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What Is an Offshore Company? Definition and How It Works
What an offshore company is, how it works, what it is legally used for, what it costs, and the tax and reporting rules that still apply to its owner in 2026.
Licensed auditor & chartered accountant · 6 years of experience in offshore accounting
An offshore company is an ordinary legal entity with one distinguishing feature: where it is registered. In this post, we’ll give you a plain definition, show how the structure works, list what offshore companies are legally used for, compare them with onshore companies, and set out the reporting rules and costs that come with one.
Quick Summary
An offshore company is a company incorporated in a country other than the one where its owners live and do business.
It works like any company: it has a registered office, directors, shareholders and a bank account, and a licensed provider in the jurisdiction usually forms and maintains it.
Owning one is legal, and the owners are identified to the provider and the bank, and the authorities can obtain their details.
Bank accounts are reported to the owner’s tax authority under the Common Reporting Standard, which 119 jurisdictions had exchanged data under by May 2026.
The owner’s home-country tax rules still apply, including controlled foreign company rules where the country has them.
A Seychelles company costs US$130 in government fees to register and US$140 a year after that, or US$850 all-in for year one with us.
What Is an Offshore Company?
An offshore company is a company incorporated in a country other than the one where its owners live and do business.
“Offshore” is a description more than a legal category. Statutes usually give the entity another name: Seychelles law calls it an international business company. A company registered in Seychelles is offshore to an owner in Germany and a Seychelles company to the Seychelles Registrar. In everyday use, the term points to jurisdictions that built their company law for international owners: fast registration, low fixed fees, and little or no local tax on income earned abroad.
The company is a separate legal person. It owns its assets, signs contracts in its own name and is liable for its own debts.
How Does an Offshore Company Work?
An offshore company has the same parts as a company anywhere. What differs is that the owner is abroad, so a provider in the jurisdiction, usually a licensed one, handles the local side.
Registered office. The company’s official address in the jurisdiction, where its statutory records are kept. Seychelles requires one for every company (section 161 of the International Business Companies Act 2016).
Licensed provider. A corporate service provider licensed by the local regulator files the incorporation, keeps the registers and pays the annual fee. In Seychelles, a company is incorporated through a provider licensed by the Financial Services Authority, which also acts as its registered agent (section 164).
Directors. They manage the company and sign for it. Seychelles requires at least one (section 130), with no residency requirement.
Shareholders. They own the company. One is enough in Seychelles, and the same person can be the only director and the only shareholder.
Beneficial owners. The individuals who ultimately own or control the company, whoever holds the shares on paper. The provider records them.
Bank account. Opened in the company’s name, in the jurisdiction or elsewhere. The bank runs its own checks on the company and its owners.
The steps to register a company in Seychelles run in that order: identity checks on the owners, a name, the filing, then the bank.
What Is an Offshore Company Used For?
The legitimate uses are commercial, and most involve business that crosses borders.
International trading. Buying from suppliers in one country and selling to customers in another through a company that is neutral to both.
Holding assets and shares. Owning subsidiaries, property or investments in several countries through one company.
Intellectual property. Holding trademarks, software or patents in one entity and licensing them to operating companies.
Investment. Pooling capital from investors in different countries, or holding a personal portfolio.
Licensed financial activity. Running a brokerage, fund, payment or virtual asset business under a licence from the jurisdiction’s regulator. An offshore company cannot carry on these activities without one.
Offshore vs Onshore Company
An onshore company is one registered in the country where its owners live and trade. The table compares it with an offshore company, using a Seychelles international business company (IBC) as the example.
Offshore company (Seychelles IBC) | Onshore company (owner’s home country) | |
|---|---|---|
Tax on company profits | Outside a multinational group, only income sourced in Seychelles is taxed, at 15% on the first SCR 1 million and 25% above (Seychelles Revenue Commission) | Taxed in that country under its corporate tax rules |
Reporting | Accounting records kept, with a copy lodged at the registered office at least twice a year when they are held abroad; no annual return | Annual accounts and a tax return, in most countries |
Government fees | US$130 to register, US$140 a year | Set by each country |
Substance | No general requirement for a trading company outside a multinational group; group companies need substance in Seychelles for foreign passive income to stay untaxed | The business already operates where the company is registered |
Public record | Shareholders and beneficial owners are not public, though the authorities can see the beneficial ownership register; current directors’ names and appointment dates become public from 1 January 2027 | Varies by country |
The answers differ from one jurisdiction to the next, which is why choosing an offshore jurisdiction is its own decision.
Types of Offshore Company
“Offshore company” covers several legal forms. The right one depends on what the structure is for.
