Any entrepreneur, when choosing a place to register his business, always pays attention to such parameters as the tax burden, the procedure for registering a company, and the frequency of inspections by government agencies. The most favorable regime in this regard is in offshore zones - individual territories or even entire states that offer extremely favorable conditions for doing business.

Full list of offshore and onshore zones at https://gsl.org/ru/offshore/offshore-zones/ in the form of a comparative table.

An offshore zone is, in simple words, the territory of a state or part of it, within which a special preferential regime of registration, licensing and taxation applies to non-resident companies, as a rule, provided that their business activities are carried out outside the borders of this state. The terms “tax haven”, “tax haven” or “tax haven” are also used to designate offshore zones in different countries.

The concept of “offshore zone” comes from the English word “offshore”, which literally means “operating outside the borders”. This definition is quite appropriate, since such a zone is understood as the entire state or its separate part, within which a special regime for registration, taxation and control of the activities of companies operates.

An offshore is a company registered in a country with preferential taxation, which has a certain type of ownership and restrictions on conducting business activities in the territory of the country of registration. An offshore allows you to conduct foreign economic activity by paying only a fixed annual fee at the place of registration.

Main features of offshore zones

In offshore zones, as a rule, the following conditions apply:

Preferential taxation;

Complete confidentiality of information regarding business owners and their transactions;

Simple and convenient business registration procedures;

Lack of audits of activities and financial reporting by government departments.

The fact is that the legislative norms of individual countries allow the head offices of foreign companies to register on their territory. For this, foreign companies pay a small fee, about $300-$1,100, to the treasury of the country within which the offshore zone operates.

The first offshore zones appeared in the world back in the days of ancient Greece. At that time, Phoenician merchants carried out their main trading operations on the deserted islands of the Mediterranean in order to avoid taxation. This tradition continued into the Middle Ages.

At the same time, Switzerland became the very first offshore zone in the modern sense of the word. It was followed by the Netherlands and many former British colonies.

In order to protect national business, offshore companies are prohibited from engaging in any business activities within the offshore zone itself. The main income of the offshore zone comes from registration and re-registration fees, tax revenues, and expenses of offshore companies for maintaining their permanent representative offices (secretary offices) in the zone. They include the following items: rent of premises, communications, electricity, payment for accommodation and food, transport, leisure, wages and some social compensations and payments (for example, payment for treatment, etc.) to bureau employees.

Many offshore companies require mandatory employment of local residents in the secretarial bureau, thereby solving the employment problem. Equipment, vehicles, and materials imported for the needs of companies are not subject to customs duties. The number of registered non-resident companies in one offshore can reach several tens of thousands.

Companies in offshore zones are mainly representatives of medium or large businesses. For small businesses, registering and maintaining offshore companies is too expensive, so it is more profitable for them to organize activities in their own country.

Classification of offshore zones

In order to understand the variety of offshore zones and choose the most suitable one for registering a business, it is advisable to highlight their individual types.

The main reason why numerous entrepreneurs annually register their business offshore is the low level of taxes. In some zones there are no mandatory payments to the treasury at all. This allows you to count on higher profits.

However, tax benefits in all offshore zones are different, which allows us to distinguish five main types of territories that are friendly to business:

1) Zones with zero taxation (classic zones). Countries that have such offshore companies on their territories do not require foreign entrepreneurs to pay taxes. They only charge them a small one-time fee once a year. Examples of such territories are the Virgin Islands, Cayman Islands, Seychelles, Marshall Islands, Belize, Nevis, Panama and Dominica.

2) Zones that take into account territorial characteristics for taxation. In such territories, as a rule, tax is levied only on the profit that was received within its framework. For companies that register only their head offices in such zones, there are no significant differences between the first and second types of offshores. Countries with such a regime include Algeria, Malta, Brazil, Malaysia, Singapore, Uruguay and Costa Rica.

3) Zones exempting certain types of activities. Offshore companies operating under such conditions provide entrepreneurs with a complete list of activities that are not subject to taxation. Offshore companies in Bulgaria, Latvia, Poland, Switzerland and some other countries operate under these conditions.

4) Zones that impose taxes on individual legal entities. Cyprus is now considered such a zone. Here the issue of full or partial tax exemption is decided on an individual basis.

