How to reduce the tax burden in 2020: offshore and midshore
According to experts' statements, small and medium businesses all over the world are going through bad times. With the reduced solvency of potential customers and the ban on certain activities, the tax burden may become a decisive factor contributing to liquidation. Low-tax jurisdictions, the legal analogue of classic offshore jurisdictions, may become an exit for entrepreneurs in 2020.
Tax-free and low-tax jurisdictions: advantages and differences
Ten years ago, offshore locations were incredibly popular. Entrepreneurs from all over the world registered their companies there, received super profits and did not pay taxes thanks to the principle "corporate to the personal level". Most of the standard fees for individuals were not available on their premises, and the profit of the firm could be easily and unrestrictedly transferred from "company income" to "personal income". Then international economic laws changed, countries joined forces to prevent terrorism financing and money laundering on a particularly large scale, EU black and gray lists appeared, and a good reputation became an integral part of any successful business.
As a result, tax-free jurisdictions became much less in demand in 2020. The fault is their bad reputation and the unwillingness of large Asian and European companies and banks to cooperate with enterprises registered in offshore areas. Most governments are now seeking to change this situation, tighten registration requirements for foreign companies, eliminate the principle of confidentiality of beneficiaries and transform tax policy in the hope of finding a balance between complying with international standards and maintaining investor attractiveness.
There are many more low-tax jurisdictions or midshires, they are legal and therefore attractive to entrepreneurs. Their peculiarity is that only business income received in the territory of the country of registration is subject to levies. If the company does business outside of the country, there are no tax liabilities.
Given the constantly changing economic realities, entrepreneurs who prefer to do business legally are increasingly choosing midshores. However, in some cases it would be more beneficial for them to register the company in a tax-free jurisdiction. Detailed consultation with IT-OFFSHORE specialists can clarify the situation. Our employees have many years of experience in matters of registration and support of business abroad and will be happy to provide not only information, but also legal support.
TOP 5 Tax-free jurisdictions in 2020
- British Virgin Islands
- Cayman Islands
- United Arab Emirates
TOP 10 low-tax jurisdictions in 2020
When choosing a country to register a future business, you should take into account not only its tax system. It is important to pay attention to the level of access to world markets, infrastructure, domestic political situation and linguistic accessibility.