What Is an Offshore Company?

The International Consortium of Investigative Journalist's team, working with leaked documents from a Panamanian law firm, has published some of its findings into the offshore financial dealings of the rich and famous, and politically connected, as well as the leaders of some countries.

What does offshore mean: To register or operate outside of a person's or business' national boundary. The arrangement is often done for the purpose of financial, legal and taxation benefits.

Offshore company: A company incorporated for the purpose of operating outside the country of its registration.

Legal: A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed regulations. Tax avoidance allows a person or business to lower the amount of income tax owed by legal means by claiming permissible deductions and credits.

Illegal: Offshore financial institutions can also be used for illicit purposes such as money laundering and tax evasion. Tax evasion is illegal because it allows a person or business to intentionally avoid paying taxes.

Sources: Investopedia, Unitrust Capital Corp.