How do offshore companies operate?

offshore companies panamaThe term offshore company means a certain structure registered in a foreign state considered a tax haven, but which develops its business outside that jurisdiction. Among the main advantages that these companies offer and make them attractive tools for people around the world is that they are relatively easy to create, that is, there is little bureaucratic burden, with them it’s possible to reduce the tax burden and you can protect the goods as well.

Creating an offshore company is a simple process that takes just a few days, you don't have to open offices or hire employees.

Offshore companies, by being registered in tax havens, do not pay taxes in those jurisdictions, because they carry out their activities abroad. In this way, by means of this totally valid legal mechanism, it is possible to reduce the tax burden.

How does an offshore company operate? Let's say that a company produces lemons in Guatemala and sells them in a supermarket in Italy. For this it has three companies, all of its property: The one that produces the lemons, registered in Guatemala, another that sells, registered in Italy and a third, an offshore company, incorporated in a country of null taxation, like Panama.

Then, the company that produces the lemons declares that, a box, has a production cost of 100 dollars and sells it at 100 dollars, to the offshore company. Therefore, the production company does not record profits in Guatemala and so does not have to pay taxes. Then, the offshore company sells the box of lemons at 400 dollars to the company that sells these lemons in Italy. This company declares that it sold the lemons, in the supermarket, at 400 dollars and no profit, does not pay taxes in Italy. Meanwhile, the 300 dollars that the company won with the box of Lemons are registered in the offshore company, in Panama, which, as it carries out activities abroad (in this case, Guatemala and Italy) also does not pay taxes.

For Spanish laws, creating an offshore company is not a crime, but if you do not declare such a society, then you may incur a violation of the tax laws. According to the Treasury, many resort to tax havens to save taxes, avoid their creditors or not be exposed to the requirements of ex-partners.