Setting up a new venture is a dream come true for many.
However, starting a company where you reside may not always be feasible or a practical solution due to higher corporate taxes (sometimes as high as 35%) and regulatory concerns.
In such cases, choosing an offshore jurisdiction with a favorable legal regime that provides optimal levels of financial privacy, lower levels of taxes, and a conducive atmosphere to do business is an attractive option.
Choosing an offshore company jurisdiction is not a cakewalk.
Several factors need to be considered before zeroing in on one.
The truth is that there is no perfect jurisdiction that will work for all types of businesses — you need to be strategic about your choice.
So here is a roundup of the best offshore jurisdictions you can consider this year for your business:
The Bahamas, a collection of 700 islands in the Caribbean, has been a popular offshore jurisdiction to set up a company, thanks to the flexible business structure and tax exemptions it offers.
Offshore companies in the Bahamas are known as International Business Companies.
They are not subject to any exchange control laws (unless such companies conduct any business with residents in the Bahamas), which directly impact the repatriation of profits.
The International Business Companies (IBC) Act, 1990, under which the offshore companies are registered in the Bahamas, also offers a high degree of financial privacy to such companies.
Offshore companies also have no tax liability to discharge in the Bahamas.
Companies can be incorporated through a registered agent within seven days.
However, communication is a huge challenge in the Bahamas as most of the population doesn’t speak English.
Moreover, the crime rate in the Bahamas is very high, making it slightly unsafe.
The United Arab Emirates is the crown jewel of the Middle East, has emerged as a popular offshore destination for investors looking to start a new venture.
Offshore companies are exempted from paying any corporate or personal taxes.
There is also a 100% exemption on paying any taxes on import or export of goods or any capital gains.
In addition, under the newly introduced VAT regime, only certain businesses that exceed the prescribed threshold of the total taxable sales and imports of a business need to be registered with the Federal Tax Authority and submit the VAT return.
There are also no restrictions on the repatriation of profits.
The free trade zones of the UAE are an option for setting up offshore companies too since they offer more flexible terms of ownership of the investments.
However, certain business activities are not permitted in the UAE.
This makes it necessary to seek advice from a business consultant who can increase your overall costs of setting up a company in the UAE.
If you are looking in the Caribbean, Cayman Islands is an option for investors desirous of setting up offshore companies.
When you have a company in the Cayman Islands, you are not subject to corporate or personal taxes.
There are also no taxes payable on capital gains or profits from investments.
You can repatriate your profits without any additional deductions.
The only obligation is the payment of an annual licensing fee to the government which is based on the authorized share capital of each company.
However, the Cayman Islands levies high import taxes that may make it challenging for a company to operate a business and earn higher profits.
Singapore is a tax-friendly economy that is home to several multinational corporations.
It has no exchange control laws, making it easy for any holding company set up in Singapore to repatriate dividends from offshore subsidiaries directly to Singapore without any tax liability.
Singapore is also a party to several free trade agreements (FTAs) and Double Taxation Avoidance Agreements, which minimizes the trade barriers.
Due to the absence of capital gains and dividends tax, foreign investors find it attractive to set up companies in Singapore.
It has been consistently voted as one of the top countries where it is extremely easy to do business.
Strategic geographical location, the presence of a skilled workforce, and a stable political climate are some of the other reasons that make Singapore a top choice for many.
However, it is mandatory to have at least one director of the company you are setting up to be a resident of Singapore.
Additionally, if you are employing any foreign nationals to work at a company set up in Singapore, you will need to obtain work permits from the Ministry of Manpower, which can be a challenging task.
If you are keen on exploring an option that serves your customers in the EU, Isle of Man is a top choice on account of its economic stability and a simple tax system.
The location of Isle of Man minimizes the EU supply chain and makes it incredibly easy for businesses to meet the needs of their customers while making profits.
There are no capital gains taxes or wealth/inheritance taxes payable in the Isle of Man.
It also offers incentives to businesses for relocating to the jurisdiction.
In fact, the government has started a Freedom To Flourish project that offers easy access to senior government officials for support and advice.
Due to a comprehensive apprenticeship program in place, corporations also get access to a skilled talent pool.
However, since the Isle of Man has a very small population and is already home to several companies engaged in finance, tech, e-gaming, etc., you may find the economic landscape fiercely competitive and end up having low-profit margins.
When it comes to incorporating a company in an offshore destination, nothing can beat Hong Kong.
Ranked as the world’s freest economy as per the Index of Economic Freedom, Hong Kong has emerged as one of the best offshore company jurisdictions.
It is one of the world’s largest financial centers and has consistently ranked very high on the ease of doing business index.
It has a highly stable political environment and an investor-friendly legal and regulatory regime.
Hong Kong also offers one of the most favorable tax regimes globally as there is a tax exemption for profits derived by Hong Kong offshore companies.
Companies resident in Hong Kong are subject to a low corporate tax rate of 16.5% and are payable on only such income that is derived in Hong Kong.
There are no exchange control laws in Hong Kong that facilitate the complete repatriation of profits.
There is also no capital tax, shareholder dividend, or interest tax payable by any company in Hong Kong.
A company incorporated in Hong Kong can be 100% foreign-owned, with even directors not residing in Hong Kong.
The location of Hong Kong offers a huge advantage — you have easier access to Mainland China markets due to the Closer Economic Partnership Arrangement.
Access to a skilled workforce is also one reason investors find Hong Kong to be committed to maintaining complete secrecy of any foreign investments as Hong Kong occupies the 4th position on the Financial Secrecy Index.
While there is scope for virtually every industry in Hong Kong, it is highly popular for entrepreneurs in the business of software, fintech, e-commerce, and retail.
There is no one-size-fits-all approach that you can take while deciding on jurisdiction.
You need to take into account several factors such as the location of your customers, your industry vertical, your home country, taxation avoidance agreements between your home country and the prospective offshore jurisdiction, etc., to figure out the right option for you.
Ultimately, any destination you choose should allow you to maximize your profits and offer you a favorable environment to do business in.
If the business-friendly environment of Hong Kong is something that attracts you, we will be happy to help you to guide further.
All you need is a registered agent or a company secretary to get started, and we are here to incorporate a Hong Kong company digitally in just a few days.
So get in touch with us right away to get one step closer to your dream!
Once you have started a business venture in Hong Kong and have employees on the payroll, it is time to familiarize yourself with the obligations you must fulfill as an employer. Making contributions to the Mandatory Provident Fund (MPF) is one of the key responsibilities an employer must discharge in Hong Kong. In simple terms, […]
Have you ever considered offshore banking or wondered how you could legally lower your tax rate? Did the Panama Papers leak make you question the legality of offshore companies? Are you worried that you might be doing something illegal? This article will debunk common misconceptions and answer all your questions regarding the legality of offshore […]
Hong Kong is globally recognized as an international business hub. Thousands of trading companies, professional services firms, and multinationals are registered annually in Hong Kong. The city has the right facilities and resources for individuals and corporations seeking an overseas destination for their businesses. While there are numerous reasons why companies register in Hong Kong, […]