Moe OdeleThe surest way to set up an offshore company and bank account are to establish your business in a foreign country to avoid paying taxes if your transactions and dealings are limited to outside the country’s borders and to have a foreign bank account. You will lose less while staying almost invincible.
Do you do business that requires that you receive and make payments in foreign currency or perhaps have a desire to exchange foreign currency directly for local currency for withdrawal? Are you in need of a foreign bank account?
Let’s go through the procedures together based on my findings.
You probably have heard about the possibility of having foreign companies in Nigeria take advantage of tax benefits. The procedure for forming an offshore company is not as cumbersome as you might think. It is a seamless process that can be completed within a few weeks.
Why should You set up an offshore company from Nigeria?
Setting up an offshore company in a foreign jurisdiction helps you to take advantage of local laws that provide low or no tax benefits to non-resident businesses. It draws foreign capital by providing pro-business laws to foreign companies and individuals that profit from asset security.
Anonymity, legal protection, simple corporate policies, and tax advantages. Fundamentally, the purpose of an offshore company outside of one’s jurisdiction is to have extra security found under the legal framework of a different country.
Hackers will find it difficult to assess your accounts and properties if you operate from different legal and judicial systems from your home. Offshore corporations are regarded as separate legal entities from their shareholders or directors.
The company’s activities, debts, and liabilities are not passed on to its directors or members, and its debts and financial rights are separate entities from the owner. This acts as a protection for the assets of the company’s owners and directors.
How can You open an offshore bank account?
You can have a dollar account domiciled in any Nigerian bank and use it to receive payments and pay for services in dollars. However, banks have charges on transactions that many customers are not comfortable with.
Today, several online platforms offer the availability to own a foreign bank account that provides currency in dollars, euros, and pounds. Payments can be received and made to merchants depending on your currency needs.
Available also is the ability to convert your currency with the applications to your desired currency need. The sweet part is that their charge is meager compared to a Nigerian domiciled one.
The fear for most people who patronize these online foreign currency merchants is that since they do not have a physical office, accountability may be difficult in the case of disputes that may arise due to transactions.
Some online foreign bank account merchants include; Mercury and Leatherback. You can check them out to see how adapted you are to their operations.
What Are the Benefits of Setting up An Offshore Company?
Privacy
An offshore gives you the opportunity to have a company that you are different from, such that all your property and liabilities are a separate entity from you as an individual. This will enable you to carry out financial transactions and corporate dealings under the company’s name rather than your own.
High Confidentiality
Having an offshore company helps keep you anonymous because most financial agencies have closed registries that are not open to investigations. This ensures that shareholders and directors remain anonymous.
So, during investigations due to criminal dealings, there would be no information to use as evidence against the organization, and its finances are not available for auditing. However, each country has its own degree of protection. It is, however, sufficient to provide enough anonymity.
Tax Reductions
Most countries that operate as offshore financial centers grant non-resident companies that incorporate in the country a special tax status. These offshore business structures have a unique situation that exempts them from paying taxes on their worldwide revenue, capital gains, or income tax in their home country.
Tax obligations differ significantly between countries; since tax responsibilities are typically determined by the country where you have permanent residency, it’s crucial to know what you owe before deciding on jurisdiction.
As the owner of a corporation, you are always subject to taxation in your home country but pay less if your business is domiciled in another country, as foreign corporations are tax-free. Still, as a beneficial owner, you will be subject to taxation.
Asset Protection
You are separating your property from yourself as a person, which adds an extra layer of defense in the event of a lawsuit. It’s much more difficult to link you to your assets when you use an offshore structure.
Furthermore, separating your investment or properties from yours helps you not be held responsible for any debts you incur as an entity. This is because the structure’s legal right to incur debts/liabilities is the same way an individual does legally.
Government agencies regulate the amount saved or kept in a Nigerian bank. Some of these regulations stipulate a different threshold that accounts can hold depending on whether it is a private or corporate account.
This becomes a limitation for you who desire to hold a considerable amount in your account, assuming that you own a private arrangement with a threshold of, say, two million naira and receive a payment of over ten million naira.
Legal Protection
Because the offshore structure is in a foreign jurisdiction, a different legal framework and set of laws cover the company if it is targeted in any asset search or litigation.
Most international offshore countries do not obey local court orders unless there is a criminal investigation with significant proof of wrongdoing. Countries with offshore financial centers erect considerable entry barriers, allowing only the most determined creditors to break into the system.
How Much Does It Cost to Set up An Offshore Company?
Since the pandemic in 2020, the Nigerian government has mandated all international payments to the country be made in US dollars. To do this, you will then be required to open a domiciliary account.
The cost of opening a domiciliary account with Nigerian banks is often free of charge. Performances are open to both Nigerian citizens and its residents. Most banks set a minimum opening balance of five hundred dollars, while others have no limits.
