Can you Move Your BUSINESS OFFSHORE | Risk and Opportunities
ARE YOU READY TO MOVE YOUR BUSINESS OFFSHORE? HERE’S HOW TO TELL.
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Take Advantage of Low Taxes
High corporation taxes can have a destructive effect on businesses. Not only do they take away a significant portion of their profits, but also force corporations to adopt cost-reduction measures, such as job cuts and low wages. Yet, advanced economies like the US and the UK have some of the highest corporate tax rates in the world (39 and 20 percent, respectively).
As such, the primary benefit of moving your business offshore is to take advantage of low taxes. Many offshore territories, popularly known as tax havens, typically levy taxes at very low rates. In fact, Bahamas, Isle of Man, Bermuda, Bahrain and the Cayman Islands don’t have any corporation taxes at all. Other forms of tax, such as property tax, personal income tax, capital gains tax, stamp duty, dividend tax and inheritance tax are either not applicable or very low.
If you, therefore, feel that the tax burden in your home country is too heavy to bear, setting up an offshore or international business company (IBC) in a zero tax jurisdiction could be the best way to ease up things.
However, it is important to note that offshoring to a low or zero-tax jurisdiction doesn’t necessarily mean your tax burden is gone. If your foreign income is subject to taxation in your home country, you will still have a responsibility to pay income tax. To fully take advantage of the low tax rates in offshore jurisdictions, you need to move along with your business; that is, obtain tax residency in your preferred overseas destination.
Avoid Double Taxation
In international business, double taxation occurs when the same profit or income is taxed in two different countries. For instance, if you are a British national with business operations in the Dominican Republic or any other country that doesn’t have an active double tax treaty with the UK, your income will be subject to taxation in both territories.
To avoid double taxation, you must either set up your business in a country with a double taxation agreement with your home country, or set sail to a zero-tax jurisdiction. This means that if a British national opts to set up an offshore company in the Bahamas – a country that is yet to enter into a double tax avoidance treaty–, their foreign income will only be taxed in the UK.
When offshoring, it is important to consider whether your preferred offshore territory has an active double tax treaty with your home country. This will help protect your business from double taxation in case the territory introduces corporation tax on all overseas companies.
Lower Your Organizational and Administrative Costs
Organizational costs are expenses incurred during the incorporation of a company. They include incorporation fees and the cost of hiring directors, holding organizational meetings and securing legal services. On the other hand, administrative costs are expenses incurred during the day to day operation of a business, such as settling rent, procuring office supplies, and paying employee wages and benefits. In many onshore countries, organizational and administrative costs are usually too high. Some cost drivers, like holding annual general meetings and filing of annual reports, are usually a mandatory requirement for corporations.
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While every effort has been made to ensure the accuracy of the information provided, it does not constitute legal advice and cannot be relied upon as such.
We does not accept any responsibility for liabilities arising as a result of reliance upon the information given.