Tax Haven Incorporation
Incorporating A Tax Haven
Our reputation as a professional and ethical international company providing corporate administration services, has enabled us to develop a global network that gives us a platform to provide quality incorporation services to our clients in different countries including Panama, Singapore, and several jurisdictions within the United States. However, each of these jurisdictions have different ratings when it comes to their suitability as tax havens.
At Paul Hype Page & Co, we focus on providing tax haven incorporation services for corporations in different tax jurisdictions. Our business operates within the laws and regulations that are provided by the governments of the day. Our solutions include all aspects of offshore companies for inbound and outbound international tax structuring.
We also provide solutions for companies that operate within a single jurisdiction. Here, you get the services of a registered office and local agent services.
Incorporating In The Seychelles & Samoa – For The Asia-Pacific Region
Offshore incorporation services in Seychelles mainly focus on the financial services industry. This is because they have got an elaborate system that allows one to open and maintain offshore bank accounts with no problem at all. This makes it ideal for foreign companies that are avoiding unnecessary scrutiny. An offshore company located in Seychelles is legally referred to as an International Business Company, and is registered and regulated under the International Business Companies Act of 1994.
Another very attractive tax haven is Samoa. Operations of offshore companies registered in Samoa but which operate outside Samoa are governed by the International Companies Act of 1987. Just like in Seychelles, companies registered under this category are allowed to do any kind of business so long as it is not illegal. In addition to that, a Samoan International Company is not is not liable to pay a number of government levies and taxes that include but are not limited to, stamp duties and local taxes.
Paul Hype Page provides full corporate management services for the establishment and administration of Samoa International Companies (SICs). We can incorporate these to meet our clients’ specific requirements or alternatively restructure shelf companies. A SIC is exempt from local taxes, stamp duties and other government levies in Samoa. We can advise you on Samoa’s corporate procedures as well as its statutory filing requirements.
Incorporating In Panama & Belize Offshore In Central America
In Panama, an offshore business is not bogged down by government interference and regulations, minimum capital requirements. When it comes to issues dealing with capitalization, a company incorporated in Panama as an offshore business as it is excluded from paying many of the local taxes. In addition to this, strict privacy laws mean that business can trust the confidentiality clause in the client-agent agreement.
Belize prides itself as the only country in Central America that is part of the British Commonwealth. One of the most unique features of offshore companies in Belize is the fact that they offer maximum confidentiality. This means that the public will not be able to access the names and the addresses of the shareholders and directors as this is considered private information. However, a company registered as an offshore company, is allowed to do business only outside Belize.
Incorporating In Delaware And Nevada States In The USA
In Delaware, there are two types of companies that can be formed and registered. We have the Corporation, and the Limited Liability Company. The main advantage of registering a business in Delaware is the fact that one does not require to be a US citizen or a resident of the state. For this reason, many businesses, 850,000 to be exact, have registered Delaware as their legal home. Half of all the companies that are being publicly traded in the United States of America are registered in Delaware.
A friendly legal framework, and a very business friendly state government, ensure that the State of Nevada is one of the best suitable for businesses in the hold of the united states. But from the fact that the company the states, does not have business taxes, and that the list of shareholders are treated with confidentiality, and the fact that the separation of the business entity from the directors and officers is so clear-cut as some of the things that make many people flock to Nevada. However, businesses and investments located in this state are liable to pay federal taxes.
Tax Haven Company Formation
An offshore company is one which is registered in a particular jurisdiction, but is not allowed to do business in that jurisdiction. In addition to this, one is not even required to travel to the specific country of incorporation to register the company. This is because, in such jurisdictions, there are many agents whose sole purpose is to ensure that businesses are registered as offshore companies without presenting undue obstacles to the subscribers. This makes the process of forming companies very easy.
Tax Haven Companies – Tax-free
The other major feature of the offshore company is the fact that it is not normally required to pay taxes. However, if a company is allowed to do business within the jurisdiction then that company would be required to pay taxes on the amount of money that they receive from within the jurisdiction. This is the case in Panama.
Tax Haven Companies – Low-tax
Apart from jurisdictions that guarantee zero tax for offshore companies, there exists another category of tax havens that are known as low tax havens. These include, countries such as Barbados, Gibraltar and Singapore. In a country like Barbados, an offshore company is charged on the total annual profits. The tax rates ranges from between 1% and 2.5%. This corporate tax is charged regardless of where the income was gotten from. In Gibraltar, the rate is 10% while in Singapore, it’s 18%.
In cases where an offshore company has been incorporated in is a pure tax haven, the company will be exempt from taxes such as withholding tax, inheritance tax, capital gains tax, gift tax, and estate tax.
The governments of tax haven jurisdictions usually benefit from tax haven companies by charging the companies an annual fee. This fee may be dependent on the level of share capital or it may be fixed depending on the jurisdiction in which the offshore company is operating from.
Incorporating a Tax Haven Company
The process of incorporating an international business company is not hard. All that one needs is to get in touch with a registered agent. In fact, many governments will not allow the registration of a tax haven company if at all it has not been registered through an agent. This agent will work on behalf of the company in that particular tax haven.