A limit means that once your account dips lower than five hundred dollars, you will begin to incur a charge fee.
Some foreign banks require you to open a bank account with a minimum balance of $6000, $80,000, or $1000. It depends on the bank and the country they are in.
Can anyone set up an offshore company?
How Do I Set Up an Offshore Company From Nigeria?
As a foreigner desiring to set up an offshore company in Nigeria, you must follow the corporate rules stipulated by the Corporate Affairs Commission of Nigeria, guiding the setup and operations of foreign-owned corporations in Nigeria.
The laws governing businesses owned by foreigners in Nigeria and regulations governing a wholly owned foreign company with foreign shareholders are elaborate, like the Company & Allied Matters Act, Immigration Act, Foreign Exchange Laws, and Capital Import Law of the Central Bank of Nigeria.
What are the steps to setting up an offshore company in Nigeria?
Step 1: Company Registration
You must register your company with the corporate affairs commission of Nigeria as a mandatory prerequisite. This is where documents like
The desired name you want to operate with must not already be taken or prohibited. The company’s share is the percentage share ratio of each of the shareholders. The names of the directors, the number of members of the shareholders
verified office addresses located within Nigeria and directors’ and shareholders’ residential addresses overseas. It also contains the data page of shareholders’ and directors’ international passports or government-issued means of identification.
duly signed documents of incorporation by the directors and shareholders. It is OK if electronic signatures are used for this purpose.
In Nigeria, the regulation states that an offshore company must have at least 10,000,000 share capital or above to qualify for business permits and expatriate quota permissions from the Ministry of Interior and the Nigeria Investment Promotion Commission.
The purpose of the ten million naira share capital is to distinguish the size of the company and show that the company’s obligations are limited to the share capital.
Step 2. Tax Registration
In Nigeria, the Companies Income Tax Act (CITA) is the primary law that regulates the taxation of companies, with the Federal Inland Revenue Services (FIRS) in charge of its administration (FIRS).
A Nigerian corporation is taxed on its worldwide revenue, while a foreign company is only taxed in Nigeria on profits due to its Nigerian operations. There are penalties and sanctions for evading tax in Nigeria.
You must obtain a Value Added Tax Registration (VAT) or Tax Identification Number (TIN) from the Federal Inland Revenue Service, as you are to quote this number for all of your company’s business bank accounts. Transactions
Step Two: Bank Account Opening
After obtaining your Tax Identification Number (TIN), you should open a corporate account; it is what you will need for business transactions since using personal bank accounts is prohibited.
You should adhere strictly to all rules and regulations guiding the usage of incorporated histories in Nigeria as stipulated by the Central Bank of Nigeria Circulars and Regulations.
Step 3. Company Office Address
It would be best if you had a physical office that is verifiable and is located in Nigeria. It would be needed for verification by the Business Permit and Expatriate Quota upon approval by the Ministry of Interior.
Step 4. Application for a Business Permit and Expatriate Quota, As Well as NIPC Registration,
Proceed to apply for a Business Permit, Expatriate Quota, and NIPC registration of your offshore company via the NIPC Desk office in the Ministry of Interior directly to the Minister through the Citizenship and Business Department.
Step 5. Residence Permit
This document is to be obtained from the Nigeria Immigration Service and collected at the Ministry of Interior as specified in the Immigration Act of 2015 and the Immigration Regulations of 2017.
This permit is needed to establish a company in Nigeria. The directors and their expatriate employees, including their family members, must obtain a Resident Permit to live and work in Nigeria. However, this residence permit is only valid for two years.
Also, it can only be issued after the overseas-owned corporation has obtained a business permit and expatriate quota approval. A statutory fee in US dollars prescribed by the government must be charged for CERPAC approval.
What are the documents required for registering an offshore company?
- Certificate of Incorporation
- Memorandum and Articles of Association
- Current Tax Clearance Certificate;
- Evidence of the Acquisition of Business/Factory Building;
- Receipt to Operate in the Oil Industry, i.e., DPR Permit (for Oil Service Companies)
- Evidence of Capital Importation, e.g., a Certificate of Capital Importation, if available;
- , Partnership/Joint Venture Agreement, the Responsibility Structure;
- Feasibility Study Report (for joint venture companies)
- Evidence of the Acquisition of Operating Equipment and Machines,
After all, the required documents have been submitted and statutory fees have been paid to the appropriate departments. Incorporation to start operations should be secured within 2 months, except for shortfalls.
In Conclusion:
An offshore company refers to a registered company whose functions are carried out in a foreign country and has all the financial, legal, and tax advantages, including ease of incorporation, low fees, no foreign exchange controls, high confidentiality, and tax advantages.
However, to operate seamlessly, you must adhere strictly to tax payment compliance or be ready for sanctions and penalties.