How to choose the best jurisdiction for registering an offshore company?
Before you start to search for a suitable jurisdiction to register an offshore company, understand the terminology and consider the advantages and disadvantages of offshore business.
Offshore Jurisdiction and Offshore Companies
An offshore company is a company opened in a jurisdiction that offers tax reliefs and has favourable corporate legislation. Such business conditions usually help to attract foreign investors.
All jurisdictions with favourable business environment can be divided into three groups:
- Onshores – European countries that have immaculate reputation and allow foreign companies to optimise taxes in a legal way;
- Midshores – Middle Eastern and Southeast Asian countries with liberal corporate law and tax exemptions for foreign companies;
- Offshores or tax havens – small countries, mostly former colonies, with their income significantly depending on taxes that are annually paid by offshore companies. These jurisdictions offer maximum protection and tax benefits to foreign entrepreneurs.
Onshores and midshores do not provide foreign companies with all the opportunities offered by typical offshores, so they cannot be treated as tax havens.
A traditional definition of an offshore is a jurisdiction with special tax and corporate legislation that allows foreign companies to:
- Significantly minimise or reduce to zero corporate income taxes, especially taxes on activities performed outside of the place of registration.
- Optimise financial and taxation reporting.
- Hide the names and personal data of the offshore owners and beneficiaries.
How Can I Benefit from Registering an Offshore?
Offshore companies offer a lot of benefits. Here are some of them:
- Tax optimisation – reduced tax rates for foreign companies
- Creation of international holdings – groups of overseas commercial companies
- Simplified financial and tax reporting
- Accounts in large foreign banks and, as a result, simplified transactions with foreign partners and better loan terms
- Reduced business risks due to distribution of assets among various jurisdictions
- Confidentiality
- Protection from raiders and illegal actions exercised by government and competitors – very useful for entrepreneurs from corrupt countries.
3 main disadvantages of an offshore company
No matter how attractive the idea of registering an offshore company can be, it may create some issues:
- Lack of trust from partners
In former USSR countries, there is little trust in offshore companies. It can be of no significance to a small trading company, but for a large enterprise, it will be difficult to procure only by prepayment. Fortunately, there are respectable countries that have nothing to do with offshores but still offer favourable taxation regimes. - Pressure in your homeland and abroad
It often happens that the government of the country where an offshore operates harasses and applies administrative pressure on such a company, especially when there is no exhaustive information about its tax payments. In countries where offshore business is officially forbidden, “attacks” on business are even Besides, offshore jurisdictions themselves are under constant pressure from large international companies and powers since registered offshore entities are often used for money laundering. - Unreliability
Constant critic and threats often become the straw that breaks the camel’s back. The time comes when super reliable offshore jurisdictions begin to change the rules of the game for the already registered foreign offshores and disclose information about their tax residents to other countries. Small countries, traditional tax havens, surprisingly, offer more protection in such circumstances. Caribbean islands, unlike Europe, rely on annual payments from offshore businesses as the largest part of the state budget.
Where to register an offshore company: 4 types of offshores
Sometimes, any company that is registered in a foreign country is called an offshore, even if it doesn’t fall under the typical offshore definition. Thus, this article will cover not only classical tax havens but also some jurisdictions that offer businesses legal ways to optimise taxation.
1. European countries with low corporate tax rates
As a rule, small European countries like Estonia, Lithuania, Latvia, North Macedonia, Cyprus, Malta and Gibraltar, offer beneficial taxation for businesses since they need the income generated from taxing locally registered companies.
Main advantages
If you register your company in a “legal” jurisdiction, your tax record will be transparent and raise no eyebrows either from the government of the country where you work or from any international organisation.
At the same time, thanks to the favourable taxation regime and existing double taxation agreements, you will have to pay fewer income tax. Low corporation tax rate is either provided by law or achieved through different tax reliefs.
Banking and business bank account
Normally, corporate banking for European companies costs more than for offshore companies. You can easily open a corporate bank account in the country where you registered your business or in any other financial institution in Europe.
It is convenient to register holding structures and companies, that conduct operational and trade activities, in European jurisdictions with favourable taxation regimes.
2. Asian countries with low corporate tax rates
Rapidly developing countries in South-East Asia and Middle East like Hongkong, Singapore, Indonesia, Labuan, the United Arab Emirates and Qatar, are ready to offer tax exemptions and low corporate tax rates for foreign companies registered on their territory.
Main advantages
Like in Europe, you will be able to register a company in these “legal” jurisdictions on the same conditions as in the offshore. You will be able to optimise your taxes thanks to a simplified taxation system or low corporate tax rates, or various exemptions. You will not have to hide any of your tax costs.
