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Tax Planning – the 16 Most Popular Offshore Zones

It is quite natural for business owners to look for more flexible and reliable countries that would perfectly suit their business and tax planning purposes. Google, Apple, Starbucks, Microsoft, and many other famous giants are good examples of such policies, as they successfully offshore some parts of their structures and business processes in pursuit of their corporate tax planning policies. Registration of a company in an offshore jurisdiction is always a quite affordable and unsophisticated solution, whereas the benefits of such a decision are significant. But the selection of the right offshore zone should be done with consideration of a set of decisive parameters.

This article discusses the 16 offshore zones that are most often preferred as jurisdictions for the registration of new companies. We hope that with our help you will be able to make the right choice and successfully start your business. While the main business trend nowadays is to tailor individual solutions and services to every client’s needs, it is still worth getting acquainted with the best-recommended business zones that suit many customers.

Optimization of taxation

Offshore companies’ main features 

Offshore companies differ from onshores by the small or no tax liabilities stipulated for entities registered in offshore jurisdictions. Other advantages include price-competitive services and flexible legislation. Companies incorporated in Anguilla, Cayman Islands, Seychelles, BVI, Panama enjoy a completely tax-free regime. If firms from Hong Kong, UK, Uruguay, Cyprus do not perform business operations in their jurisdictions, they are also considered offshores and do not have to pay taxes. All of the above-mentioned countries are quite suitable for business incorporation for tax planning purposes.

In the past, one of the key characteristics of offshores was their adherence to the high-level confidentiality of business and personal data. But now that the AML/CFT (anti-money laundering and combating the financing of terrorism) legislation has been promoted across the world, many offshore jurisdictions participate in the automated exchange of information. Nevertheless, information on the beneficiaries is not always publicly available. Moreover, in many cases, nominee services are legally allowed and quire frequently used by business owners. 

We have to state it straightforwardly that nowadays it is not possible to have guarantees of absolute anonymity by registering an offshore company. After the terrorist attacks in 2001 in the United States, the danger of terrorist financing is taken very seriously under control all over the world. This fact has impacted the requirements set for offshore companies globally. Such international organizations as the OECD, UN, EU, FATF have agreed to impose on offshore jurisdictions massive pressure, demanding complete elimination of the banking privacy and confidentiality of financial transactions, and requesting the disclosure of information on ultimate beneficiaries.

1.Belize

Belize is a former British colony and a classic offshore zone. Taxes on inheritance, profit, interest, and dividends are not payable there, which is an obvious advantage in terms of tax planning. Other benefits appreciated by Belizean offshore companies include the absence of currency control, the low-cost company registration, no requirements for the filing of financial statements, and no requirement for the immediate payment of the authorized capital.

Information about ultimate beneficiaries is not available to third parties. Nominee services are allowed. Registration of a Belize International Business Company (IBC) in Belize is quite profitable, as it can be used for asset protection, tax planning, conventional agency and trade transactions.

An IBC in Belize needs to have a local registered office, a registered agent, and keep accounting records. The recommended amount of the authorized capital starts from USD 50,000. It is not necessary to get it paid immediately. Company registration in Belize takes from 3 to 14 days.

The Belizean legislation is based on the IBC Act of 1990. According to it, offshore companies can engage in any type of activity.

2. British Virgin Islands 

Registration of a company in the BVI is a wonderful tax planning strategy. The perks include zero taxation, a simplified reporting system, flexible legislation. These are much appreciated by non-residents who open companies there. The local corporate legislation is focused on commercial activities.

Benefits of BVI offshore companies in terms of tax planning are as follows:

  • bearer shares and registered shares are allowed;
  • there can be only one director (a natural or legal entity);
  • the company management system can be rather unsophisticated;
  • there are no audit and reporting requirements.

Other advantages of the BVI include this jurisdiction’s political stability. The size of the annual state duty payable by companies issuing no more than 50 thousand shares is USD 350. If there are more shares, such an entity needs to pay USD 1.1 thousand to the state budget.

Please note that many business fields are subject to licensing in the BVI, including banking, mutual investment funds, insurance and reinsurance, investment consulting, and fiduciary services.

There are requirements for the real economic presence of companies in Seychelles, if they are engaged in banking, in

3.Seychelles

Seychelles is a classic offshore zone where companies have no tax obligations. This jurisdiction is ideal for tax planning strategies of cross-border groups, international trusts, and commercial companies. The state has not signed any agreements on the exchange of tax information with any country, so the company owners’ confidentiality is fully guaranteed. Besides, the nominee service is legally allowed.

