Offshore zones

Pauline Familara
Pauline Familara
1 December 2020
Offshore zones

Offshore zone is called the country or certain territory of the states where considerable privileges in the taxation are established for non-resident companies. Opening foreign companies under the jurisdiction of such zones attracts foreign capital into the local economy and protects the national business from its influence.

The history of the development of zone offshore jurisdictions begins in antiquity, when trading operations were carried out on separate islands of the Mediterranean in order to avoid paying taxes and duties. In the Middle Ages, such European cities as Livorno, Trieste, and Sibenik became such zones. The first modern offshore definition zones are considered to appear in Switzerland with its banking legislation, which protects deposits, as well as in the Netherlands. Later, in the 1960s, the former colonies of the British Empire were made major offshore centers.

Offshore zones: peculiarities and benefits

The main features of offshore countries are:

  • Simplified and rapid registration of companies with the anonymity of founders;
  • Zero or low taxes;
  • No governmental monetary control;
  • Confidentiality of foreign companies’ operations;
  • Non-resident companies are forbidden to do business in offshore zones and offshore countries where they are registered.

Business in zone offshore jurisdictions is profitable for medium and big businessmen, as it helps to reduce tax burden and cut company expenses, and has cheap registration cost. Among other benefits of opening a company in an offshore zone are:

  • Obtaining a foreign company status;
  • No financial or accounting records required;
  • Free management of financial assets;
  • Possibility to open bank accounts in any country in the world;
  • Full confidentiality of transactions;
  • Full security of assets;
  • Simplified financial operations with other offshore participants.

Offshore countries, offshore types

There are currently more than 50 offshore countries and territories. Offshore zone definition divides them into three big groups depending taxation:

  • Countries with moderate tax rates and tax privileges only for certain types of business;
  • Classic offshore countries with preferential tax rates for all business activities of non-residents, provided if they conduct their business outside the country;
  • Tax havens – special territories in a country with tax preferences for non-residents.

The main difference between offshore zone and free economic zone is that a non-resident can not conduct business in this territory, nor can he purchase residency. However, in many countries, such companies are allowed to acquire real estate.

There is also an unofficial offshore classification depending on their location, dividing offshore countries into three categories:

  • Island states with zero taxes for non-residents, small fixed payments and lower requirements for accounting records (the UAE also belongs to this group and is considered the best offshore zone option thanks to its respectability, steadiness and capital protection guarantees);
  • Highly respected European and Asian offshore zones with tax preferences only for certain activities: Monaco, Gibraltar, Lichtenstein, Ireland, Hong Kong, China and Singapore;
  • Substandard offshores – certain territories within a country with tax preferences: some US states, Labuan in Malaysia and Russia’s Kaliningrad Oblast.

When selecting a suitable zone, you should consult with specialists, who will advise you which type of offshore is best for a certain business.

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