Use of Tax-Incentive Structures

Besides tax aspects and advantages, a number of clients prefer offshore locations thanks to the anonymity and confidentiality on the part of local authorities, which is guaranteed by legislation of those countries. This anonymity and confidentiality can be exported even to the onshore locations as an offshore firm entry into an onshore company when the offshore firm purchases ownership interests of the onshore company.

Many offshore jurisdictions guarantee full confidentiality of ownership of offshore companies, which is based on the legal standards of the offshore jurisdiction in question, where it is an offence to cause disclosures of information concerning the beneficiary owners of the companies.

This legal regulation applies also to possible questions on the part of third country governments, authorities or tax inspectors, concerning the beneficiary owners of the company in question. In general terms, it is possible to state that no beneficiary of an offshore company will be disclosed to third parties by the authorities of the country where the offshore company is registered and where a similar code of confidentiality is recognised, as long as the company is doing business in a legitimate field of business activities, which of course includes also international tax planning and optimising the existing tax burden or asset protection.

Depositing free financial means in various currencies in foreign banks on term deposit or current accounts can protect the depositors from envying neighbours, competitors, executions, but it also sharply reduces the risk of economic bankruptcy connected with the economy of one country through diversification of assets into foreign jurisdictions. Another advantage is represented by the fact that the yields of term deposit accounts are not subject to taxation in offshore banks.

If we take into consideration that the average annual yield on a dollar term deposit account at an international bank established in a tax heaven is from 4.5 per cent to 8.5 per cent per annum, then it surely pays to consider an investment in an offshore jurisdiction. It is good to be reminded that at present more than 2/3 of the liquid capital is concentrated in offshore financial centres or comes from these centres. The requirements on the registered capital of the bank are in a majority of offshore jurisdictions lower than in onshore countries.

Holding Companies

Offshore corporations often hold investments in subsidiaries and/or associated companies, publicly quoted and private companies, as well as joint venture projects. Capital gains arising from the disposal of particular investments can be made without taxation. In the case of dividend payments, reduced levels of tax on income can be achieved by utilising a company incorporated in a zero or low tax jurisdiction that has double tax agreements with the contracting state.

Many large corporations are interested in investing in countries where no double tax agreement exists between the country of the investor and the country in which they are investing. In this case, an intermediary company is established in a jurisdiction with a suitable treaty. For example, the Madeira SGPS company has been used for investments in the EU, since corporate entities registered there can avail themselves of the EU parent/subsidiary directive. Cyprus has an extensive double tax treaty network with many eastern European countries and countries of the former Soviet Union, and the use of Cypriot companies for inward investment into these countries provides a tax efficient conduit.

A business company basically acts in the role of business mediation company, in the most ideal case it is doing business by itself. By its being registered in a liberal tax jurisdiction it taxes its profits at an acceptable tax rate or it does not tax them at all if it is subject to such a fiscal system which enables it to do so.

E-Commerce

Shifting business to an offshore jurisdiction removes restrictions, regulations and taxation. What can you do with 50 percent more time and money?

Ship management and yacht ownership

Many important offshore jurisdictions - Panama, Liberia, the Isle of Man, Madeira, Jersey, Gibraltar, Cyprus, the Bahamas, Belize and Mauritius - have modern ship and pleasure craft registration facilities for the purpose of providing low cost registration fees and exemption from tax on income derived from shipping and chartering activities. The owners of pleasure craft operating within EU waters for extended periods require specialist advice with regard to VAT.