Benefits of the Seychelles offshore jurisdiction for tax planning purposes are as follows:

  • no requirements for the amount of the authorized capital;
  • shareholders’ meetings can be held in any country;
  • zero or absolute minimum taxation;
  • no residency requirements for directors;
  • no requirement to keep and submit reports;
  • easy registration and management of the company.

The annual state duty is only USD 100.

There are requirements for the real economic presence of companies in Seychelles, if they are engaged in banking, insurance, trust activities, work with investments, transactions with securities.

4.Marshall Islands

Registration of a company in the Marshall Islands is the easiest solution for foreign investors. Firms are exempt from world-wide income taxes and other fiscal payments, there are no audit and reporting requirements.

Benefits offered by Offshore Marshalls in terms of tax planning are as follows:

  • information about the beneficiaries is not publicly available;
  • nominees and bearer shares are allowed;
  • the Corporate law is based on British law;
  • the corporate structure can be extremely flexible;
  • the cost of registration and administration of the company is low.

Non-resident companies must not conduct commercial activities with local legal entities. But cooperation with investment consultants, lawyers, accountants is allowed.

Although the country gained independence from the U.S. in 1990, the Marshallese economy is largely dependent on the U.S. government. This fact is worth keeping in mind when registering an offshore company there.

5. Nevis

An offshore company in Nevis is ideal for asset protection. The company does not pay any taxes as long as it conducts business outside the jurisdiction. There is no income tax, capital gains tax, wealth tax, dividends tax, gift tax.

Please note: Any income generated in Nevis is subject to fairly high tax rates – 33% corporate tax; 20% capital gains tax; 15% withholding tax on non-resident payments.

Requirements set for company registration in Nevis are minimal: just one director and one shareholder would be acceptable, the amount of share capital is not stipulated (but the recommended amount starts from USD 100 thousand), the issue of bearer shares and NPV shares is allowed.

Nevis has not signed any double taxation treaties so far. Therefore there is no exchange of tax information with other countries. Nevis is considered by many business owners a convenient jurisdiction for tax planning policies.

6.Singapore

Singapore ranks number one in Asia by the number of millionaires per capita. While the entire world is watching with amazement Singapore business people grow rich year by year this island city continues building its impressive agile development by attracting foreign investors and allowing them to join the international community of successful entrepreneurs. It is impossible to call this jurisdiction a completely tax-free zone, but the state offers entrepreneurs a lot of incentives, including the following ones:

  • no taxes on corporate income earned outside the country;
  • political and economic stability;
  • high reputation;
  • no currency control and restrictions on the withdrawal of profits.

During the first three years after the company registration, it does not have to pay a corporate tax from the first net income of 100 thousand. Such conditions are very beneficial for tax planning.

Among other essential features of the Singapore offshore jurisdiction are the financial reporting requirements, a fairly high cost of the registration and maintenance of companies. At least one director is required to be a Singapore resident.

7.Cayman Islands

The Cayman Islands, a British Overseas Territory, offers foreign entrepreneurs quick company incorporation (literally in 24 hours), absence of any requirements regarding the size of the authorized capital, the stable economic and political situation. Besides, the Cayman Islands have no income, inheritance, gift, capital gains, wealth, and VAT taxes. Therefore, using a local firm for tax planning is a good option.

There are no foreign exchange controls. All companies in Cayman must keep financial records of their current financial situation. Availability of a registered address and a registered agent is a prerequisite for every offshore company established for tax planning and other purposes. To maintain zero taxation, it is necessary to operate only outside the jurisdiction. In this case, the company can be safely used for tax planning. 

Please note that a non-resident company can not take loans from residents, engage in insurance, banking, reinsurance activities. It cannot buy local real estate (but it can rent some property) and is not allowed to engage in trade in the Cayman Islands.

8. Panama

Panama is probably one of the most well-known offshore zones. Non-resident companies are not taxed here, there is no currency control. Advantages of Panama as an offshore jurisdiction for tax planning objectives include the following ones:

  • high level of confidentiality;
  • nominal service allowed legally;
  • no requirement for a minimum amount of share capital;
  • ability to issue registered and bearer shares.

If a non-resident company does not conduct business in Panama, it is not required to file reports (reports are required only in case of liquidation of the firm).

The only annual tax for companies in Panama is the franchise tax. Its amount is USD 300. Once it is paid, it opens for the company access to the international market.

9.Cyprus

Cyprus is not considered a classic offshore zone. It’s been long enough since it was withdrawn from the blacklists, which means that a company in Cyprus cannot be completely tax-free, but it is still worth using it for tax planning. The tax rate on net profit is considered one of the lowest in Europe – 12.5%. Exports and imports of goods within the EU are not subject to VAT. Any interest profit, as well as royalties and dividends, are not taxed. The tax on capital gains is 0%. If a legal entity has no commercial purpose and no commercial presence, a full tax exemption can be achieved through reengineering of the company, which is ideal for tax planning.

