Whether you are selling intangible, virtual goods or offering your services remotely or even in person, you may at some point have considered reducing tax, simplifying accounting, increasing your privacy, reduced liability, or for other reason move your freelancing to an offshore jurisdiction.
This is entirely dependent on where you live and the structures available to you vary immensely. In some jurisdictions, this is completely out of the question, whereas in others you can utilize different forms of offshore structures to reduce your tax liability.
If you live in a jurisdiction that only taxes income remitted from within or into itself, you can stash profits offshore.
Whatever you do and whichever structure you opt for, ensure that the structure itself costs less than the taxes you would otherwise owe. I know from experience how fickle a freelancing budget can be before things start taking off.
You might not be able to reduce your tax rate much if at all, but by invoicing your customers through an offshore company. The funds would then sit offshore until such time you transfer them onshore. This can for example be structured by having a local company which either owns the offshore company and acts as a holding company, or has a service agreement with the offshore entity.
Again, what you can do relies entirely on where you live and applicable laws and tax codes.
The advantage here is that the offshore entity likely doesn’t have to do any significant bookkeeping, if any. Some consider bookkeeping to be a huge chore.
I’m not convinced the benefits here are all that great. Bookkeeping isn’t all that hard. Rent a book at your local library about how it’s done or outsource it. Smaller accounting firms often charge quite humble fees to keep your books for you.
Many, if not most, freelancers are registered as sole-proprietorships, which are registered to the proprietor’s residence. Not everyone enjoys this.
Some therefore opt to offshore part or all of their freelancing to a jurisdiction where the names and addresses of shareholders and directors are not public information.
Similar to above, because many freelancers are sole proprietors, they have an unlimited liability, meaning their private assets can be claimed by creditors.
By shifting the company offshore into a Limited Liability Company (LLC) or similar, the freelancer may be freed from personal liability. The reality of this will depend on applicable laws.
Another common reason for transferring one’s freelance work offshore is for jurisdictional reputability. If you are a freelancer based in a country with a poor international reputation, you may be able to attract more business if you act as a company registered in a reputable jurisdiction.
Similar to the above, another reason many freelancers choose to form an offshore company is to open a bank account in a more financially stable country and ensure that the funds in that bank account are owned by a legal entity in a different jurisdiction than their own.