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Offshore VS Territorial Tax Regimes


The following company types can be used for tax planning and international business structuring purposes:
  • Zero tax offshore companies incorporated in jurisdictions (often described as tax havens), where legislation for international business companies allows foreign companies to be fully exempt of taxes if they do not conduct business activities on their own territory.
  • Companies incorporated in a territorial tax regime, which offers both offshore and onshore-type companies.  Although not regarded as a tax haven, it has a favorable tax regime which means when correctly structured and administered, the company can be used for international trade without paying local tax, provided that profits are not of local source. This is often referred to as “territorial taxation”.

OFFSHORE

  • Companies incorporated in offshore are exempt of tax. In place of tax there is fixed annual government and registered agent fee.
  • The offshore company is usually the most cost-effective solution, with very simple maintenance.
  • Offshore companies do not keep public records on directors and shareholders. Such information is held only by a licensed Registered Agent.
  • There are no requirements to file annual financial statements nor audited accounts.
  • Offshore companies may be black listed in various countries, which impose restrictions on dealing with zero tax jurisdictions (for example, LatviaLithuaniaEstoniaItaly and a few others).
  • Most Popular Applications: One-man trading company Principal company in an agency structure Holding structure for owning real estate or foreign company shares. Ship management and yacht ownership.

TERRITORIAL TAX REGIMES

  • 0% tax is achieved through territorial tax regime. It means that corporate income tax does not apply if profits are not generated in this jurisdiction.
  • Annual fees and company maintenance requirements vary, depending on local requirements.
  • Information on directors and shareholders of the company is publicly accessible at Registers (with few exceptions, for example, UAE and the US).
  • Although foreign-sourced profit is exempt of tax, financial statements must be filed.
  • Tax treaties are accessible, provided the company presents a tax residence certificate. They are used in tax planning to eliminate withholding tax on dividends, interests and royalties.
  • Most Popular Applications: International Trading Holding assets and real estate Holding subsidiaries  Holding Trade Marks and Intellectual   Property.

TERRITORIAL TAX REGIMES