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What is Offshore Hosting?
Offshore web hosting is the practice of hosting a website on servers located outside one’s own country in order to gain some specific benefit. Technically, anytime you host a website on foreign servers you are engaging in offshore hosting. However, the term implies doing so deliberately to achieve some specific goal, usually related to privacy, security, or freedom.
People have been offshoring and outsourcing forever, and a major feature of the contemporary economy is the reality of globalization. If it is cheaper to make t-shirts in one country than in another, you can be sure there are a huge number of people moving their t-shirt making operations there. It’s just a fact of life.
Another fact of life is government interest in pretty much every activity of human life, especially business and communication. Through regulations, taxes, censorship, and criminalization, governments of all countries make it difficult (or, at least, less profitable) to engage in certain types of businesses or say certain types of things.
Businesses move manufacturing from one country to another in order to reduce production costs. Web hosting is a little different, though. Businesses and individuals often move their servers from one country to another in order to take reduce legal risk.
Reasons to Use Offshore Web Hosting
Most offshore hosting needs fall into one of a handful of categories.
Freedom of Speech / Freedom of the Press
If you are going to host controversial content of any sort, there is the possibility that you will run afoul of some law, regulation, or cultural norm. Besides the fact that you might be actually punished (jail time, fines, lawsuits), it is usually the case that the offended authorities would seek to remove your content from public consumption. If your content is served from a country that has a more robust protection of freedom of speech, you are more likely to be able to avoid having your content forcibly taken down.
A good example of this is the site WikiLeaks. WikiLeaks releases classified government documents to the general public. If they were hosted in the United States, or in most other countries, the US Government would have shut them down by now. However, their hosting servers are in Sweden, a country which has an extremely robust protection of the freedom of the press. The Swedish government cannot legally compel WikiLeaks to divulge their sources, nor can they require the site be taken down.
Illicit Business Activity
In the U.S., selling certain pharmaceuticals directly to consumers without a prescription is illegal. In many Asian countries, online gambling is strictly prohibited. A wide number of jurisdictions have regulations concerning pornography.
In these cases, the best option (other than not engaging in those activities) is to host your website somewhere where those types of businesses are not illegal or where the regulations and penalties are not as strict.
What is interesting about this is the cross-pollination of offshore business hosting. People in the U.S. often set up their gray-market pharmaceutical sites in Asia, and Asian entrepreneurs host online casino sites in the U.S.
Taxes and Legal Residency
The actual legal ramifications of this are far outside the scope of our expertise, so we’ll steer clear of specific examples, however:
It seems that some people use offshore hosting to establish a legal business presence in the hosting company. This may be used for tax advantages, or other benefits.
Obfuscation of Illegal Activity
This is a step beyond simply moving a business from a jurisdiction where it is illegal to one where it is legal, some people use offshore hosting as part of a strategy to hide activity which would be illegal in any jurisdiction.
Encryption technology exists to set up a hidden web service on just about any computer connected to the internet. However, if you are using a hidden web service to run a highly illegal operation of any sort, the number of ways that your activity can be traced back to you is higher than zero — especially if you are subject to any kind of intense scrutiny.
Some offshore hosting companies provide completely anonymous service, requiring no identifying information be provided by the customer. Payment is made through Bitcoin or cash, and communication is handled strictly through anonymous email.
Doing this provides a layer of protection between the activity of the site and the person running it.
(Of course, we know you would never need to do anything like this.)
Problems with offshore hosting strategies
While moving hosting to a country where the content or business activity is legal is helpful, it doesn’t always provide complete protection from regulation.
Let’s say for example I want to set up a gambling site, and I live somewhere running a casino is illegal. I could host my online casino site somewhere else, where doing that is legal. But if I’m still running the site while sitting in my house, I may still be breaking my local law.
The main reason people engage in offshore hosting — seeking freedom from government intrusion — is the root of the danger. Governments that want to intrude on your activity will usually figure out a way to do it, and offshoring is no guarantee that you will be safe.