When a company chooses to register in a country while conducting operations in another country, they are generally trying to gain benefits. After all what is the harm in gaining benefits? As long as it does not cause harm to anyone there should not be a problem. However the main benefit they try to get is a reduction in taxes. Companies would register in countries that have low taxation rates for companies that register there but operate elsewhere. However trying to take advantage of reduced taxes, is it even legal?
The answer to that is yes. The first thing that has to be understood about offshore companies is that they are not trying to evade taxes. They are trying to gain more profit from less taxation therefore they will pay taxes just at a lower rate than the one they would have to pay in the country they are operating in. This is therefore perfectly legal. After all they are paying the taxes they are meant to pay. However the line between legal and illegal is rather quite thin.
In many countries while the amount of tax that has to be paid maybe quite low for a company that only operates there, they may have other clauses tied to this; therefore the company would have to contribute in other ways. If these are not done then the company can be in trouble. Furthermore if there are more taxes that have to be paid other than the corporate tax then these will have to be paid as well and if the company does not pay them it will be considered as evasion and the one running the business will be very much in trouble and may even face jail time or witness the closure of his company. So if these payments are not paid then the person will be doing an illegal activity. The worst part about not making these payments is that the government of the country the RAK offshore company has registered with can inform the government of the country the company is operating in and the latter might punish you as well.
To avoid such troubles, it is better for the company to consult with experienced lawyers and consultants who would be able to provide them with assistance and inform them of all the taxes that would have to be paid other than just the corporate tax.
Therefore when these companies maintain operations in one country and register with another, they have to be very careful of what they do because if they cross the line and do something illegal, they would face severe charges and punishment.