Financial statements of an offshore company: what is important to know

According to the current legislation, companies are required to keep accounting records and submit them if necessary. To clarify the nuances of keeping accounting records of an offshore company, contact our experts at IT-OFFSHORE.

The concept of record keeping

Record keeping means the preparation of documents with data on assets, revenues, and expenses. The documents show information about the sources of financing. In most countries keeping accounting records is one of the basic requirements for the full and lawful operation of companies, and only in exceptional cases, it is allowed to exempt the firm from the obligation to keep accounting records.

For a long time, it was believed that the firms registered in the classic offshore did not need to keep accounts and submit information to the local regulatory authorities. However, over the past few years, the laws of all offshore zones have changed and filing offshore company financial statements in 2021 is required almost everywhere.

Some companies may not be required to be audited or to submit financial reports, however, the availability of primary documentation and accounting is mandatory.

Peculiarities of bookkeeping

It is necessary to start bookkeeping when starting a company. If there is a company where bookkeeping has not been done before, it is receommended to start sorting out the bookkeeping as soon as possible.

If the company is new, the accounting records will need to prescribe the costs associated with the registration, the creation of capital. Then an initial balance sheet with data on the composition of the property of the offshore and the sources of its appearance are drawn up.

If the company is active and located offshore, it is necessary to begin accounting as early as possible. Preliminarily it is recommended to organize an inventory of property, capital, and accounts, and based on the results start keeping the balance sheet.

Why accounting is necessary and what are the consequences of the lack of accounting

Keeping accounting is required, since it is a legal requirement for many offshore companies. It cannot be excluded that the controlling authorities will request filing of the report and in its absence, the company will have to pay a hefty fine.

Reporting is required in the following situations:

• Plans to sell the company;
• It is necessary to sell real estate assets registered in the name of the firm;
• Execution of a major transaction is expected;
• Need to open an account with a financial institution.

Keeping accounting records has many advantages for the businessman. It will be possible to objectively assess their own financial situation, to manage the company more effectively. It will be possible to legally optimize taxation, it will be easier to open an account in a foreign bank. Lack of accounting does not allow investing in major projects. It is not possible to sell a company without accounting.