In many of these tax havens, the traditional documents are still required: the articles of association, and the memorandum of association. These documents are meant to establish the relationship within the company and the relationship between the public and the company. Despite the fact that the contents of these documents may differ from one jurisdiction to another, the general information required is normally the same:
- The name of the company
- The amount of share capital
- The purpose of incorporating the company
- The number of issued shares and their classes
- The rights and privileges of each class of shares
- The name and the address of the agent registering the company
Once these documents have been filed through an agent, registration is usually so fast unlike registering a traditional business in many jurisdictions. In jurisdictions such as Belize, Anguilla, Dominica, Panama and Nevis, the process may take hours. In other jurisdictions, the time taken maybe longer.
Tax Haven Companies Privacy
Apart from the fact that they offer very low tax requirements, many tax haven jurisdictions are known to be very keen on the privacy of the shareholders and the directors of a particular company. In some countries, the information is not held publicly while in others the company doesn’t even need to declare who the real shareholders of the company are.
However the extent of privacy differs from one jurisdiction to the other. For example in Panama one would be required to name three directors of the tax haven corporation. However in others, one may only need to name one director who can also double up as the shareholder. In most cases companies are allowed to name nominal shareholders and directors. This goes a long way to protecting the identity of the shareholders and the beneficiaries of the company.
Since majority of tax havens simply charge a license fee, some tax havens do not require one to file returns on the income earned. This means that the company can prepare financial statements for its own internal use without having to present this to the government. In lower tax rates have AIDS, the government will need this financial statements in order to determine the amount of taxes that is supposed to be paid by an offshore company. However this information is usually very confidential and even an agent is not supposed to release this information to anyone. He is bound by confidentiality laws and any breach of these laws may cost him stiff fines and a jail term too.
Tax Haven Companies – Uses
There are many reasons why one may feel or see the need of establishing a tax haven. The first reason is that it offers a lot of privacy. For people who would not want to be constantly examined and scrutinized by the public, tax havens are great solutions.
The second reason is that of ensuring that one reduces the tax liability of his company. Instead of being charged 30% on taxes or any rates that your country may be charged, an individual or a company may decide to register its business in a tax haven to conduct its business there and then save on taxes. This way the company would be able to grow without any problem.
Various Definitions of a Tax Haven
Tax havens have several different definitions.
A tax haven is a country, or a state, or a territory where taxes are charged at a very low rate, and sometimes not at all! That’s why many entrepreneurs and other businesses find it extremely attractive to move to a tax haven.
Likewise, former economic advisor to Jersey, Geoffrey Colin Powell defined what tax haven is in his own words.
“What makes a place a tax haven is the existence of a complex tax structure which is intentionally formed so that businesses and individuals could take advantage of and engage in tax avoidance.”
Others propose that any territory that alters their laws in order to attract foreign investment can also be considered to be a tax haven.
In Dec 2008, The U.S Government Accountability Office, in its report on the use of tax havens by American companies, regarded the following properties a tax haven included: nominal or zero taxes; lack of transparency in the legislative operation, administrative or legal provisions; provisions for self-promotion as an offshore company; lack of exchange of tax information among foreign tax officers.
Origin of Tax Haven
The tax independence of the Channel Islands, as they claim, date back as far as Norma Conquest, while the Isle of Man maintain that their fiscal independence began even earlier.
However, the modern idea of tax haven is normally accepted to have emerged after the World War I. Bermuda, for example, claims they were the first tax haven in the world after the creation of the first offshore companies act in 1935. Nonetheless, their claim is controversial as compared with the act of a Trust Law by Liechtenstein in 1926 established to attract foreign investors.
On the other hand, various economic commentators propose that the world’s first “valid” tax haven was Switzerland, followed by Liechtenstein. No wonder, after the social upheaval in Germany, Russia, South America and other countries, Swiss banks had been a capital haven for most people.
Offshore Banking, Sizable Business?
Although incomplete, statistics point out that offshore banking is a large business. In 2007, the OECD predicted that offshore capital amounts between $5 trillion to $7 trillion, and up to $21 trillion to $32 trillion sheltered in unreported tax haven around the world.
Now, this is where it gets interesting. If this assets earns 3% each year, and such capital were tax levied at 30%, it would still create a wealth between $190 billion to $280 billion in tax revenues, which is more than any other tax shelters.
However, tax policy director of the Chartered Institute of Taxation was skeptic over such prediction. If the figure was true, the sums could amount to about 5 to 8 times the total amount of currency presently circulating in the world.
In its 2012 report, the Tax Justice Network said the world is losing between $190 billion to $255 billion every year to tax havens, at 3% tax rate and 30% capital gains tax rate.
Citizens of Tax Justice, on the other hand, reported that countries generating $940 billion as profits declared by U.S. multinational corporations only made a meager of 7% of their total investments overseas.
Net funds submitted to several banks in the UK in 2009 amounted to $323 billion – $218 billion from Jersey, $74 billion from Guernsey, and $40 billion from the Isle of Man.
Which stage of business is this at?
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By Eric Eio
Managing Partner of Paul Hype Page & Co.
Eric was awarded an ACCA graduate in 2000 and also graduated from University of Sydney with a Bachelor degree in Computer Science & Accounting. Since graduation, he had worked in Big 4 as an auditor , including a one year overseas stint with Ernst & Young, Shanghai in 2005. He left his last appointment as an Audit Managerial position with PricewaterhouseCoopers, Singapore in 2008 before setting up his own Certified Public Accountant Practice – Paul Hype Page & Co. His firm is being selected to be one of the advisory panel for Singapore top 500 SME.