Photo by Markus Winkler on Unsplash
Negosentro | Save on Taxes in the Epoch of De-Offshorization: Six Promising Tax Havens | Let us be honest and openly say that people go offshore for two main reasons. First, to protect their assets be they property or intellectual rights. It is true that you can still protect your assets with the help of various offshore structures. However, you cannot conceal owning property any longer wherever you go and you should be aware of that.
The second reason is low or zero taxes charged in offshore zones. Many entrepreneurs dream of reducing their tax burden. It must be admitted that most countries raise taxes more often than they lower them. Offshores offer some attractive fiscal opportunities.
At the same time, an offshore company may have a serious disadvantage: it may prove difficult to open a corporate account for it. And if your company does not have a bank account, it is practically useless.
Notwithstanding this disadvantage, there are some countries that look attractive anyway, mainly in terms of taxes. They can be referred to as ‘tax havens’ in this or that sense. Below we discuss six such countries.
We list the countries that meet the following criteria:
- Their international reputation is good;
- They charge low taxes;
- It is possible to open bank accounts for companies registered in these countries;
- There are some additional advantages such as an opportunity to acquire citizenship of, or legal residence in, the country, for example.
The first two countries (Nevis and Marshall Islands) can be referred to as ‘offshores proper’, the second two countries can be called ‘mid-shore jurisdictions’, and the rest are onshore countries offering some advantages typical of offshore jurisdictions.
1. Nevis
Nevis is part of the Federation of St Kitts and Nevis in the Caribbean Sea. An offshore jurisdiction with a well-developed infrastructure, flexible legislation, and local banks. These are the main reasons why Nevis is on the list.
| Income tax: | 0%, if the business activities are performed outside the country |
| Dividend tax: | 0%, if paid from outside the country |
| Opening a bank account locally: | Possible |
| Opening a bank account internationally: | Difficult |
| Applications: | Asset protection, holding companies, inheritance trusts |
| Additional advantages: | Nevis disregards foreign court decisions and does not accept class suits. The plaintiff has to pay a large sum of money before filing suit and he or she will lose the money if the case is lost. If the case is won, the plaintiff can get hold only of the company dividends and profits but not of the company’s fixed assets (unless the company is found guilty of fraud). St Kitts and Nevis also administer a citizenship-by-investment program that allows ‘buying’ citizenship of the country. This is the oldest and one of the most reputable such programs in the world. |
2. Marshall Islands
The Pacific Ocean, a tiny island state, a large ship register, and a true offshore jurisdiction. A spotless reputation and flexible legislation make the Marshall Islands one of the most attractive offshores today.
| Income tax: | 0% |
| Dividend tax: | 0% |
| Opening a bank account locally: | Not possible |
| Opening a bank account internationally: | Possible but a lot of preparation and paperwork is required |
| Applications: | Trading, online business, IT projects, maritime ownership, IPOs, asset protection |
| Additional advantages: | The jurisdiction enjoys a wonderful reputation indeed: it is on the EU, OECD, FATF, French, and many other national ‘white lists’. Associated with the USA. Has one of the largest registries of marine vessels and yachts. |
3. Panama
Do offshore companies pay VAT? In many jurisdictions, they do not but the VAT is payable in Panama even though the rate is comparatively low. Panama is not exactly an offshore jurisdiction for many other reasons as well. It is a country with an advanced financial sector, industrial zones, and a rapidly growing economy. And don’t forget about the Panama Canal!
At the same time, the territorial taxation system is applied in Panama when no globally made incomes are taxed in the country. Only if the profit is derived within Panama, the income tax is payable. This fact makes Panama similar to offshores.
| Income tax: | 25% on domestic income and 0% on foreign income | |
| Dividend tax: | 10% on dividends from local sources and 5% on dividends from foreign sources | |
| VAT: | 7% | |
| Opening a bank account locally: | Possible | |
| Opening a bank account internationally: | Possible | |
| Applications: | Holding companies, trading companies, IT projects, and financial services (a license is required) | |
| Additional advantages: | Panama grants legal residents to foreigners buying real property in the country. The living standards are high. |
4. Gibraltar
A rocky peninsula bordering on Spain but belonging to Great Britain. Gibraltar enjoys a high level of autonomy, however, and the local Government is free to make their own fiscal decisions in particular. If you establish a non-resident company in Gibraltar, you will have to pay no income tax there. The tax for resident companies is low, by international standards.
| Income tax: | 10% for resident companies and 0% for non-resident companies deriving incomes from other jurisdictions |
| Dividend tax: | 0% |
| VAT: | 0% |
| Opening a bank account locally: | Difficult |
| Opening a bank account internationally: | Possible in Europe and other parts of the world |
| Applications: | Online business, gambling, trade |
| Additional advantages: | Gibraltar allows re-domiciling foreign (offshore) companies from other jurisdictions. Non-resident companies in Gibraltar allow for a reduction of the tax burden and improve ownership confidentiality. |
5. Hungary
Hungary is attractive for its low tax rates, EU membership, and opportunity to open bank accounts in the country. Foreign investors are becoming more active in using Hungary in their business structures.
| Income tax: | 9% |
| Dividend tax: | 0% if dividends are paid to foreign companies |
| Opening a bank account locally: | Possible |
| Opening a bank account internationally: | Possible but requires more time |
| Applications: | Trade business, IT sphere, access to the EU market |
| Additional advantages: | Taxes are lower than they are in Cyprus and Ireland |
6. Serbia
Serbia is not an EU member state but it is a gateway to Europe anyway. Companies from the EU, China, Russia, and the USA use Serbia as a transit point for their goods going in different directions. The rent and the electricity bills are so low that it makes good economic sense to open even a large industrial plant in Serbia. Companies registered in Serbian Special Economic Zones are exempted from the VAT and customs duties. Other tax incentives are also available.
What makes Serbia especially attractive for offshore company owners is the possibility to open a subsidiary of the offshore company in Serbia thus entering the European market and opening a European bank account.
| Income tax: | 15% |
| Dividend tax: | 0% for residents, 20% for non-residents |
| VAT: | 20%; 0% in Special Economic Zones |
| Opening a bank account locally: | Possible |
| Opening a bank account internationally: | Possible |
| Applications: | Trade, production, services, import-export, access to the EU market |
| Additional advantages: | Local companies usually have no trouble opening bank accounts. It is possible to set up a subsidiary of a foreign company (including an offshore company) in Serbia and then set up a corporate bank account there. Becoming a legal resident of Serbia is easy: all you have to do is start a company or purchase some real estate in the country. The legal resident’s status simplifies bank account opening, cancels the tax on dividends, and potentially turns the holder into a legal resident of the EU when Serbia joins the Union. Duty-free trade with the EU, USA, and a number of other countries. |
As you can see, some countries and territories offer attractive opportunities to reduce your tax burden. If you can legally save on taxes, what’s wrong with that? You’ll need some professional advice, however.
Photo by Markus Winkler on Unsplash
