Depending on who you talk to, where you consume information from, and what you believe in, you might conclude that going offshore is the right decision you can make for your and your business' financial future.
If you're still indecisive, you might want to read our arguments on why you should take your business offshore. But for now, read on to familiarize yourself with the basics in choosing an offshore jurisdiction.
Information straight from the horse's mouth never hurts, I believe.
I decide to go offshore – now what?
Suppose that you have concluded that going offshore is the right decision you can make for your and your business' financial future, you need to move on to the next step, which is learning as much as you can about offshore company formation – how to set a company offshore, how to choose the right offshore jurisdictions, etc.
You can find the answers by looking for recommendations, reading articles or consulting with a lawyer or service provider like us. You (should) want to be sure before you decide on anything related to offshore company formation.
To aid you in your endeavor, the following is ten things to consider when choosing an offshore jurisdiction for your business.
1. Political and economic stability
It's only logical to want your business to be headquartered in a stable country. Economic crash, unfavorable political regime change, and so on disrupt your business operations and impact your bottom line significantly.
Supportive political climate and sound economic policies can only do good for you and your business.
2. Jurisdictional reputation
Reputation speaks louder than offshore benefits, like zero taxes, no financial reporting, and so on. If the offshore jurisdiction you're interested in is blacklisted by the global community, you should stay away from such jurisdiction.
3. Legal requirements suitability
Not all jurisdictions are suitable for tax planning and asset protection. To make matter more complicated, even if the jurisdictions are suitable for tax planning and asset protection, those may not be appropriate for your company. Generally speaking, you should seek to incorporate in a jurisdiction that enable you to establish a company with the following characteristics:
- - Low to minimum capital requirements,
- - minimal to no filing obligations,
- - the availability of nominees,
- - little to no beneficial ownership disclosure requirements,
- - no audit requirements,
- - tax exemption for business activities outside the jurisdiction,
- - fast incorporation,
- - statutes and policies that are beneficial to International businesses.
4. Tax rates
This is perhaps the main focus of most businesses that establish branches or headquarters in offshore jurisdictions. Indeed, zero corporate taxes are preferable, obviously. However, not all exceptional offshore jurisdictions offer zero tax rate.
Some of the best ones, such as Cyprus, has a 12.5 percent annual tax rate, which is still categorized as a tax haven. Plus, if you're serving the EU market, Cyprus is a great HQ for your company, as you can get Intra-Community VAT number, which is required for doing business with anyone in the EU region.
5. Double taxation treaties availability
Double taxation treaties aim to eliminate the double income taxation – one by your business operational jurisdiction and business incorporation jurisdiction.
Suppose your company operates in your home country, and seek to incorporate in, say, Delaware. To avoid getting taxed by both jurisdictions, then you need to assess the availability of double tax treaty between your home country and Delaware, U.S.A. If the treaty is available, then you can enjoy tax benefits offered by Delaware, such as zero tax on dividend payments and royalties.
If you aim for simplicity, United Kingdom might be a better choice of jurisdiction for incorporation. With more than 130 bilateral treaties, UK has one of the best tax treaty networks in the world.
6. Offshore structure administration
Setting up a company offshore means that you need to take care of the legal and accounting requirements for the offshore structure. You need to know how to comply with the local laws and accounting practices.
It's a resource-consuming process and you do need help to navigate your way through the legal and accounting matters.
7. Costs (initial and running)
Whether you like it or not, costs also determine your choice of offshore jurisdiction – and maintaining offshore company doesn't come cheap. There are fees like Government fees, registered agent fees, etc.
Since each jurisdiction charges differently, you should know the initial costs, as well as the running costs before deciding on anything. As always, consult with an International corporate service provider for the list of offshore jurisdictions, along with the incorporation fees related to them.
The list above should be sufficient enough to give you a better understanding on choosing the right jurisdiction for your business, as well as finding out whether a particular offshore jurisdiction is more suitable to your business than the others.
You can use the list above to have a more focused discussion with your lawyer and offshore company formation service provider, and eventually, help you in making a well-informed decision.
Good luck in your endeavor!
Read also "Beyond tax avoidance: People just want to escape"