Offshore zone is a country (or its part) which has special business environment for foreigners. Offshore definition supposes low or zero tax rate, lowered requirements for accounting audit and a possibility for real owners to remain anonymous. At the same time, there are also certain requirements for such companies, including:
- Annual fixed duty;
- Prohibition of doing business or generating profits within the territory of an offshore;
- Company owner to be a non-resident (foreign citizen).
More and more businessmen are wondering what is offshore and how it can help them to revise or get rid of taxes. This method enables the redirection of financial flows in order to minimize the financial burden. Meanwhile, opening an offshore company is perfectly legal provided all the commercial and tax laws are not violated. To learn more, contact our experts at S.H Business Adviser.
Business in offshore zones: benefits and specifics
Offshore company definition says that it is an international legal entity operating within a tax-free zone («tax haven»). The popularity of this business model is attributable to its undeniable advantages:
- Low or zero taxes;
- High degree of owners’ privacy;
- Swift opening procedure;
- Wide range of legal organizational forms;
- No annual audit and streamline accounting;
- Possibility to simultaneously register and open a company.
Classic definition offshore companies can conduct any kind of business in different countries, which does not require special licensing – such as banks and insurance companies. Doing business in an offshore zone is forbidden; in case of non-compliance with that rule, a company loses its status and has to pay taxes just as local market participants. Companies under these jurisdictions are controlled by the International Monetary Fund (IMF) and central banks.
Types of offshores
Offshore zones can be divided into three categories, each with its own peculiarities.
- Zero tax offshores
Small countries and island territories with the highly stable political situation: Panama, Beliz, Seychelles, and others. The UAE, which is a home to 36 free economic zones, also belongs to this category.
The benefits of such jurisdictions are zero tax rates and no obligatory accounting, as well as anonymity of business owners. Companies pay mandatory fixed payments annually.
- Offshore zones with high respectability
The key features include tax preferences (for certain kinds of activities), as well as mandatory submission of financial records. Moreover, offshore companies are strictly supervised by the authorities. Information about owners is not confidential. Examples: Cyprus, Ireland, Hong Kong, Switzerland, Gibraltar and others.
- Low-tax offshore zones
Such jurisdictions have a special taxation policy, information about company owners is public, financial records and audit are mandatory. This category includes some US states.
Choosing a jurisdiction is a complex process which should be approached with responsibility, taking into account all the specifics and up-to-date information. You should know what is meaning of offshore jurisdiction and consider both legislation and economic conditions of a country of registration. Moreover, you should define the goals of opening an offshore.
How to choose the right offshore zone for company registration
In order for the offshore scheme to work with maximum efficiency, the entrepreneur must carefully approach the process of choosing jurisdiction. In order not to be mistaken, you should definitely consult with experts who are familiar with the peculiarities of doing business and registering a company in the most popular offshore zones. They will explain to you what is offshore meaning and advice about all features and differences of such zones. Differences in the legislative framework can manifest themselves in:
- tax rates;
- restrictions on licensing certain types of activities;
- relation to intellectual property;
- requirements for the minimum number of directors, shareholders;
- availability of benefits for certain activities, etc.
It is important to pay attention to such a factor as the fact that the state has an agreement on the avoidance of double taxation with our country.
Additional tasks, in addition to the desire to minimize the cost of taxes that pursues the entrepreneur are also important. In particular, the purpose of opening an offshore company can be:
- protection against raider seizure or securing ownership of a particular asset;
- reduction of internal costs;
- establishing business contacts with Western or Eastern business partners;
- work in a country with a stable economic and political system.
Offshore in UAE for CIS citizens
The procedure of opening bank accounts for offshore companies has become even more complicated over recent years. Popular jurisdictions, such as Latvia and Cyprus, have virtually ceased opening accounts. It is already nearly impossible to open a bank account in former classic offshores, like BVI, Panama, or Virgin Islands. As a result, the UAE in terms of a tax jurisdiction remains the only real option.
What is the definition of offshore companies in the UAE? They are International Business Companies with full protection for anonymity and bank privacy. The UAE is the only jurisdiction that is not part of agreements on information exchange and disclosure of information on beneficiaries with other countries.
The main advantages of the offshore zone of the UAE:
- There is no import and excise tax.
- There is no income tax.
- There is no sales tax, wealth tax and capital tax.
- Possibility of full foreign ownership of the company.
- Possibility of full repatriation of profits.
- The absence of any legislation surprises and new restrictions.
- Full confidentiality for beneficial owners, the absence of agreements on the exchange of information with other countries.
To choose the perfect offshore jurisdiction, you should seek help from professionals. S.H Business Adviser has a solid experience in the field. Our qualified team is ready to offer you a comprehensive consultation, selecting the best option suitable for your business.