There are numerous advantages to incorporating your business in a tax friendly jurisdiction. The question often asked is “which one”! We are here to help you decide, and would invite you to contact us for a free initial consultation. In the meantime, here are some points to consider:-
Low tax or no tax?
No tax sounds good but it does not always work especially where the company is actively trading in high tax areas. Zero tax companies (often IBC's) are better utilised as discreet asset holding vehicles or for private consultancy services. By contrast, low tax jurisdictions can often be zero tax with a little bit of extra work, whilst at the same time providing respectability needed for the business.
Trading in the European Union (EU)
The main consideration is the VAT and withholding taxes imposed by your EU based trading partners. Where the majority of trading takes place in the EU, it is always better to set up a company in the EU. Both Cyprus and Ireland have corporate tax rates of 12.5% on profits.
There are many advantages to utilising and benefiting from double tax treaties (DTA’s). This is a complex area and needs careful consideration to avoid additional work and costs.
Who will run the company?
This is more important than it sounds at first, due to the concept of “management & control” - the basis on which many tax authorities determine whether the company is tax resident in their jurisdiction. For a definition of Management & Control, please see our FAQ.
Zero tax jurisdictions
Commonly referred to as IBC’s and best used for asset holding and discreet trading e.g. consultancy income. This category includes: Belize, B.V.I., Seychelles and Dominica etc. as well as RAK in the UAE. They are all broadly similar & therefore the choice of jurisdiction is one of perception & price.
Common features are:
zero taxation and no audit;
minimal information on the public register;
corporate directors are allowed;
Low tax jurisdictions
When trading internationally e.g. into Europe, it is often better to use a “low tax” rather than a zero tax jurisdiction. Examples are: Singapore, Hong Kong, Cyprus, Ireland and even the UK in some circumstances.
For EU trading, and thus requiring VAT registration, Cyprus and Ireland are two jurisdictions to consider.
We have prepared a quick “Jurisdictions Comparison” table where you will see the differences of the various offshore and onshore jurisdictions. The table contains the most frequently requested features and our company formation costs.