions like Singapore with strong international trade agreements, efficient customs processes, and strategic geographic locations, can facilitate smoother international transactions and logistics among other benefits.

Investment Companies

Investment companies, including private equity and venture capital firms, benefit from incorporating in jurisdictions with favorable regulatory environments and access to diverse investment opportunities. These locations often offer attractive tax structures and investor protections.

Professional Services with Global Clientele

Firms offering professional services (e.g., consulting, legal, financial advisory) to an international clientele can benefit from incorporating in jurisdictions known for professional service standards. This can enhance their credibility and provide a more stable operating environment.

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When an Offshore Company Isn't the Best Option

Incorporating an offshore company can offer several benefits, but there are certain situations where it may not make sense. Here are some cases where incorporating an offshore company might not be the best option:

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Offshore Company - Case Studies

Offshore companies are utilized by businesses of different industries and varying sizes, from medium-sized enterprises to multinational corporations, to strategically structure their operations. Here are examples of well-known corporations that employ offshore structures:

Alphabet Inc., the parent company of Google, is an American multinational technology conglomerate. Alphabet has multiple subsidiaries in offshore jurisdictions, including many in Singapore. The most notable subsidiary in Singapore is Google Asia Pacific Pte. Ltd., founded in 2008, which serves as the company's Asia-Pacific headquarters. This subsidiary manages the company's operations across the Asia-Pacific region, leveraging Singapore's strategic location, favorable business environment, and advanced infrastructure. Additionally, Alphabet has other entities in Singapore that handle various aspects of its business, including data centers, advertising sales, and research and development activities.

Alibaba Group, a Chinese multinational technology company specializing in e-commerce, retail, internet, and technology, registered a holding company in Singapore, Alibaba Singapore Holding Pte. Ltd., in 2016. This holding company manages Alibaba's Southeast Asian investments and operations, including its e-commerce platform Lazada, which Alibaba acquired to strengthen its presence in the region. By leveraging Singapore's strategic advantages, Alibaba has optimized its operations and expanded its market reach in Southeast Asia.

Nextbillion.ai is a technology company specializing in providing hyperlocal mapping and location data solutions for enterprises. Founded by Indian entrepreneurs Ajay Bulusu, Gaurav Bubna, and Shaolin Zheng in 2020, the company addresses complex location problems with tailored technology solutions. Originally based in India, Nextbillion.ai expanded to Singapore by setting up Nextbillion.AI Pte. Ltd. to benefit from Singapore's supportive business environment. This strategic move has helped the company secure significant funding from multiple investors.

Founded by Indian entrepreneur Suchit Kumar, TEXUB is a prominent B2B marketplace that provides a secure and efficient trade ecosystem for businesses in the IT, CE, and Mobility sectors. The digital platform connects verified buyers and sellers, streamlining the trading process. TEXUB, which began in India, now has hubs in the USA, Netherlands, UAE, India, Hong Kong, and Singapore. The Singapore subsidiary, TEXUB PTE. LTD., was established in 2022 to manage local operations and leverage the region's business advantages.

Bizzell International, founded by American entrepreneur Anton C. Bizzell, designs innovative solutions in agribusiness, transportation & logistics, hospitality, healthcare, education, and energy. Initially started in New Carrollton, Maryland, Bizzell International now operates in several countries. To enhance their service delivery in the SEA region, the company established BIZZELL INTERNATIONAL (SINGAPORE) PTE. LTD. in 2023, benefiting from Singapore's strategic location and business-friendly environment.

Monega is an Indian company providing high-end medical engineering equipment and services. It supplies a wide range of medical and laboratory equipment, pharmaceuticals, nanotechnology solutions, and clinical laboratory supplies. In 2022, they established a Singapore subsidiary, MONEGA ENTERPRISES (SG) PTE. LTD., to supply their equipment globally while benefiting from Singapore's tax advantages, numerous double taxation agreements, and free trade agreements.

Why Consider Singapore for Your Offshore Company?

Singapore stands out as an exceptional jurisdiction for incorporating an offshore company. The country is widely recognized as a highly reputable business destination, free from the negative connotations often associated with other offshore jurisdictions. Known for its robust regulatory framework and transparent legal system, Singapore offers a stable and trustworthy environment for businesses to thrive, making it a preferred choice for international entrepreneurs and corporations. Below are some of the reasons why international businesses choose Singapore for setting up their offshore companies:

Ease of Doing Business

Renowned for its business-friendly environment and streamlined regulatory framework, Singapore consistently ranks 2d among the top destinations for ease of doing business, according to the World Bank's "Doing Business" report.

Favorable Tax System

Singapore is internationally recognized for its efficient and competitive tax system that allows for a low tax rate for Singapore offshore companies. New entrepreneurs will roughly pay around 9% offshore company Singapore tax on the first S$200,000 in annual profit. The country has no dividend or capital gains tax.

Tax Exempt Foreign Income

Taxation of foreign income of a Singapore offshore company also provides an advantage. In most cases, foreign-sourced dividends, branch profits, and service income are tax exempted.

Double Taxation Avoidance Agreements and Free Trade Agreements

Singapore's extensive network of Double Taxation Avoidance Agreements (concluded with more than 80 countries) ensures that a company doing business with or from Singapore will not face double taxation. Besides, businesses operating in Singapore benefit from the country's robust network of free trade agreements. These agreements facilitate easier access to global markets, reduce trade barriers, and provide stronger protection for intellectual property.

Strong Intellectual Property Protection

Singapore offers strong protection for Intellectual Property, which is crucial for businesses that rely on innovation and proprietary technology. The country's IP laws and enforcement mechanisms are among the best in the world, providing a secure environment for business operations.

Flexible Accounting Requirements

Singapore has some of the most flexible regulations for accounting requirements and annual filings. Small companies and exempt private companies in Singapore enjoy an exemption from preparing annual financial statements.

Low Incorporation Costs

The cost to open a Singapore offshore company is comparable to other offshore jurisdictions. But in the case of Singapore, your company will be registered in a reputable international business hub.

Remote Bank Account Opening

A Singapore offshore company bank account can also be opened remotely. Singapore offers world-class options in banking and related financial services for corporate clients. You may also consider a digital bank account opening.

Fast and Remote Incorporating

Offshore company registration in Singapore is a seamless and quick process. You can register a company remotely. It can take as little as 1 day to a few days to incorporate. The duration primarily depends on the speed at which the client can act and the due diligence process.

Government Incentives

The Singapore Government offers today more than 80 business assistance programs. These incentives can provide substantial benefit, in some cases worth tens of millions of Singapore dollars.

Planning to Incorporate an Offshore Company in Singapore?

We are headquartered in Singapore and eager to address any further questions you might have and to support you with the formation and ongoing compliance of your offshore company in Singapore. Our services are competitively priced while maintaining the highest standards of service delivery, all backed by our industry-leading corporate services platform. Contact us today.

Frequently Asked Questions about Singapore Offshore Company

Each Singapore bank follows its own internal guidelines and requirements when considering a bank account application, but in principle, they all follow anti-money laundering regulations set-forth by the Monetary Authority of Singapore. Offshore companies incorporated in Singapore and engaged in genuine business activities should have no problem opening a bank account. The key is to provide sufficient and detailed information about the business to the bank. We will advise you further on a suitable bank once you have engaged our company registration and compliance services. For more details, read our bank account opening guide.