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Tax havens come in distinct categories. The key is to find a tax haven that suitable for your business operations.

Tax Havens

Different categories of tax havens are as below:

  • No-tax havens
    Certain countries does not require companies to pay taxes at all. These are commonly known as no-tax havens.

  • Only income that derived locally is being taxed
    On the other hand, there are countries that only tax income that derived locally i.e., any income from local operations.
  • Tax treaties
    Another category of tax haven is countries that have signed tax treaties with other countries. In this way, investors do not get taxed twice for the same income.
  • Special privileges to foreign companies that incorporated in the nation
    There are also tax havens that offer special privileges to companies incorporated in their country.
  • Offer better benefits to international business
    You would also be able to find tax havens that offer better benefits to international businesses while others pose advantages to individuals.

The key is to find a tax haven that is most suitable for your business operations and which offers favorable jurisdiction. Tax havens generally follow the rule of favorable jurisdiction. Any large corporation will be able to tell you the difficulties in setting up businesses and operating from countries with a prominent level of bureaucracy and legal obligations. Thus, you would want to operate from a country that can give you favorable jurisdiction.

When making such a comparison, you would look at it from these few criteria: an economically stable country which is neutral politically, adopt a free trade policy, ability to offer privacy to corporations based there, and ease of which each business can conduct their operational activities. These are the main factors you would want to investigate before thinking of setting up an offshore company. Of course, the fact is still that you do not need to be physically present when setting up an offshore company.

Countries such as Seychelles and Luxembourg allow you to set up businesses there through an agent. Other countries such as Cyprus and Cayman Islands allow you to open bank accounts the same way. You do not even need to step foot in the offshore office if you do not want to. Thus, it is even more important that you select a tax haven that will give you the flexibility to operate a business without having to be there all the time.

For an in-depth description of offshore companies and tax havens, click here.

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Offshore Companies

Before opening an offshore company, you would also need to look into appointing a nominee director and nominee signatory. This is especially important if you do not intend to be the director of your offshore company. Most business owners prefer to have a nominee director in their place for privacy reasons. This is highly normal. As such, they then appoint nominees as directors in the offshore company. You can rest assured that nominee directors are highly passive and do not take any pecuniary interests in the running of the business. Instead, they are just paid a nominal directors fee and must uphold certain responsibilities. Apart from that, they are not concerned with the running of the company nor do they have any decision-making authority. The same goes for nominee signatories.

If you choose to incorporate an offshore company, you can be satisfied with the following: your company will be set up as a limited liability corporation; there will be minimal statutory obligations; capital requirements are low; disclosure of company information will be kept confidential and not many agencies will be privy to such information, if at all; the location of your company’s shareholders and directors meetings can be held anywhere which is convenient for you; and there is hardly any necessity for audits to be held on your accounting and financial records. With all this information at hand, you would then be able to come up with a comprehensive plan for your tax obligations.

Finally, you would need to understand the type of law that is used to govern the business and commercial operations in each tax haven country before making your decision. There are three types of laws normally utilized by each country around the world. The English common law is found throughout the world, especially in the British colonies. It is also the one you would normally find in tax haven jurisdictions. The British Virgin Islands, the Bahamas, and Belize adopt the English common law. Meanwhile, the European Company Law is based on French Law and is often seen as slightly more time consuming as there are more requirements. You also have US Company Law which mainly has differences in terminology and language. Countries such as Panama and Liberia adopt company law based on certain aspects of the regulations in the US.

Engage with incorporation specialist to set up your offshore company

There are many things you need to think about before incorporating an offshore account. The best way to go about it would be by opting for the services of a consultancy agency which would be able to give you the information you need to make the best decision for your organization. From tax planning advice to incorporation best practices and information on favorable jurisdiction, Paul Hype Company would be your best chance for a more informed decision. Whether your country of choice is Belize or the Bahamas, the Cayman Islands or Cyprus, Singapore, or Labuan Island, we will be able to help you with your offshore company incorporation needs. To find out more, visit their website or contact them today.

The Different Categories of Tax Havens FAQs

What is the example of tax haven disadvantages?2021-01-20T09:24:53+08:00

Some disadvantages of tax haven are it’s difficult for business to open a business bank account and it’s hard for business to attract outside investors.

What is the example of tax haven advantages?2021-01-20T09:24:34+08:00

Business benefits from tax reduction is the example of tax haven advantages. In tax haven countries, investors pay very little or even zero tax for taxable income.

Which countries are popular for tax havens?2021-01-20T09:24:11+08:00

Popular tax havens countries for investors are British Virgin Islands, Taiwan, and Bermuda.

What are tax havens?2021-01-20T09:21:19+08:00

Tax havens are places or countries that offer relatively low tax rate for foreign investors.

2021-01-29T09:12:10+08:00May 22, 2013|0 Comments
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