What Is the Best Country to Set Up an Offshore Company?

Starting from the middle of the 19th century, offshore companies have remained an integral part of international finance. Did you know that only from 2017 to 2019, 436,000 new companies were registered in Hong Kong? However, not all countries provide equal benefits, so it is important to know where to set up first.

How to Find the Right Jurisdiction

An offshore jurisdiction is a country with low or zero tax rates. These are mainly countries enforcing corporate laws that ensure financial confidentiality and reduce the risk of fraud. The jurisdictions in which you can open an offshore company provide the following advantages:

• Tax benefits

• Protection of property

It is worth noticing that the classic offshore zones have changed over the past few years due to the changes in the legislation. The international community has been paying close attention to offshore zones since 2000. At the G20 meeting held in April 2006, it was decided to take action against jurisdictions that refuse to cooperate.

Thus, it is important to know the benefits of each country at the early beginning. You can also see the full list of countries with its benefits on wis-international.com.

Classification of Offshore Zones

People who have not previously encountered offshore companies may be frightened of the word “offshore.” Thanks to the efforts of developed countries, it has a negative connotation, which is not true. Cisco, Google, WhatsApp, and many other giant companies have a successful offshore experience.

Offshore centers can be divided into three categories.

• Classic offshore zones. Companies registered here are completely exempt from taxes on income received outside the state. Examples of classic zones are Seychelles, Belize, and Panama.

• Low-tax offshore zones. Compared to a zero rate on earnings, the 10 percent deduction may seem significant. On the other hand, in some states, the income tax can be as high as 45%. Gibraltar, Ireland, Isle of Man, etc., are low-taxed.

• Countries that are not fully-fledged offshore zones but provide certain tax benefits. The level of trust in such zones increased this year due to strict reporting requirements. An example is the United Kingdom.

What Is the Best Way to Choose the Jurisdiction in 2021 for Your Company?

To register an international offshore company in the right place and achieve the planned result, you should pay attention to several criteria and answer the main questions before starting. It is important to understand that not all information can be found online, and it is better to use an offshore company formation service not to overpay more.

1. Why do you need an offshore company?

Decide on the purpose of registering an offshore company (international activities, expanding business horizons, accumulating and preserving assets, reducing taxes, etc.), and study each territory on this issue separately

2. Which country will you choose? Consider:

• Niche activity, since the registration of an offshore holding company cannot be carried out according to a single template and be equally profitable in one country;

• The reputation of the jurisdiction, especially at the international level;

• The existence of an agreement on the avoidance of double taxation;

• The banking sector, which may be weak or strong;

• The processing time for offshore bank accounts

3. What are the taxes and benefits in the offshore sector?

After tightening European standards for the exchange of tax information, confidentiality, and taxation, many classic offshore zones have introduced new rules for non-resident companies.

Best Offshore Zones in 2021

1. Hong Kong

The attractiveness of Hong Kong is mainly due to the stability of its legal system based on common law, the financial stability of the region, and the special rules of corporate taxation. The following advantages can be mentioned:

• A permit for 100% ownership

• Business-friendly tax regime: zero corporate tax on foreign companies’ profits and a low tax rate from 8.25% to 16.5%

• Lack of currency control.

• Open trade policy

• Chosen by most start-up companies, entrepreneurs, and those looking to establish an international trading business.

2. United Arab Emirates

The country has a highly developed infrastructure. For those who want to register a company in the Emirates, it offers very favorable tax legislation. It is especially worth paying attention to the free zones in the United Arab Emirates. Registering a company in a free economic zone in the UAE can be profitable for a foreign entrepreneur.

3. Cyprus

Due to the stability of the legal system of Cyprus, it has a well-established reputation as a reliable center for international companies. In 2004, the Republic of Cyprus joined the EU, and in 2008, it joined the Eurozone.

• The legal system based on common law and low tax rates (the corporate tax rate is 12.5%) make Cyprus companies an attractive form for building holdings.

• Cyprus holdings can take advantage of a well-developed network of Double Taxation Agreements. When paying dividends, interest, or royalties, it is possible to reduce the withholding tax rate to 5% or zero.

4. Seychelles

Seychelles is one of the most popular classic offshore zones. Offshore companies in Seychelles are exempt from taxation and are not required to submit annual reports. The country maintains a high level of confidentiality – a closed register of shareholders and directors. Compared to other offshore zones, the requirements for documents/information requested from the beneficiary are quite moderate. There are also no requirements to provide an audit report. There are also no strict requirements on directors and shareholders with no need for the declaration of operational objects.

5. The British Virgin Island (BVI)

BVI is the oldest offshore zone with the following benefits:

• No taxes when conducting business outside the country and on its territory;

• High level of confidentiality;

• Lack of currency control;

• The minimum size of the authorized capital is not set.

In conclusion, if you would like to enjoy the full benefit of your offshore business, aside from location, you should consider your company type, bank account, and even your citizenship. You can learn more about each zone’s benefits and taxation on wis-international.com. Under globalization, thinking globally is the key to success in any business.

This article does not necessairly reflect the opinions of the edtiors or the management of EconoTImes