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Separate Placement of Offshore Administrative Offices

There are a great many possibilities that arise when an individual or corporation establishes an offshore presence with an international business corporation, offshore banking, trust, and foundations. From the administrative aspect an offshore company may have a headquarters office and the overall operation may have a different office for an offshore holding company. To the extent that an international business corporation has operations in many parts of the globe it may need a single, hopefully central, offshore location for administrative offices. Offshore administrative offices not only can provide an efficient means of managing distant operations but can also benefit from tax incentives offered by host countries.

Separate placement of offshore administrative offices from other parts of the offshore business may not be an issue with a new offshore company. However, a successful offshore concern with business activities in many jurisdictions may find it difficult to manage personnel and other aspects of the business without an expansion and the creation of a separate administrative presence. At that time the question may arise as to where to place the administrative offices. It will be at that time that geography, various aspects of the host country, and tax treatment will arise.

Offshore Administrative Offices

An administrative office is exactly that. It is where upper level management for a region or the company’s operations for the whole world may be located. It need not be and commonly is not located where specific business operations, manufacturing, packaging, transport operations, call centers, etc. are located. If a company is a subsidiary of another then administrative offices will typically be located so that communication back and so that visits are efficient. The office will typically be responsible for coordination, analysis, financial operations, and other services related to its region. Surprisingly a number of countries typically thought of as high tax jurisdictions offer substantial tax incentives in order to attract such enterprises.

Choosing the Location of Administrative Offices

As we noted above an administrative office will not be necessary for a small company with local and regional operations. It is when business and services become global that the presence of personnel in distant, regional centers is necessary. Often times the need for intensive marketing by personnel familiar with the languages, customs, and general culture of a region requires that administrative personnel be close to the action. Picking a jurisdiction with the right package of communications facilities, overall infrastructure conducive to doing business, international transportation facilities will be important. Coupling these factors with the cost of doing business the country is the next matter of concern. Then the issue of tax incentives and advantages becomes important. Basically a company should not set up operations in a country based solely upon tax advantages, such as tax free operations for a period of time, unless the jurisdiction is in the right geographic location to further the successful pursuit of new business or management of current business.

Interestingly, nations such as the UK, France, Belgium and Greece, among others, have made it a point to offer directed tax incentives in order to attract the administrative personnel and central offices of large, multinational offshore corporations. Monaco, for example, offers tax incentives and also does not tax foreign employees of such an operation when they are stationed in Monaco.

Depending upon the need for travel it may make more sense to locate administrative offices in a country where the major airport is the hub of a regional, or preferably global, airline. Also locating the facility near that airport will improve efficiency when it comes to regional travel to global travel back to the home office. There are many offshore jurisdictions that would love to have the administrative offices of a substantial international business corporation on their shores. However, many of these jurisdictions do not have the infrastructure to support fast, broad band internet, a major airport, or major banking operations.

The opposite side of the coin is that many choose to set up business operations offshore specifically to take advantage of the asset protection and privacy features of many offshore jurisdictions. If a company sets up offshore with these matters in mind it will likely have set up its business under the umbrella of an international business corporation which is in turn a property of an entity such as a Panama Private Interest Foundation. Such an operation may function very efficiently within a region. However, if business is successful, as one always hopes, it may expand globally. Then it may require that the holding company or the business it self look at separate placement of offshore administrative offices. In this case care should be taken not to disrupt the overall offshore asset protection and privacy aspects of the overall offshore solution in setting up separate offshore administrative offices.

Maintaining Asset Protection and Privacy Features as an Operation Moves Globally

To the degree that the principals of an operation wish to maintain their privacy and that of their assets a number of strategies may be useful as a company expands. One useful consideration is that a company may wish to set up subsidiary operations in different parts of the globe as franchises or separate corporate entities in which the parent operation maintains controlling interest. This strategy allows the company to raise investment capital by selling stock, for example, or franchising operations instead of by borrowing. It also distances the principals for operations in the far reaches of the globe. Thus, they will want offshore administrative offices in distant regions to manage such operations.

This is similar to the issue of trying to optimize tax consequences of the business when choosing a location for administrative offices. There will be times when the principals will have to decide whether asset privacy and protection are the primary goals of their operation or corporate growth and long term, compounding profits. As with many such issues a degree of forethought coupled with competent advice will help. Starting with an agent or advisor who works across national boundaries is setting up offshore entities and working with someone with experience will go a long way towards setting up the most effective and flexible offshore solution at the very beginning. As with all such matters obtaining competent legal and tax advice is paramount.