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Offshore companies strategically located in jurisdictions offering favourable regulatory environments present numerous opportunities for businesses seeking to optimise their operations. This guide explores five distinct offshore company types with unique features and advantages.
Key takeaways:
Mauritius and Hong Kong, as hybrid environments, offer versatile solutions, providing GBC and AC entities in Mauritius and tax-efficient offshore activities in Hong Kong.
LLCs and LLPs strategically combine limited liability and partnership flow-through features, facilitating tax-efficient profit distribution among members.
Traditional offshore centres compete with onshore jurisdictions as high-tax countries entice international companies with diverse tax planning regulations.
European Union member states like Luxembourg, Cyprus, and Malta present holding company regimes suitable for foreign-sourced income treatment.
The Seychelles International Business Company (IBC) is a tax-exempt and minimal reporting option for professionals establishing personal service companies.
1. Low or zero-tax companies
Low or zero-tax offshore companies include a range of entities strategically established in offshore jurisdictions like the British Virgin Islands (BVI), Belize, Seychelles, Mauritius, and Samoa. The International Business Company (IBC), known for its role in asset protection and privacy, is the most popular type of offshore company. An IBC can conduct global business operations while avoiding taxation in its country of incorporation.
Popular IBC jurisdictions include Anguilla, Bahamas, Belize, the British Virgin Islands, Cayman Exempt Entities, Samoa, Seychelles, Mauritius and Ras Al Khaimah in the UAE. This entity provides a diverse and tax-efficient structure for businesses looking to expand internationally.
Mauritius and Hong Kong
Mauritius and Hong Kong, which are home to both onshore and offshore businesses, are examples of hybrid environments.
There are two company types in Mauritius that are designed for offshore operations and foreign tax planning. The Mauritius Authorised Company (AC) offshore company operates as a tax-exempt entity, paying zero taxes and functioning as a tax haven like a BVI company. On the other hand, the Mauritius GBC Company holds tax residency status and is commonly used to engage in double tax treaties and facilitate international tax planning strategies.
Even though Hong Kong is not categorised as a tax haven, it has a favourable tax regime. This means that Hong Kong companies can engage in offshore and international business activities without paying taxes in Hong Kong as long as the income earned is not derived within the jurisdiction, commonly referred to as territorial taxation.
2. Limited liability company and partnership
Limited Liability Companies (LLCs) and Limited Liability Partnerships (LLPs) arise as different types of companies designed for offshore businesses, international companies, and tax planning. Combining the advantages of limited liability with the flow-through characteristics of a partnership for tax purposes, these entities offer a strategic solution for businesses aiming to distribute profits among members tax-efficiently.
Profits from an LLC or LLP are allocated to members based on their ownership holdings and then taxed at the individual level. In some cases, when all members or partners are non-tax residents of the jurisdiction where the LLC or LLP is formed, and no business activities take place in that country, neither the LLC nor LLP nor its members or partners are subject to taxation in the company’s country of origin.
Prominent examples include the fiscally transparent US LLC in the United States and the UK LLP in the United Kingdom.
3. Company incorporated in tax-advantageous onshore jurisdictions
Beyond traditional offshore centres, onshore jurisdictions are becoming increasingly attractive to international users. High-tax countries globally compete to entice international companies and individuals with diverse tax planning regulations and opportunities.
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