Taxation principles of offshore jurisdictions
One of the main purposes of registration of an offshore company for the owner of any enterprise is the possibility to take advantage of the benefits that non-resident companies are provided with.
Taxation in offshore jurisdictions divides them into four main groups:
- Classic offshore jurisdictions. These are jurisdictions, mainly island states of the Caribbean, providing a complete tax exemption to non-resident companies if they carry out no activity in the territory of the country and do not earn profit from it. Offshore companies registered therein only pay a fixed annual duty to the state registration authority. They are also exempt from annual accounting and reporting and audit. Such a system makes it possible to transfer unlimited amounts of money through offshore structures and accumulate them avoiding paying taxes.
- Countries that provide favorable taxation for separate activities, for instance holding companies in the Netherlands, Luxemburg, Switzerland. Taxation of offshore companies https://www.offshorecompanyregister.com/ in such states is similar to that of a classic offshore jurisdiction except closer attention paid to accounting and reporting. They are also distinguished with a lot higher level of confidence in the world, expensiveness and complexity of administration. Those jurisdictions are most often chosen by large international businesses to form holding structures as they combine respectability of European registration and favorable tax laws.
- Separate territories having offshore tax regime but at the same time they are part of a usual state with a normal tax system. Some states of the USA such as Delaware, Nevada and Oregon can be given as examples of such offshore jurisdictions. In overwhelming majority of them taxes are minimized due to division of tax system into several levels: federal, state and local. Accordingly companies registered in those offshore jurisdictions are exempt from local taxes and only pay federal taxes which may be either zero or minimum.
- Non-traditional offshore jurisdictions. Actually these are countries which are not offshore jurisdictions https://www.offshorecompanyregister.com/ in any respect but they are among them due to historical background. One of the best examples is Cyprus which long ago ceased to be an offshore jurisdiction as such but out of habit is considered to be such. Ireland can also be considered as such with reservations. After the banking crisis in early 2013 and changes in legislation of the Republic of Cyprus it is possible that it will no longer be perceived as a suitable tax haven for business and become a usual jurisdiction with normal taxes imposed on companies registered in its territory.