International business company (IBC). A company, usually limited by shares, built for business outside the jurisdiction. A Seychelles IBC is a typical example.
Limited liability company (LLC). Owned by members instead of shareholders and run under an operating agreement, with flexible profit sharing.
Foundation. A legal entity with no shareholders, set up by a founder to hold assets for beneficiaries or a stated purpose.
Trust. A legal arrangement, not a company: a trustee holds assets for beneficiaries or a purpose under a trust deed.
Limited partnership. At least one general partner manages the business and carries unlimited liability, and limited partners invest with liability capped at their contribution.
Are Offshore Companies Legal?
Yes. Incorporating a company in another country is legal, and so is owning one, as long as the owner follows their home country’s rules. Three sets of rules come with it.
The owners are identified. Recommendation 24 of the FATF Recommendations, the international standard as amended in June 2026, says countries should make sure that “adequate, accurate and up-to-date information on the beneficial ownership and control of legal persons” can be accessed rapidly by their authorities. It also says countries should not permit new bearer shares. Seychelles prohibits bearer shares (section 48), and under its Beneficial Ownership Act each company’s register of beneficial owners is kept at its resident agent’s office and uploaded to a database run by the Financial Intelligence Unit. That register is not public, but the authorities can see it. Recommendations 10 and 22 say banks and company service providers should identify the beneficial owner and take reasonable measures to verify that identity.
Bank accounts are reported. Under the OECD’s Common Reporting Standard, financial institutions report accounts held by foreign tax residents, and accounts of passive companies controlled by them, to the local tax authority, which sends the data to the owner’s country each year where the two exchange under the standard. The OECD’s list of jurisdictions that have exchanged information stood at 119 on 20 May 2026, Seychelles among them. In 2024, those exchanges covered over 171 million accounts worth nearly EUR 13 trillion, according to the OECD’s 2025 peer review. The United States exchanges account data under FATCA, its own law, instead.
Home-country tax still applies. An offshore company does not change where its owner is taxed. Controlled foreign company (CFC) rules tax residents on the income of a foreign company they control. The OECD’s Corporate Tax Statistics 2025 counts 56 jurisdictions with such rules in place in 2025. Separately, a company managed from the owner’s home country can be treated as tax resident there. In the UK, for example, a foreign company is resident if “the central management and control of its business is in the UK” (HMRC).
What is illegal is failing to declare the company, its income or its accounts where the owner’s country requires it. Check the rules of your country of residence before you incorporate.
How Much Does an Offshore Company Cost?
The cost has two parts: government fees, set by the jurisdiction, and provider fees for the registered office, the filings and the compliance work.
Seychelles is a worked example. The FSA’s fee schedule sets the government fees, and the table shows what a Seychelles company costs with our price beside them.
Item | Amount | When |
|---|---|---|
Government registration fee | US$130 | At incorporation |
Government annual fee | US$140 | On or before each anniversary of incorporation (section 12) |
Government fees over three years | US$410 | US$130 plus two annual fees |
Our formation price, year one | US$850 | All-in: government fee, registered office and documents |
Our renewal price | US$850 a year | Includes the US$140 annual fee |
Optional extras, such as bookkeeping from US$350 a year, sit on top. We form a Seychelles IBC from US$850, with the government fee and registered office included.
FAQ
Is an offshore company the same as offshoring?
No. Offshoring means moving work, such as manufacturing, IT or customer service, to another country. Business process outsourcing (BPO) means handing a process such as payroll or customer service to an outside supplier, at home or abroad. An offshore company is a company incorporated outside the country where its owners live and do business, and owning one does not mean moving any work abroad.
Is an offshore company tax free?
Not automatically. Some jurisdictions do not tax a company’s foreign income: Seychelles taxes only income sourced in Seychelles when the company is outside a multinational group. The owner’s home country can still tax that income under its own rules, so the answer depends on where you are resident.
Who can own an offshore company?
In most offshore jurisdictions, any individual or company, of any nationality. A Seychelles IBC needs one shareholder and one director, with no residency or nationality requirement, and a company can hold either role. Every owner passes identity and source-of-funds checks first.
How do you open an offshore company?
You choose a jurisdiction, and a provider there, usually a licensed one, runs identity checks on the owners and files the incorporation. For a Seychelles IBC, we ask for a certified passport copy and proof of address dated within the last three months for each owner and director, one to three proposed names, a short description of the business, and the beneficial owners’ details and source of funds.
How long does it take to set up an offshore company?
It depends on the jurisdiction and on how quickly the owners’ documents clear. We register most Seychelles IBCs within 1 to 3 business days after KYC approval.
