'Tis the season – to go offshore. Indeed, despite the fact that the global crackdown on offshore centers is more intense this year, there are resilient offshore jurisdictions that are still serving offshore asset owners at the highest standard.
If you have consulted your trusted tax advisor and agreed to take the offshore path for your wealth and tax planning, your next step would be considering the right offshore jurisdictions for your situation. While the decision to pick offshore jurisdictions should be made on a case-by-case basis, there are certain jurisdictions that you may want to pay close attention in 2018.
You may still want to consider the ones with a long-standing reputation like the United Kingdom, The Netherlands, Singapore, Hong Kong and Switzerland, but you should consider 'lesser known' jurisdictions, too – for two good reasons:
- - Low(-ish) requirements for an offshore company formation and/or offshore bank account.
- - Staying below the radar - a sound strategy when it comes to offshore asset protection.
The next question is, which jurisdictions that offer plenty of benefits for asset owners but not 'mainstream'? To help you answer the question, here are five offshore jurisdictions you should consider for 2018, but you may actually never heard of them.
1. Puerto Rico
You might ask, “Isn't it a territory of the U.S.?” Yes, indeed; it's under U.S. laws, including the Federal Securities and banking laws. However, when it comes to taxes, Puerto Rico takes care of its own business – literally. Instead of 39.6 percent (the U.S. Federal tax rate,) the tax rate in Puerto Rico can go as low as 4 percent.
At that rate (lowered from 12.5 percent through various incentives,) the income tax rate in Puerto Rico is very much interesting for offshore asset owners. In fact, in certain cases, your tax rate can go down to zero – e.g., dividends on your company profits are taxed at zero percent; your capital gain is also tax-free.
Another (big) upside of banking in Puerto Rico is the fact that it's not required to comply with AEoI, which mean that your asset information is fully private. Learn more about opening an offshore banking account in Puerto Rico here.
Bulgaria is not known as the “go to” place to setup your company offshore and/or open an offshore bank account. However, due to the importance of getting an intra-community VAT number for doing business in the European Union, Bulgaria is becoming an increasingly important offshore jurisdiction.
One of the biggest reasons is the low tax rate, at 10 percent. While it's not zero like the jurisdictions in the Carribean, the corporate tax rate is the lowest in EU, and among the lowest in Europe. Plus, your company and bank account are not considered as “questionable” - which is important when dealing with formal financial institutions like banks.
Mauritius is a traditional offshore jurisdiction that's in a crossroad; while the offshore financial sector in the jurisdiction is declining steadily over the years, it's shifting the focus from the main offshore hub for foreign investments to India to serving clients for investments in Africa, particularly in the southern part of the continent.
What makes Mauritius attractive is the low effective corporate tax (three percent) and the ease of offshore bank account opening (remotely.) Along with the trusted court system and stable political and economic climate, your assets are in safe hands.
Taiwan is known as one of the biggest players in the world in the tech sector. But did you know that it's actually also a very prominent destination for offshore investments? Indeed, according to research, Taiwan is considered as one of the most important 'sinks' in the world, attracting and retaining foreign capital, mainly from the Mainland China, via Hong Kong.
One more thing: Taiwan hasn't signed any AEoI agreements, which means that your information is kept in full privacy – for now. Until when, only Taiwan's government knows.
That's right, The United States is off the lists of typical offshore jurisdictions. However, did you know that it's actually the largest and strongest offshore jurisdictions in the world? Indeed, The United States ranks third in the world in terms of the secrecy and scale of the offshore industry. Plus, the jurisdiction's refusal for mutual information exchange is one major reason why it's ideal for non-U.S. citizens.
Moreover, there are U.S. states that don't have income taxes: Wyoming, New Hampshire, Alaska, Florida, South Dakota, Texas, and Washington. What about Delaware? Delaware is arguably the most popular among the others; with 50 percent of U.S. publicly traded companies incorporated in the jurisdiction, it has an excellent reputation especially for businesses.
However, while the corporate tax rate in Delaware can be as low as zero percent, the additional annual fees are quite hefty, which make it ideal for large corporations. To compare, jurisdictions like Wyoming is more small firm oriented, with a legal system that protect small businesses (including one-person company,) such as single-member protections and charging order protections.
The offshore world in 2018 is pretty much the same as the passing years: The global push toward tax transparency will continue to chip away privacy from offshore jurisdictions. 2018 will also be the year for 53 offshore jurisdictions to undertake the first exchanges.
Asset owners who want to maintain their privacy need to look for offshore jurisdictions that allow them to achieve that. Options are becoming limited, but there are still legitimate offshore jurisdictions that are ideal for protecting your assets; those that are non-traditional jurisdictions.