Best Countries for Registering Offshore Companies

An offshore company is a business entity that is registered outside the country of the company owner’s residence. This is the meaning of the phrase that we are going to use in the text below even though we must admit that the word ‘offshore’ may have different connotation for some people.

Those who do not know much about international business and tax planning mistakenly associate offshores with money laundering and terrorism financing. The matter is, however, that there are very few money-laundering schemes remaining in today’s world. Due to the global de-offshorization efforts, financial machinations are very hard to perform. For instance, you cannot conceal your foreign bank account from your home country’s fiscal authorities because countries automatically exchange financial information with each other. True, it was possible to set up a numbered bank account before but not any longer.

What an offshore company actually is

An offshore company is a business entity in a foreign country that has favorable tax policies. One of the reasons why people register offshore companies is expanding the geography of their business operations and attracting clients from many countries. Besides, offshore jurisdictions often offer good company re-domiciliation conditions.

An offshore jurisdiction does not have to be a small island country in the middle of the ocean. You can open an offshore company in Europe, Asia, and some states of the USA in 2023. Because the choice is so wide, you have to give yourself enough time for investigations when choosing the best country for an offshore company. Here we would like to give you some food for thought and point out several countries that you might want to consider. Before we do so, however, we would like to indicate the main advantages that an offshore company can bring.

Why is it a good idea to register an offshore company?

An offshore company can be used for various purposes and it can help you solve different tasks. The main reasons why people register offshore companies include the following ones:

  • Legal tax optimization: legislations of some countries allow foreign corporate entities registered on their territories to pay little or nothing in taxes.
  • Establishment of holding structures that hold a group of companies located in different countries. This is a way of expanding your business.
  • Engagement in activities that are illegal in the country of the company founder’s residence. It can be gambling, insurance, financial services, FOREX trade, brokerage services, and so on.
  • Capital diversification via investments in foreign companies.
  • Opening corporate bank accounts in foreign countries.
  • Protection of personal and business assets from lawsuits, creditors, relatives, and other risk factors. If this is your main goal, then you should consider creating an offshore trust in Nevis, Belize or the Cook Islands because a trust is the most efficient asset protection instrument.

Please note that over the last 10 years, many offshore jurisdictions have amended their corporate legislations following the recommendations of G20, OECD, EU, and FATF. Please acquaint yourself with the most up-to-date legislative information before setting up an offshore company in a particular country.

Recent changes in the tax policies of offshore jurisdictions

What legal provisions have been changed in the global de-offshorization process and how have they affected offshore business? The main advantages that people seek when registering offshore companies are tax benefits, confidentiality, no reporting requirements, and freedom of action. The most important factor for many is probably the opportunity to save on taxes. Let’s see what has changed in the tax codes of some offshore jurisdictions.  

New tax exemption regulations in 2023

Many offshore countries have updated their tax legislations but have their legislations been improved? We apologize for the oxymoron but these have been improvements for the worse. Many countries have raised taxes.

  • Seychelles used to charge local IBCs no taxes at all but after the tax reform of 2019, the country adopted the territorial taxation system. Today Seychelles-registered offshore companies pay taxes only on the income made within the country and any foreign income is tax-exempt. However, the Business Tax Act that was passed in 2021 says that in case a local company is part of an international business group and it ‘does not have sufficient economic substance’ in the country, the company is taxable on its global (!) income including passive income such as dividends and interests.
  • IBCs used to pay no taxes in Belize before but now a ‘Business Tax’ is payable by all companies and it is levied on global income. The standard rate is 1.75% and the first US$ 37,500 is tax-free. At the same time, LLCs still don’t have to pay any taxes in Belize, which makes the country attractive for registering an offshore company there.
  • St Vincent and the Grenadines used to charge zero taxes until recently. Now the profit tax (after all the costs have been deducted) is 30%. The main advantage for offshore companies have been preserved, however: the taxation system has remained territorial, which means that only the profits made within St Vincent and the Grenadines are taxable.
  • The Federation of St Kitts and Nevis also applies the territorial taxation system. Local tax residents pay the tax at 33% while offshore (non-resident) companies can be tax-exempt.

You should also consider registering a company in the BVI and Caymans because these jurisdictions have preserved zero tax rates.

Where should you register an offshore company in 2023?

Tax benefits are not the only advantage that you can get by registering an offshore company. You should choose the country carefully and in addition to ‘true’ offshores consider some European and Asian jurisdictions too.

‘True’ offshore zones for your company

Offshore jurisdictions in the full sense of the word charge zero taxes and the company maintenance costs are low there. However, in view of the recent changes, offshore jurisdictions can be divided in three groups:

  • Countries that retain zero taxes in 2023: British Virgin Islands, Caymans, Bahamas, and Bermuda.
  • States that apply the territorial taxation system wholly or partially: Seychelles, St. Kitts and Nevis, Marshall Islands, Guernsey, Jersey, and Isle of Man.
  • Offshore countries that have stopped charging zero taxes: Belize, Saint Vincent and the Grenadines, and Malta.

You can also consider registering an offshore company in one of the following states:

  • Mauritius;
  • Panama;
  • Antigua and Barbuda;
  • Dominica;
  • Grenada;
  • St Lucia.

You have to realize that tax regulations change often in offshore jurisdictions.

Offshore zones in Europe

Some European countries offer favorable tax conditions to foreign companies registered on their territories. You can set up a business entity in one of the countries listed below and do business from a reputable jurisdiction. Besides, you will gain access to the best financial institutions in the world.

  • Estonia;
  • Lithuania;
  • Latvia;
  • North Macedonia;
  • Cyprus;
  • Malta;
  • Gibraltar.

An offshore company in Asia and in the Middle East

The following oriental jurisdictions are attractive for registering an offshore company:

  • Hong Kong;
  • Singapore;
  • Indonesia;
  • Labuan Island;
  • UAE;
  • Qatar;
  • Turkey.

We must admit that setting up a company in any of these countries is not as easy as registering one in an offshore jurisdiction. On the other hand, these countries are well-respected and their banking sectors are well-developed. A foreign company registered there can enjoy tax benefits if it meets certain requirements. For example, Singapore, where many international businesses outsource accounting singapore, offers tax holidays for startups, the UAE has multiple Free Trade Zones, and the corporate income is 3% for local companies in Labuan.

To avoid mistakes in the process of offshore company formation, you should study your home country’s legislation that concerns CFC and double taxation avoidance. Besides, some professional advice would come in handy if you want to register an offshore company.