A tax haven is a country where substantial tax benefits to businesses (usually – international businesses) are provided by the law. In this general sense, it's all relative: a country with a 12.5% corporate income tax may seem like a tax paradise for a business person who has been used to a 40% tax in his own country. In these terms, you can find "tax havens" in the most unusual places!

In the traditional meaning, a tax haven is a country where You can register a company which will remain totally tax-free in that country (except for fixed government fees).

A proper tax haven country will in fact have a whole system of laws, regulations and practices, facilitating the attraction of foreign and international business to its shores – and not only by zero tax! Such country, commonly known as an "offshore financial centre", would also have a developed financial system with minimum restrictions, simplified and fast company registration procedures, flexible corporate regulations, confidentiality provisions strictly limiting publicly available corporate information, minimum accounting and book-keeping requirements.

An offshore company may act as a trading intermediary – sales, distribution or import -export company. The company would typically buy directly from the manufacturer or wholesaler and arrange the goods delivered directly to the end-customer from the place of production or purchase. This can be of particular interest where goods originate from one country, are sold in another, yet the principal is located in a third country. An offshore procurement company can be used by a domestic importer to source goods abroad, or an offshore sales company can be used by a domestic producer to distribute the goods. The profits arising on the difference between purchase and sales price may be accumulated in a tax-free environment. Such profits can be re-invested into further development of the business, without incurring any excess tax liability.

In theory, an offshore company is a company (corporation) registered outside the domicile country of the beneficial owner. However, the term “offshore” is most commonly used not simply to refer to any other country outside the domicile country, but directed particularly to the “tax havens” – low tax or zero-tax countries. So, in practice, the offshore company enjoys many benefits that are not exactly possible for a domestic company back at home.

An onshore corporation must pay income tax (sometimes very high amounts), whereas an offshore company is tax-free or has a considerably lower tax rate. An offshore company is also free from financial reporting and sophisticated accounting requirements. To form an offshore company, the company owner does not have to commit high sum of paid-up capital, or any capital at all. Offshore corporation is not required to register its shareholders and directors on a public file. Offshore company is easy and quick to register, simple to operate and maintain. Apart from those benefits, the internal structure and management principles of offshore companies are still largely similar to those of any "regular" business corporation.

Anyone who has ever come across the concept of a "company" or "corporation" will know that it is a legal concept, aimed at creating a new, distinct, separate "legal person". The purpose of creating such a new corporate body is to legally allocate and put some assets into a new "body", which would then have its own existence and continuity.

A "company" or a "corporation" is what's called in legal-speak a juridical person, or a corporate body. A corporation can have and do much of the same as any private individual – it can own assets in its own name, enter into contracts, acquire rights and obligations, be liable for its actions. So, same like an adult human being, a corporation normally has it's own legal personality. Even a corporations' life is somewhat similar to that of a human being – a corporation is "born" (by a fact of registration in an official Registrar) and it can "die" (by being dissolved or liquidated).

There are several components in every corporation, each with its own purpose. As this article primarily deals with what is popularly known as "offshore company", a question may arise: what is the difference between an offshore company and an "ordinary" company? Structurally – there is no substantial difference! An offshore company will quite simply be the same sort of corporation, just created outside the usual domicile country of its owner(s).

So, as far as semantics go, "offshore" for an American can be Canada, or Russia ... or British Virgin Islands. Quite simply, offshore is something that is NOT onshore. However, for quite some time, the term "offshore" has been used in a much narrower sense – pointing to a company, which is not only formed outside the normal domicile of its actual owner, but is also enjoying a number of cool extra benefits. For instance, it can be free of taxation. Free from onerous reporting and book-keeping requirements. Free from burdensome capitalization rules. Free from the necessity to register its owners on a public file. Fast and easy to register. Simple to maintain and operate. That's what most people would deem as an "offshore company". However, structurally, this offshore company still retains most of the components of a "regular" company.

Following is a description of the main elements and components of an offshore company, in particular, as applicable to a British Virgin Islands Business Company.

No. A BVI Business Company may open the bank account, or even several accounts, wherever the owner wishes. There is absolutely no requirement for a BVI company to bank in the British Virgin Islands.

Furthermore, the particular banks that the BVI can offer to its offshore companies will most likely not be suitable for most of the offshore companies due to their requirements and the range of services they offer.

The annual renewal fees are the annually recurring government and professional fees that You would pay in order to continue and maintain Your offshore company in good legal standing as per the laws of the state of registration, for as long as the company continues operations. In a way, You can compare these fees to taxes and the administrative overhead, only in the case of an offshore company the figures would probably be much less.