Jurisdiction | Tax optimisation methods |
| Hongkong | Low corporation tax rate of 7.5–16% |
| Singapore | Simple taxation system Tax allowance Tax holidays for start-ups for up to 3 years |
| Indonesia | Tax exemption of 50% for small-sized businesses |
| Labuan | Low corporation tax rate of 3% for registered trading companies |
| United Arab Emirates | No corporation tax for registered companies that don’t operate in tourism, banking and natural resources Free-trade zone, tax holidays VAT only 5% |
| Qatar | Low corporation tax rate of 10% for registered companies that don’t deal in natural resources |
Banking and business bank account
Banking costs in Asia are higher than in a typical offshore, but significantly lower than in the EU. You can open a corporate bank account in the country where you registered your business or in any international financial institution.
Asian jurisdictions with low corporation tax rates are usually used for registering trade companies to operate both in domestic and international markets.
3. Traditional tax havens
You can register an offshore company in one of the small countries in the southern hemisphere or Africa, for example:
- Mauritius;
- Bahamas;
- Seychelles;
- Panama;
- Belize;
- Former British colonies on the Caribbean islands: St. Kitts & Nevis, Antigua and Barbuda, Dominica, Grenada and St. Lucia.
Main advantages
Traditional tax havens are convenient since they offer all the advantages of an offshore. Your company won’t have to pay corporation tax on revenues earned outside of the country. Information about your beneficiaries and tax payments will remain confidential and won’t be disclosed to other countries or international organisations. Annual financial and tax reporting is simplified.
Banking and business bank account
You won’t have to pay much for a bank account and banking in these island countries. You can open a bank account at the place of registration or in any offshore bank.
4. Special taxation regime for foreign companies in the UK
Taxation regime for businesses in the UK is hardly mild. The country has never positioned itself as an offshore. However, in comparison to other island jurisdictions, it is prestigious and respectable to have your company registered in the UK.
Under the British corporate law, there are two forms of business that enjoy significant tax benefits which in the long run can be compared with the offshore taxation regimes. These forms include LLP and SLP (Scotland) and LP (England and Wales).
Advantages of LLP, SLP and LP
With these forms of business, the partners share the profit. They must pay taxes only if their company operates in the UK or if they are UK residents.
Thus, if the company operates outside the UK and the partners are not UK residents, taxes will be paid in the partners` country of residence.
What are the advantages of such forms of business? The company does not pay stamp duty when it acquires real estate. SLP and LP do not have to submit annual accounts if they operate outside the UK. LLP, however, must submit annual accounts in any case.
As a result, British partnerships are convenient for trading companies.
Banking and business bank account
In the UK, the process of registering a company and running a business is simplified, so banking costs are not high. However, you may require the help of qualified advisors at first if you don’t have much knowledge of British corporate and tax legislation.
You can open a bank account in either a European or British bank. It is important to note, however, that British banks treat foreign clients cautiously, so you will need to consult an experienced advisor.
How To Open an Offshore Company
- Take your time reviewing all available jurisdictions. Once you identify a jurisdiction with the best business conditions, you must choose an appropriate incorporation structure.
You can do it by yourself or with the help of legal advisors, the latter being a better option. They know how to register an offshore company and run business in an offshore jurisdiction. - Prepare necessary documents. To register an offshore, you need a legal address, and sometimes a physical address and a nominee director who is an offshore resident. Some documents may also require notarised translation.
- Pay a government fee and, in some cases, a commission of a local incorporation agent. Submit a registration application with accompanying documents.
As a rule, entrepreneurs who apply for offshore registration with the help of experienced corporate advisors successfully complete due diligence checks and quickly get an official offshore registration certificate. - Open an account in a local or international bank, register your company with electronic payment systems, prepare and submit first company accounts – these have nothing to do with offshore registration, but are required for the company’s operation.
Opening an offshore with Imperial & Legal
No matter where you register your offshore – in Malta, Antigua and Barbuda or in Singapore – you need a deep understanding of local tax and corporate laws.
If you need professional assistance, you can contact Imperial & Legal advisors. Our skilled experts will choose the most suitable jurisdiction for you and help you register your offshore company.
If you are specifically interested in registering an LLP, SLP or LP in the UK, you can benefit from our incorporation packages: Standard, Imperial and Standard Plus. These packages can cover the needs of any foreign businessperson who starts working in the UK, from choosing the company name and registering it to opening a bank account and obtaining business visas for two employees of the newly set up company.
