Individual selection of jurisdiction
Do you want to carry out ICO, create crypto exchange, launch goods distribution online, protect yourself from unlawful actions of state authorities or get access to great capital market?
There is no ideal algorithm which will with the initial data: a goal, desired tax rates, ease of administration, accurately determine which jurisdiction is ideal for you, since nowadays only experienced lawyers can carry out this task.
The answer to the initial question “How to choose a jurisdiction for business may be broken down into 6 parts, on the basis of which any jurisdiction should be assessed for the incorporation profitability in accordance with its laws.
1. The reputation of the jurisdiction
Reputation is more important than any preferences that laws promise. This is especially true for offshore jurisdictions, because even if you are lured by zero tax or lack of filing of financial statements, it may turn out that the jurisdiction offering this is on the blacklist of most countries. In the future, this will result in the impossibility of opening bank accounts, increased taxation in a country where the ultimate beneficial owner is a resident, and many other troubles.
2. Political and economic stability
This point is obvious, but it is impossible not to mention it, since the registration of your company in a country with an unstable political situation will lead to complete paralysis of all business processes.
3. Availability of legal preferences
This point is the most extensive and most specific, because it includes many criteria, among which it is worth highlighting:
– low requirements for the authorized capital;
– low requirements for reporting;
– the possibility of “appointing” nominee owners / directors;
– lack of requirements for disclosure of ultimate beneficial owners;
– exclusion profits earned outside the jurisdiction from the tax base;
– the speed of the registration process;
– legislation that takes into account the conflict of laws rules necessary for conducting business internationally
4. Tax rates
The level of taxation is one of the first characteristics that are looked at within the process of making a decision to register a company in a new jurisdiction. Classic offshore companies often offer from 0% to 5% flat corporate tax rate, but we do not advise you to choose such jurisdictions without analyzing all the other points outlined by us. In addition, when analyzing the tax attractiveness of a jurisdiction, one should pay attention not only to nominal, but also to real (effective) tax rates. During the evaluation of the real tax rate one should take into account the characteristics of your business, the industry in which you operate, and other factors.
5. Availability of double taxation agreements
This point is better to consider in conjunction with the higher point, because low tax rates in the jurisdiction of your company registratio does not mean a low level of taxation. Although the previous sentence may seem absurd, it is becoming more and more true in the modern world, where the rules of taxation of CFCs (controlled foreign corporations) are being adopted by an increasing number of countries. Taxation of CFCs by a country of which the ultimate beneficial owner is a resident leads to the fact that classical offshore companies are losing their popularity, and they are being replaced by developed countries with average tax rates and a high number of double taxation treaties, such as the United Kingdom (more than 130 of these bilateral treaties).
6. Cost of establishment and maintenance
Setting up and running a company abroad requires payment of state fees, commission of legal agents and other expenses. For this reason, it is necessary to accurately weigh all the benefits that can be obtained from setting up the company you need abroad.
The above described list is exhaustive for conducting a detailed analysis of any jurisdiction. At the same time, from our experience, we understand that decisions to register a company abroad may also be due to personal reasons. Contact the chat, and we will provide you with legal advice, in which we will help you choose the exact jurisdiction that suits you.
What is an offshore zone?
Many of our clients, when ordering the service of registering a company in a foreign jurisdiction, immediately focus on offshore zones, because all of presume that offshore zones have zero tax rates, minimum reporting requirements and low requirements for the transparency of the corporate structure. But is it the case?
For the classic offshore zones: Belize, Panama, Cayman Islands, Samoa, Seychelles and about thirty others, these characteristics are true. But business have less and less reasons for happiness, and this is mainly due to the efforts of the OECD member countries and other economically less developed countries to fight offshore jurisdictions and the erosion of the tax base and shifting of profits from taxation. Blacklists of offshore jurisdictions are created by the EU, the USA and other major players. If an offshore zone finds itself into such a list, it will mean restrictions when reducing the tax base in the case a transaction occurs with a company from such jurisdiction and many other restrictions.
Nevertheless it is not a reason for despair, Legarithm will select a working model for you, in which the advantages offered by offshore zones will be preserved (let’s be honest – not at the level of 0% tax rate, but not 20% +), as well as take into account the main onshore jurisdictions, with that you interact with so that you can use legal tax instruments and conduct transactions without hindrance.
What types of offshore zones exist?
An offshore zone is not a legal term and in everyday communication denotes jurisdictions with low tax rates. Some countries and international organizations have created their own lists of jurisdictions that are considered “offshore” by the state that has adopted this list. Any categorization of offshore zones is conditional, but as a rule, the division is carried out based on the level of tax rates, image adopted by the international community and types of activities that are subject to tax preferences.
1. Classic offshore and / or jurisdictions with zero tax
As a rule, these are island states or autonomous entities of developed states with average economic development, in particular Belize, Panama, Cayman Islands, Samoa, Seychelles, British Virgin Islands, Nevis and others. The deoffshorization trend is creating increasing pressure on such jurisdictions.
2. Countries with low real tax rates
Such countries, as a rule, are not considered offshore zones by other developed states, because they themselves belong to them, in particular, Cyprus, Ireland, Singapore. Nominal and real tax rates in such states are usually at an average level, for example, 12.5% / 10% for Cyprus, a similar level of nominal tax rates is inherent in Ireland. In addition, the tax legislation of such countries may have preferences granted for special types of activities (for example, in Ireland there is a special tax rate of 6.25% on income received from transactions related to intellectual property).
3. Countries with a special territorial structure
In such jurisdictions, the taxation system depends on the territory, district, special economic zone in which the company is registered, for example, companies registered in free economic zones in the UAE.
Individual selection of jurisdiction for the company
Whatever Your purpose looks like, lawyers of Legarithm will help You to choose that jurisdiction for company registration, which will provide the shortest way to reach the goal. We will provide a comprehensive analysis, which will include a general description of the jurisdiction, difficulties in filing accounting, the possibility of attracting investments, issues of labor and tax legislation. Thanks to our comprehensive experience, you will receive advice that will assess the risks of doing different types of activities in a particular jurisdiction. Legarithm does not offer standard solutions for customers who are engaged in non-standard business, because our goal is to find an individual solution that will bring real value, and not to “reinvent the wheel”.