Offshore investing- the dream of a businessman
The dream of any businessman is minimum taxes and the simplest possible conditions for doing business. The embodiment of this desire has become offshore. It is they who are now the main obstacle to mutual understanding between the business world. and governments of many countries.
It is unlikely that now there will be an entrepreneur who would not like to reduce the expenses of his company. First of all tax. Many find ways to achieve this. Recently, such a method of evading tax pressure as the creation of offshore companies has become very popular. Everything happens within the framework of the law, while the owners of the company have the opportunity to earn a lot of money.
The offshore business has become more important in world capital turnover. Its features and the new features that it offers deserve constant attention. It is no secret that quite a lot of foreign businessmen conduct their business through offshore firms. For example, in Denmark, they even joke that tax evasion is a national sport.
The purpose of creating offshore investment
Carrying out business through offshore provides a legal opportunity to increase the degree of investments protection. Moreover, their use is especially relevant for entrepreneurs working in the countries of the Eastern Bloc. The high probability of investment risk due to economic, political, social, and legal instability in these countries limits the inflow of foreign investment needed to modernize the industry, commerce, and finance.
According to experts, about 80% of investments in Ukraine were made through offshore companies. For this, mutually beneficial agreements, lines of credit, subsidiaries and joint ventures can be used. Foreign investment can also be made in the form of equipment and technology.
What is “offshore”
Legal tax planning is not just a well-established accounting and proper preparation of balance sheets, it is also a legitimate opportunity to either not pay any taxes at all, or to reduce their level to a minimum.
Therefore, “offshore” (from English offshore – “offshore”, “abroad”) is one of the most well-known methods of tax planning. It is based on the laws of many countries, partially or fully exempting companies belonging to foreign entities from taxation, but on the condition that the firm has no income in this country and the owners and management are not residents of the country.
By creating an offshore company, an entrepreneur can significantly and completely legally reduce the number of tax payments of his local firm. As a result of the interaction of a local firm and an offshore company, it is possible to virtually eliminate income tax payments and significantly reduce income tax payments.
At the same time, the main rule to be followed when creating and using offshore companies is to take into account the norms of domestic legislation and the norms of the country of incorporation. Failure to follow basic requirements can lead to bad consequences.
Today, there are more than 60 countries in the world whose regulatory framework provides for tax breaks for offshore companies. The most famous include:
Europe: Ireland, Liechtenstein, Luxembourg, Madeira, Malta, Monaco, the Netherlands, Switzerland.
British Isles: Guernsey, Gibraltar, Jersey, Alderney, Maine, Sark.
Middle East: Bahrain, UAE.
Africa: Liberia, Mauritius, Seychelles, Zanzibar.
Pacific Ocean: Cook Islands, Hong Kong, Labuan, Marshall Islands, Nauru, Singapore, Vanuatu, Western Samoa.
Central and South America: Belize, Costa Rica, Panama, Uruguay.
All these countries can be divided into two groups:
a) those that tax offshore companies with a relatively low tax;
b) those that completely exempt such companies from taxes (in this case, the firm pays the government a fixed fee for renewing the license to operate).
The classic methods for creating offshore are:
“Offshore – safe.” A company is created only for the purpose of storing and using funds. For example, you have a certain amount of money and you would like to place it in a safe place. At the same time, you want to have immediate access to it, freely dispose of these finances and at the same time be protected from the political instability of the state in which you live. The solution is to open an offshore company, where you are the director and, accordingly, the account holder (no one will know that you and the owner). The correct choice of the jurisdiction of the company makes it possible to solve any problems.
The most popular funds for storage are the Commonwealth of the Bahamas, the British Virgin Islands, Belize, Caicos.
“Offshore – a member of your business. ” Your company conducts foreign economic activity and you need to optimize taxes, simplify document flow, speed up financial flows and ensure their reliability. In this case, an offshore company plays the role of an intermediary between your local company and the seller (buyer) with whom you conduct your international business.
“Import of fixed assets”. This method is used to import, for example, the means of production while avoiding the payment of duties and VAT.
