Many offshore jurisdictions have the legislation to provide tax-exempt companies. For a fixed fee, the company attracts no further tax liability within the territory.
However, this does not mitigate the company's tax matters if it trades onshore. Therefore, these companies are mainly used today for holding assets, such as bank accounts and portfolios, within a trust structure. However, some companies are used for trading, where the invoice is raised offshore and the goods are purchased in country A and are sold in country B.
Offshore holding companies are normally managed by a local agent, who often provides the nominee share holding. Usually this person also provide the directors, for confidentiality reasons, although in some cases the beneficial owner provides his own directors. Once this matter is attended, a separate declaration of trust between the shareholders and the beneficial owner is then issued, to show claim to the company.
The concept of owning real estate in both Spain and Portugal via an offshore company used to be a popular route to creating an offshore holding company. This used to avoid capital gains tax at the point of sale, as it was the company that changed hands and not the property. However, both countries have adopted tough fiscal penalties to deter this route.