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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.

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.

One of the most common reasons for businesspeople to register an offshore company is to optimise taxation. Another significant advantage of an offshore is confidentiality. It can be useful for entrepreneurs from corrupt countries where successful businesses can be under close supervision or even be illegally taken over.

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:

  1. 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.
  2. 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.
  3. 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? 4 types of offshore companies

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

HongkongLow corporation tax rate of 7.5–16%
Singapore

Simple taxation system

Tax allowance

Tax holidays for start-ups for up to 3 years

IndonesiaTax exemption of 50% for small-sized businesses
LabuanLow 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%

QatarLow 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:

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.

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.

FAQ about registering an offshore company

Which other developed country, apart from the UK, can I open an offshore company in?

Low corporation tax rates are offered not only by small “legal” jurisdictions in Europe and Asia, but also by countries with high living standards and strong economies.

For example, Portugal and China have special economic zones with profitable taxation regimes for foreign companies.

Which tax havens offer the most favourable conditions?

It is impossible to answer this question since it depends on the goal of a particular businessperson who plans to open an offshore. All traditional tax havens offer standard advantages like tax optimisation, simplified reporting and confidentiality.

According to Imperial & Legal advisors, it is necessary to consider two aspects when registering an offshore company: additional perks and reliability.

For example, Caribbean countries offer citizenship by investment programs that allow foreigners to obtain a second passport for a relatively small investment and travel visa-free to almost any country of the world. In most cases, you will be able to take part in this program 100% remotely.

In recent years, there have been several scandals when previously reliable offshore jurisdictions disclosed information about companies registered on their territories for political reasons. Small Caribbean countries, however, have only recently gained independence from the Crown. Most of them don’t even have an army of their own. The wellbeing of Caribbean citizens depends on tourism, foreign investments and payments from offshore companies. That’s why, Antigua and Barbuda, St. Kitts and Nevis, St. Lucia, Dominica and Grenada still resist the requests of the international organisations and preserve confidentiality of their offshore foreign companies and citizens who take part in their citizenship by investment programs.

Which tax exemptions will I enjoy if I register a company in Estonia?

In Estonia, there is no corporation tax on undistributed profit. In other words, if the profit stays in business, you won’t have to pay taxes on it.

If the profit is somehow distributed among the partners, the corporation tax will be paid under the so-called 20/80 scheme: 20% of the profit will go to the state budget while 80% will be dividends. If you meet a number of requirements, you will also be able to reduce the tax rate to 14%.

Besides, Estonia has signed a number of double taxation agreements, so you will be able to pay corporation tax only in the country where your company operates. There is a reduced or even zero VAT rate for many goods and services.

How much does the company registered in Indonesia need to earn to get a 50% exemption on a corporation tax?

If a company’s annual revenue is less than IDR 50 billion or about USD 3.5 million, it is treated as a small-sized business and can get a 50% tax exemption on a corporation tax. The tax rate can be then lowered to 10% if some other requirements are fulfilled.

However, sky is the limit. For some Indonesian companies with revenue less than IDR 4.8 billion (about $550,000), the corporation tax rate can reach the record-low 0.5%.

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