There are a multitude of different tax factors involved in setting up and operating an Offshore structure. No one should go Offshore with a business entity with the intent or purpose of evading taxes. Tax evasion is a felony and should not be tolerated. On the other hand, there are certain tax benefits that are available if the structure is properly set up and if the reporting requirements mandated by the Internal Revenue Code are adhered to.

A US person that conducts foreign operations directly must include the income and losses from those operations in US income. Income earned by a foreign corporation from its foreign operations generally is subject to US tax only if it is distributed to US stockholder. The CFC (Control Foreign Corporation) rules of the Internal Revenue Code are an attempt to address the deferral of income issue with respect to Offshore Entities. A CFC generally is a foreign corporation that is more than 50% owned by US persons. In certain situations, a US stockholder and a non CFC will not be taxed on the income of the Offshore Entity unless it is distributed to him/her. The non CFC has to be managed and operated Offshore and the US person cannot own more than 50% of the entity.