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For foreign investors and business owners looking to setup offshore business, one of the most important considerations in selecting a jurisdiction is the government policies, especially the tax requirements. This will allow you to understand the compliance burden you will face after setting up your offshore company and therefore, based on this, you can determine the most suitable jurisdictions for your business.
The following are the top five tax-free countries to start your offshore business:
1. British Virgin Islands:
Owing to a business-friendly environment and strong infrastructure, the British Virgin Islands is one of the top countries to setup offshore business in. Located in North America, the BVI has a stable political and economic environment. Businesses are regulated under the BVI Business Company Act which was last amended in 2019.
The government does not levy corporate taxes on the companies in this region and therefore, the British Virgin Islands is known as a ‘tax haven’. BVI ranks 1st out of 70 countries in the Corporate Tax Haven Index of 2021. Foreign investors are not subjected to capital gain tax or withholding tax as well. Businesses are instead required to pay an annual fee.
The registration process of an offshore company is convenient and hassle-free. The requirements to set up such a company are low with a need for only one director and one shareholder, who can be the same person. This process can be completed within a week. Moreover, the BVI International Tax Authority does not impose audit filing requirements or submission of financial statements on the businesses.
Despite being required to disclose information about the directors, shareholders, and unique beneficial owners (UBOs), this information is not disclosed to the public, guaranteeing complete privacy for the business.
2. Bermuda:
Located in the North Atlantic Ocean, Bermuda is a British Overseas Territory that has its own government. There is a strong infrastructure available in this country, suited for business needs and a well-developed financial infrastructure.
Bermuda is one of the top tax-free countries worldwide with no corporate tax, income tax, and capital gains tax levied by the government. It ranks 3rd out of 70 countries in the Corporate Tax Haven Index of 2021. Despite being labelled as a ‘tax haven’ which has a negative connotation to it, the Organisation for Economic Cooperation and Development (OECD)has put Bermuda on the “whitelist” of countries that have transparent tax policies.
It is convenient to incorporate a business in the country with the requirement of one director, one shareholder, and no minimum share capital. However, the incorporation process may require a longer time. Besides, you will also complete one annual filing known as the Statutory Declaration on which the government bases its annual fee.
3. Hong Kong:
Strategically located in the heart of Asia, Hong Kong is one of the top locations to setup offshore business in. Despite the recent political instability caused in the country, the economic and judicial system remains sound. The government has continued to offer various benefits to attract foreign investors. One such benefit provided to offshore companies includes the complete tax exemption on foreign income. Moreover, the government also exempts business owners from capital gains tax and withholding tax on earnings remitted abroad. The government also has an extensive network of tax treaties with 45 countries.
According to the Ease of Doing Business Report, Hong Kong has a rank of 3rd out of 189 countries. The registration process in Hong Kong is smooth and hassle-free without any unnecessary bureaucracy. With fewer registration requirements including a low share capital requirement, the registration process is quick. Besides this, Hong Kong is considered to be a financial hub and provides various banking facilities to business owners.
4. United Arab Emirates:
The strategic location of the United Arab Emirates connects it to the Middle East and African countries, providing businesses with access to the international markets. This along with the growing economy and strong infrastructure available in the region attract foreign investment.
Besides, with the aim to create a business-friendly ecosystem in the country, the UAE government offers complete exemption from tax payments to offshore companies, especially in the free trade zones. These zones are spread across the region and include the Ras al Khaimah Free Trade Zone and the Ajman Free Trade Zone.
Additionally, the incorporation process of an offshore company in UAE is relatively easier which can be proven by the rank of 16th out of 189 countries, it received by the World Bank Group’s Doing Business Report.
Moreover, with a stable political and economic environment and business-friendly government policies, UAE may be a top choice to setup offshore business.
5. Bahamas:
Located near the United States and Cuba, the Bahamas is a top location for foreign investors who are attracted to the complete tax exemption offered by the government to offshore companies, not conducting business locally, for up to 20 years from incorporation. Moreover, for business activities conducted within the country, low taxes and various tax benefits are offered which attracts foreign investment further. Some of these tax benefits include complete exemption from capital gain tax and withholding tax.
Regulated under the International Business Companies Act of 2000, setting up an offshore company is a convenient process with fewer requirements to set up business including the need for one director and one shareholder. The opening of a corporate bank account in the Bahamas is a relatively easy process as well. Besides, it is not compulsory for businesses to file annual reports, to have documents audited, and to hold the annual general meeting in the Bahamas.
Moreover, with flexible and business-friendly laws, the government also guarantees complete privacy to the shareholder information of the business and security over the business assets.
Thus, the above-mentioned five countries are the top tax-free countries where you can consider setting up your offshore company. There are other factors you need to consider which may include the requirements of your business, the total cost of registering, and more.
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