The local address of a registered office and a secretary is a prerequisite for company registration in Cyprus.

10. Gibraltar

Non-resident companies in Gibraltar do not pay corporate tax, inheritance tax, capital gains tax, dividends. However, such firms cannot conduct business in this jurisdiction, otherwise they will lose their tax-exempt status. If necessary, you can use the nominee services. Gibraltar is an attractive European jurisdiction with favorable conditions for foreign entrepreneurs who are in search of the best places for tax planning.

Gibraltar is an ideal place for the redomiciliation of offshore companies of the classical type.

11. Canada

Canadian companies are actively used for tax planning purposes in international business. Considering the high-profile reputation, political stability, low taxes (subject to certain conditions), this jurisdiction can be recommended if entrepreneurs develop partnerships in Canada for tax planning. Among other advantages of this offshore, we can mention the simplicity of corporate legislation, zero corruption, and zero bureaucracy, etc. If the company does not conduct business where it is incorporated, it will not pay taxes, which is important for tax planning.

Please note that many new businesses in Canada are required to obtain a business license to operate legally in their municipalities.

12. Serbia

The country is not considered a classic offshore jurisdiction but offers quite attractive conditions for foreign entrepreneurs. It is profitable to open a branch In Serbia for a classic offshore company. In this case, it is possible to conduct business in the country and keep the existing offshore firm. A foreign company with a Serbian branch can be granted residence status and TIN without registration of a new legal entity. The banking system in the country is considered one of the best in Europe. Local banks have no problem cooperating with foreign branches.

Companies in Serbia pay the following taxes: corporate tax – 15%; dividend tax – 15%. Income tax ranges from 0% to 15%.

13. Anguilla

Anguilla is a British Overseas Territory and is considered an offshore haven with neutral taxes. There is no direct tax on capital gains, real estate, or corporate income, which makes the jurisdiction a suitable option for tax planning. Foreign investors most often open International Business Companies (IBC) that are used only for international activities. There are no thin capitalization rules. It is possible to use nominal service.

Some activities require a mandatory economic presence in Anguilla: fund management, banking, and insurance, leasing and financing, shipping.

14. Estonia

This European country allows a zero tax on the capital reserve of foreign investors. Besides, there are minimum requirements for the authorized fund and its formation. An entrepreneur can obtain a business visa and even a residence permit. Estonia is considered a leader among European countries in terms of technological innovations. It is possible to obtain e-residency of the country and to pass digital verification of documents online, establish a company online, declare taxes remotely, etc. If an entrepreneur plans to accumulate profits on corporate accounts or use them to develop the company, such a company can be definitely used for tax planning purposes.

Please note that as soon as the company’s profits are distributed – the company will have to pay tax on them at a rate from 14% to 20%.

15. The Bahamas

The Bahamas is a small island state, a classic offshore. Companies are not taxed on profits, dividends, capital gains, trading activities. The cost of annual renewal of the company is quite low – only USD 350. The beneficiaries’ data is not publicly available. The company can work with any currency.

For a Bahamian company to be tax-exempt, it is not allowed to conduct commercial activities in the Bahamas, own local real estate, provide its legal address to other firms. A local company is just right for tax planning.

Non-residents in the Bahamas cannot engage in the hotel business, work in the entertainment industry, own mass media, or conduct activities in real estate, fishing, farming.

16. Labuan

Labuan is a Malaysian country. Although it is not as popular with foreign entrepreneurs as, for example, Cyprus or Panama, its incentives for non-resident firms are also worth your attention. This offshore is not tax-free, but the tax rates are small and rather beneficial in terms of tax planning. The rate of corporate tax is only 3% of the audited net profits. There is no VAT and no capital gains tax. This jurisdiction makes provisions for the reliable protection of personal information.

Availability of a registered office and a resident secretary is a prerequisite for a company in Labuan, Malaysia.

When planning your future business you will need to be aware of all strengths and weaknesses of this or that jurisdiction, compare them, and only then give preference to the country which can best suit your business plans. This article provides you with some insights, but in your real-life decisions, you should rely on experienced consultants who are knowledgeable about all details and updates of the local legislation. We recommend the services offered by our professional experts. Our experts’ assistance in the design of your business strategy, selection of the most efficient tax planning solutions, and the most suitable offshore zones will save your time, efforts, and resources. 

You are welcome to contact us at the e-address given at the top of this page and tell us about your needs. The experts will send their feedback as soon as possible.  

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