International tax havens, varieties and characteristics
More and more entrepreneurs and businessmen ask themselves a question what jurisdictions to use for tax optimization. Along with the tax privileges when choosing a jurisdiction for creating a business, equally important are the political environment and conditions for a comfortable residence. What tools to use, what to choose: classic offshore zones or territorial units with special economic status? Let’s try to clear up in details.
There are several reasons why do such countries adopt a policy of loyal taxation. Some offshore countries live at the expense of tourism and the financial sector. Typically, these are sparsely populated areas on the island formations. Such jurisdictions are characterized by the complete absence of the state control and corporate taxation. In practice, such countries are used only for the registration of the offshore companies, whose activity is carried out outside the jurisdiction, and therefore is not taxed.
On the territory of such countries, due to a number of the objective reasons, there is an underdeveloped social infrastructure and an extremely low standard of living. For example, in the jurisdiction of the Cayman Islands there is no concept of the social protection of the population. Pension and social contributions are compulsory only for the employer. The main source of the replenishment of the state budget is the customs duties on imports.
However, there is a significant exception, namely the microstates such as the Principality of Monaco, Singapore and Andorra. Here you will be offered all the benefits of the modern civilization and maximal comfort for residence. But here there some drawbacks: you have to sacrifice the privacy of business and to take up the financial and accounting reporting. Accordingly, the administrative costs on keeping and maintenance of offshore companies increase.
List of the offshore states
Persian Gulf States
Features of the economic zones in the Middle East are more and more often used as an effective tool for optimization of the taxable base. The Middle Eastern Countries adopt a loyal tax policy to attract the direct investments to the national economy.
Owing to the reserves and the resources of the oil and gas sector, these countries have created the national welfare and ensured a relatively high GDP per capita. For example, in the United Arab Emirates, the corporate taxes are imposed only on the enterprises and the companies which are engaged in the oil and gas industry and in the banking sector.
Such a scheme makes it possible to exempt the foreign investors and entrepreneurs from paying the corporate taxes, including the tax on the increase of capital and income tax. It should be noted that there is a relatively high standard of living in the Emirates and the registration and maintenance of business does not involve significant expenditures. The amount of the obligatory social benefits for the local companies is 12.5%, but it is applicable only in the case of hiring local citizens.
The similar fiscal policy is adopted in the other Middle Eastern countries, such as Oman, Bahrain, Kuwait and Qatar. The majority of the countries of the Persian Gulf are the oil giants that can afford the loyal tax policy at the expense of the export of the oil and other sources in order to attract direct investments.
Switzerland can serve as a representative of the European part of the continent. Switzerland is characterized as a country with a very flexible tax policy. The corporate tax rate for the company may depend on the number of the factors, among which there are:
- Type of the business or commercial activity;
- Volume of the expected investments into the national economy;
- The number of the new work places, etc.
For persons who have a tax resident status, the tax rate can amount about 35%, and for the foreign citizens there is the opportunity of creating the contractual tax relations. When calculating the rate of taxation the housing costs of the founders and expenses for rental of the office premises are taken into account.
Offshore and preferential zones
In addition to the offshore countries, some territorial units with the special economic status are operating on the territory of the different countries. As a rule, such status provides the preferential tax treatment and the simplified procedure of registration or incorporation of the foreign company. On the territory of such specialized area, one can obtain a tax resident status, which requires the payment of the applicable fees and taxes. Meanwhile, the registration of the offshore company involves only the payment of the annual fixed contribution.
A separate category in this group, consists of the countries which provide the preferential or simplified taxation schemes.
One offshore zone can be singled out on the African continent, namely the Liberia. In this jurisdiction, the offshore company can be registered either by a resident or by the foreign citizen. The companies, which do not possess a tax resident status and operate outside the jurisdiction, are exempted from all kinds of the corporate taxation.
Significant benefits in terms of taxation are provided for the local companies, which create new jobs in the market and contribute to the active diversification of the economy, including the participants of the investment projects. The added bonus for the international business includes the following benefits: favorable investment climate, loyalty of the regulatory authorities, absence of the currency exchange regulation and exemption from taxes when transferring the financial assets.
You must have some knowledge of fiscal and corporate law of this or that country to make the right choice of the jurisdiction for setting the international business. It will be rather difficult for the average entrepreneur. But you can always entrust your concerns to the team of qualified professionals, and get the wanted result as soon as possible.
Each of the proposed jurisdictions has its own characteristics and features which are very important for every single business solution. Contact us and get the experts advice for free.