Licensing of financial activities is one of the mandatory requirements for conducting honest and legal business in every state, regardless of the type of activity. For companies in the fields of gaming, brokerage, crypto, banking, etc., a financial license is also required. However, in order to register your activity officially, you need to decide on the jurisdiction, its conditions, legislation, and legal norms. In this article, we will discover offshore and onshore license obtaining differences and benefits and suggest an action plan for registering your business.
What is onshore?
Onshore jurisdictions are developed countries where international agreements with other countries in the field of financial and tax information exchange are implemented and all FATF and OECD requirements are met. In such jurisdictions, there is no preferential taxation for companies, regardless of where they operate. As a result, all companies are taxed on the same terms and at the same rate.
An onshore company is a legal entity established in a transparent jurisdiction, where the activities of companies are subject to ordinary business laws and taxation of various types.
Advantages of onshore companies
Disadvantages of onshore companies
Where can I register an onshore company?
The most popular onshore jurisdictions for obtaining a financial license are the UK, Singapore, Cyprus, Hong Kong, Germany, Switzerland, Lithuania, some US states, and so on.
What is offshore?
Offshore is the exact opposite of onshore. Offshore jurisdictions are countries where non-resident companies can register a business and pay taxes at preferential rates (sometimes there is no taxation at all). In such territories, there are no agreements on the exchange of tax and financial information. Besides, the lists of owners are not publicly available.
An offshore company is a legal entity registered in a state that provides a preferential tax regime.
Advantages of offshore companies
Disadvantages of offshore companies
Where can I register an offshore company?
The classic offshore zones are Seychelles, Vanuatu, Nevis, the Isle of Man, Curacao, Comoros, Belize, etc.
Physical presence in the jurisdiction
Most often mandatory
Reduced or none
Reputation of the jurisdiction
Transparency of the company's activities
Open sources contain information about the company
Information is not disclosed or is disclosed to a limited extent
Maintaining financial statements
Accounting, financial auditing, and reporting to the tax authorities are mandatory
The requirement for reporting is optional
Application of the Double Tax Treaty (DTA)
Time of obtaining a license
Relatively long, depends on the jurisdiction
Relatively fast, depends on the jurisdiction
Cost of obtaining a license
Low compared to onshore jurisdictions
Why is it better to obtain a financial license in an offshore jurisdiction?
Having discussed offshore and onshore license obtaining differences and benefits, UniversePAY would advise you to opt for an offshore jurisdiction. If you are considering a gaming, brokerage, crypto, and banking business, you will definitely need a license to provide services legally.
Obtaining a license is mandatory not only for offering services on the market directly, but also for the provision of professional intermediary activities. However, license obtaining in offshore jurisdictions will be much cheaper, easier, and faster, and the operational capabilities will almost be the same. On top of that, companies registered in offshore jurisdictions have a general legal capacity and can conduct any activity that is not prohibited by law. Nevertheless, each type of financial license and place of registration has its own requirements, a list of documents, and monetary commissions.