Offshore can mean a wide variety of activities, but it generally refers to those transactions or activities that are conducted outside of a person’s home base for the purpose of enjoying tax savings and relaxed regulations. Offshore activities can include foreign banks, investments, and deposits, as well as businesses that are incorporated in a country other than one’s native country.

Companies may move offshore to take advantage of lower corporate taxes or to escape the high cost of regulations imposed by the local government. For example, some companies may set up an offshore subsidiary in a tax haven in order to avoid paying local taxes and minimize the costs of complying with other regulations that could have a negative impact on the company’s business operations. Others may choose to move to an offshore jurisdiction so they can conduct global business activities without being encumbered by restrictions or taxes that would not be allowed in the usual local jurisdiction.

Offshore financial institutions can also be used for illicit purposes, such as money laundering and tax evasion. The issues surrounding tax avoidance and evasion, as well as the increasingly global nature of business activity, has led to an increased focus on such offshore activities and the need for international tax authorities to be able to monitor and report on such activities. Enhanced cooperation between countries is allowing for greater transparency in reporting of foreign accounts and activities, making it much more difficult for individuals, companies, and other entities to evade taxes by moving or operating their businesses offshore.

While an offshore arrangement may provide short-term benefits for certain companies, the long-term consequences of moving activities offshore can range from reputational damage to potential prosecution, as well as creating more potential complications due to increasingly rigorous tax laws. Companies must take care to ensure that they understand all of the risks associated with any offshore arrangement, in order to avoid tax issues, reputational damage, or other regulatory issues.