Auditing Financial Statements of Offshore Companies. Service offer

Classic offshore zones are jurisdictions (most often islands) where you can register a certain type of companies called offshore companies.

These companies may take different organizational legal forms: for example, an International Business Company in Seychelles or a BVI Business Company in the BVI.

However, what these companies have in common is that they do not operate in their country of incorporation and are usually exempt from filing financial statements and paying taxes, but they are obliged to pay an annual government fee and keep underlying documents and records.

Of course, this fact does not exempt offshore companies from paying taxes or complying with other statutory requirements in the countries where they conduct their business, but still makes them much easier to use and administer.

However, the recent years show a steady trend for the introduction of a requirement to prepare financials for all companies, including those traditionally considered offshore ones.

This requirement was initially introduced by banks: they started asking to provide financial statements both when opening a new account for a company and when reviewing the existing accounts that have been in operation for a long time.

Also, financial statements (often with an auditor’s report) have always been essential if a client needed an independent assessment of their company’s financial position (for example, required for the sale of a company or requested by partners).

Even previously we encouraged clients who own offshore companies to prepare a simplified version of financial statements (so-called management accounts) in order to comply with the rule to maintain and keep proper accounting records and underlying documentation of companies – the rule you find, in one form or another, in the legislation of all offshore jurisdictions.

However, in some jurisdictions, the preparation of financials is no longer a practical recommendation, but a statutory duty.

For example, in 2021, the Seychelles International Business Companies Act was amended to require International Business Companies not only to keep accounting records, but also to submit them to the company’s registered agent at least twice a year, whereas large companies are now required to prepare and provide the registered agent with a financial summary containing a balance sheet and a profit and loss account.

Similar changes have been made to the BVI legislation: in 2022, the British Virgin Islands Business Companies Act was revised to require companies to provide their registered agents with certain financial information in the form of Annual Financial Returns. And, of course, companies still have the duty to keep and retain accounting records and underlying documentation. These changes came into effect on 1 January 2023, and generally one can say that BVI companies are currently obliged to prepare and file simplified financial statements.

To put together a set of documents for preparing financial statements, we ask clients to provide information on the company’s activities in the particular financial year:

1. statements of accounts at banks and EMIs;
2. contracts and agreements made in the financial year;
3. previously made contracts and agreements which continue in the financial year in question (for example, loan agreements);
4. other underlying documentation related to the activity during this period / disclosing the business of the company in the financial year (invoices, statements of work performed, way bills, etc.).

It is enough to provide copies of the above documents.

The cost of financial statements and audit for an offshore company is determined on the basis of the time spent on that work at rates ranging from USD 100 to USD 200 per hour (depending on the type of work and qualification of a specialist involved; in some cases and in certain jurisdictions, the rate may be as high as USD 400 per hour).

We try to be flexible in our approach to pricing, taking into account the client’s individual requirements and various specific factors. For example, we have cases in our practice where charging fees per hour can be inconvenient, so we offer to agree the cost of the company’s financial statements and audit in advance.

This cost can be estimated based on the analysis of underlying documents provided in advance (bank statements, copies of contracts and invoices, details of the company’s assets and liabilities, etc.). This method enables the client to plan ahead for the expenses to come and simplifies decision-making in terms of budgeting.

For your convenience, we provide below some indicative fees for our services depending on the number of transactions and other factors:

*The fees are indicative and do not include the preparation of consolidated financial statements.

The fees for the financials of such a company start at USD 2 000 and will depend on the location, use, type and book value (estimated value) of the property.

The final cost will depend not only on the jurisdiction of the company, the type of its business, the number of purchases and sales of goods / works / services (as indicated above), but also on the complexity of the company’s document flow.

We all know that offshore companies generally are not required to have their financial statements audited or filed with any authorities. However, an offshore company may need an audit too. Like the preparation of financials, an audit may be necessary for the following purposes:

• controlled foreign company (CFC) reporting by the owner of the company if he or she is a resident of a country with CFC legislation;
• opening a bank account or review by a bank of the existing account;
• valuation of the company itself (for example, for its sale).

The fees for auditing financial statements prepared according to the International Financial Reporting Standards (IFRS) start at EUR 1 500*.

In some jurisdictions, we may be able to assist with the preparation of financial statements and audit in accordance with local standards. However, the fees for such services will be slightly higher than when following the international standards. For example, the cost of an auditor’s report made under Seychelles standards (GAAP Seychelles) starts at USD 3 500.

*This is a minimum cost of a report by a Cypriot auditor.

**The fees are valid as of February 2025.

***In some cases (for example, if the company’s document flow is of higher complexity) and in certain jurisdictions, the rate may be as high as USD 400 / hour.