“Resident Nowhere”. The legislation of some countries allows you to avoid the taxation of wages that a private person received during a trip abroad.
Recently, the purpose of using offshore companies has changed somewhat. Now the offshore is quite an effective tool for stabilizing payments, regulating the prices of export-import contracts, self-financing, selling copyrights, leasing equipment, hiring personnel, supplying raw materials and purchasing real estate abroad.
Countries, where offshore companies are registered, can be divided into several categories.
1. Small states, islands with a low level of development of their own economy, but with a sufficiently high political stability (the Bahamas, British Virgin Islands, Vanuatu, Seychelles, etc.). As a rule, these countries do not put forward any reporting requirements; the main thing is to pay an annual fixed fee to the treasury.
2. Countries whose management controls are more stringent than in the previous case, a register of directors and shareholders of companies is maintained. But the prestige of such firms is much higher. These are Ireland, Gibraltar, Luxembourg, Switzerland, the Isle of Man and others.
3. There are also a number of non-offshore countries in which you can work in a decent company and at the same time pay very small amounts. This is the United States, United Kingdom, Canada. These states have such organizational and legal forms that allow them to quietly conduct business activities with low costs for fixed fees.
Registration and cost of an offshore company
If we talk about the procedure for placing an order for registering a company, then it will take no more than five minutes and it can even be done on the websites of companies offering such services (by the way, this market is very developed now).
The cost of services for the opening and maintenance of offshore companies is different. First, it depends on the jurisdiction – more prestigious, respectively, more expensive, but there are cheap, and secondly – on the type of company. For example, offshore banks, trusts or insurance companies are more expensive than a regular company.
The nature of the business is also relevant. For one-time ones, low-cost ($ 500-700) companies are of course registered, for example, in offshore zones in the Caribbean, the English Channel. Approximately the same amount will have to pay for the registration of the company in some US states.
In general, the price can vary from a few hundred dollars to tens of thousands, for example, the opening of a company in Switzerland ($ 15,000) or an offshore bank ($ 22,000). Regarding the cost of services for the maintenance of the company (documentation, reports), it ranges from 450-800 to 6500 US dollars per year.
For example, the cost of services of one of the Kiev consulting agencies is as follows:
• Mauritius – $ 1,700 and $ 1,800
• United Kingdom – $ 2,100 and $ 1,800
The cost of the company, depending on the jurisdiction, includes:
1. Registration fee.
2. Certificate of registration.
3. Charter of the company (By-Laws or Memorandum of Association).
4. Protocol on the appointment of the director (s).
5. Notarization and Apostille.
6. Issue share certificates.
7. Corporate printing.
8. Legal address.
9. License fee per year.
10. Secretarial services for a year.
11. Consultations on taxation of a specific jurisdiction.
Some companies, taking into account the individual wishes of the client, offer a large selection of price packages with discounts. Many of them provide services that require special confidentiality (for example, the creation of a company with full nominal service).
Offshore and Ukrainian legislation
Attempts to stop the export of Ukrainian capital abroad have been made for a long time. But at first, they were more declarative. Domestic legislation has become more radical on the issue of offshore companies when it felt the pressure from international organizations involved in the fight against money laundering. And although this process in Ukraine was not as active as, say, in Russia, however, domestic regulatory documents are much tougher in terms of control and punitive measures. In addition, they involve a greater number of different government bodies.
Until today, about ten different documents were adopted in the country, which regulated the foreign economic activity of companies.
The fight against offshore in the country led to the following results:
• in its classic version, that is, the Bahamas, Nauru, etc., the offshore has narrowed to a minimum;
• active export of capital led to pressure from international organizations had negative consequences for the country’s economy;
• entrepreneurs are forced to change their work patterns depending on the new legislation;
Thus, we can conclude that the burdensome tax policy of any state continues to force businessmen to find ways to legalize tax planning. In addition, this process is changing and will contribute to the development of the relevant services market.
Cyprus is no longer offshore
In the most popular offshore center – Cyprus – adopted a new tax law. According to him, the island loses its status as an offshore zone. That was the main condition for the entry of Cyprus into the European Union.