Tax Friendly Business Environments – What to Look for

13 January 2023

In the modern, globally connected world of business, favourable business environments can be vastly beneficial to a growing entity. As governments around the globe seek to create offshore investment opportunities from onshore locations, there are benefits to be found on both sides of the equation.

Opportunities arise in aspects of business from privacy and tax exemption to grants and favourable business terms. In attracting foreign investment in this way, for the nations of the globe, bringing in such ventures means bringing capital to their economies.

When considering an offshore company formation, there are several considerations you should make. These relate specifically to the jurisdictions offering offshore set-ups and can change drastically from one location to the next.

5 Areas to Consider When Choosing an Offshore Location

Political Landscape

The political landscape of the jurisdiction in which you choose to set up your business should be your first consideration. Levels of corruption and bureaucracy can vastly affect the likelihood of change and the stability of the country. For business, these changes can quickly affect the benefits of doing business, so whilst bureaucratic authorities can offer a more stable platform, they can also fall victim to corruption, with the economic decisions being made behind closed doors.

Whilst undertaking business in an offshore jurisdiction, trade controls, tariffs, legislation around competition and of course tax rules take precedent. Finding somewhere that fairs well on the ease of doing business charts, with favourable tax laws can make doing business simple, and profitable.

Tax Laws

Tax exemptions are usually the carrot by which the jurisdiction lures you in. Favourable tax environments come in many different forms, from outright tax exemption and double-taxation treaties to free zones or flexibilities for certain trades. Understanding the criteria that the jurisdiction is fishing for, can help you make an informed decision about why your business is better there.

You should also make careful considerations and informed decisions based on the tax laws in your own country. Double-taxation laws between states can mean in some instances that you have less or zero obligation to pay tax in your home country. Checking your obligation with a tax advisor in your country of residence, however, can be paramount to keeping you on the right side of the law.

Legal Obligations

Every nation will have criteria that foreign investors need to oblige by. These criteria dictate how your business will behave within the jurisdiction. Dependent on the type of business you are operating, these legalities could pertain to consumer, copyright, discrimination, fraud, employment, import & export and health & safety.

Considering these legal aspects and how they may affect your ability to do business could be a deciding factor when choosing an offshore jurisdiction.

Business Structures and Processes

Looking at the business structures, incorporation processes and entities that are permitted for offshore incorporation in your chosen jurisdiction will clarify if you can form a company and the type of company you can form. These could be IBC (International Business Corporation), LLP (Limited Liability Partnership) or a PLC (Private Limited Company).

For example, to set up an offshore company in Belize, the jurisdiction offers LLC, primarily, although it is also possible to set up an IBC. With SFM, Belize company registration can be completed in as little as twenty-four hours.

The type of company you require will be determined by the type of services your business offers and of course your requirements from the offshore company. Various locations offer various entities and they can affect capital requirements, number of shareholders, directorship requirements, accounting/auditing requirements, tax proceedings, disclosure requirements, incorporation times, business policies and offshore bank account requirements & procedures.

Costs for Incorporation

Finally, you should consider the costs involved in setting up an offshore business. Different locations incur different charges from registration fees, government fees, registered address and agent fees, annual renewal fees, and more. Not only that, but the type of company you choose to register can also accrue different charges.

Our comprehensive guide to fees can be found through this link.

If you require any further information on the information in this article, please feel free to contact us via our website.

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