There are many of us who incorporated offshore companies. As we highlighted on our website, there are many advantages when we use an offshore company compared to an onshore company. We constantly receive inquiries regarding offshore companies and tax planning. 

To be successfully in using an offshore company to your advantage, we have to look at a few things.

  • Which country does the owner pay his tax?
  • Which is the country of incorporation for the offshore company?
  • Which country will the bank account be located?
  • Where will be the customers from?
  • Where will be the suppliers from?

As a golden rule to start with, the country where the owner pays his tax, the country where the bank account is located and the country of incorporation for the offshore company should not be the same. For example, if you are a Malaysian and you registered a Belize company and the offshore company has a bank account in Malaysia. So what does that translate to? So you have a bank account in Malaysia which means that all your revenue will come from Malaysia and your profit from this Belize company will be in this Belize company's bank account in Malaysia. So now, as an owner of the Belize company and you are a Malaysian, your Belize company's bank account in Malaysia, the Malaysia bank that holds your Belize company's bank account will flag you to the tax office and you may be liable to pay tax for this company. If you fail to declare the Belize company's profit, it is considered tax evasion. 

Now, we are going to make a small change. We are going to "shift" the bank account oversea, to Mauritius. What will be the outcome? You are a Malaysian who own a Belize company and the Belize company's bank account is in Mauritius. Technically, Belize has no tax for this company and you are not required to do any reporting or pay tax. If you are going to remit the profit back to your personal bank account in Malaysia, please declare the tax to the tax authority.

You can't determine what is the profit or loss that you may make using your offshore company but you can determine if you want to send it back to Malaysia and pay tax for your profit.