5) Zones with low taxation. Offshore companies of this type do not provide for the abolition of taxes. However, the latter are so low within their framework that they sometimes turn out to be lower than the one-time collection of zones of other species. Currently, this regime operates in certain territories of Ireland, Estonia, Montenegro, Portugal and Malaysia.

Despite the fact that offshore zones are a subsystem of service zones of special economic zones, classic offshore zones, unlike classic SEZs, have differences:

In a SEZ it is possible to conduct activities on the territory of the zone, but not in offshore areas;

In SEZs they receive resident status, but in offshore areas they do not.

In addition, in offshore companies it is enough to pay an annual fee, regardless of the scale of activity, but in the SEZ they still pay all taxes and fees, that is, there is a dependence between the economic indicators of companies and the taxes paid.

The difference between countries with moderate taxation and classic offshore companies is that:

Countries with moderate taxation are often more open than classic offshore companies (the latter are aimed at confidentiality, pay less attention to violations of financial violations, etc.);

Countries with moderate taxation often sign bilateral agreements to avoid double taxation, but classic offshore companies do not.

Highlight:

Countries with moderate taxation, this is the practice of a number of developed countries, in which, along with high taxes, preferential tax regimes apply to a number of activities (the so-called onshore-offshore countries), but the attractiveness is political, economic stability, as well as many agreements on avoidance of double taxation and other aspects.

Tax havens - that is, classic offshores. Preferential taxation for foreign non-resident companies. Companies must conduct their activities outside of offshore (a distinctive characteristic of classic offshore companies)

Tax oases are like internal offshores within the country. Preferential treatment for registered companies that must operate outside this territory. The difference from tax havens is that they operate only in the oasis, and not throughout the country. Companies from the same country as the tax haven are often used to optimize taxes.

By registering their business in the territory of other states, companies accept the business conditions prescribed in the laws of these countries.

In particular, we are talking about the process of registering companies and checking their activities by specialized government agencies. The legislative environment provides for the distribution of offshore zones into three large classifications.

According to the procedure for registering a business, offshore companies are divided into:

1) free, within which you can register a company by preparing an application and copies of constituent documents in English (almost all zones);

2) formal, when in addition to the constituent documents, a number of additional documents from the country of the main activity of the Zone, located in the EU, will be required.

By the nature of audits of financial statements.

There are jurisdictions that do not require maintaining and submitting their financial statements to government agencies (Vanuatu, Liberia, Maldives, Andorra, Costa Rica, Mauritius).

According to the degree of confidentiality, all offshore companies can be divided into:

Open register zones that require full disclosure of information from business owners (Hong Kong, Luxembourg, Switzerland, Singapore).

Zones with a moderate register, obliging entrepreneurs to publicly post information about their largest shareholders and their shares (Belize, Barbados, Lebanon, Malaysia, UAE).

Zones with a closed register that provide businesses with complete anonymity (Nauru, Liberia, Vanuatu, Mauritius, Liechtenstein).

Entrepreneurs are looking for the most favorable conditions: no taxes, a simplified business registration process, etc. However, when growing into a large company, you also have to take care that the chosen territory has a good reputation. Here we already have to make concessions and agree to more stringent demands.

So, according to the degree of loyalty to the subjects, all offshore companies can be divided into the following categories.

1) Classic offshore territories have the following main advantages:

There are no taxes in such zones, and the governments of the respective states are limited to only charging entrepreneurs an annual fee of $200-400.

The authorities do not interfere with the activities of the business and do not inspect it.

Maintaining and submitting reports is not mandatory.

The entrepreneur and his company are provided with complete anonymity and confidentiality.

These territories include the Bahamas, Panama and the British Virgin Islands. Despite their high attractiveness, they often become a haven for illegal financial transactions and illegal capital transactions. That is why business partners at the international level are distrustful of companies registered in these offshore zones.

2) Prestigious offshore zones. They do not have such loyal conditions, but they are highly valued by businessmen all over the world. Their advantages include:

Availability of low tax rates;

High degree of trust from foreign major partners;

Location within convenient transport accessibility.

At the same time, in such offshore zones, companies are required to submit financial statements to special government bodies, as well as disclose information about the owners of the business and the nature of the transactions.

A similar regime currently operates in such countries as Cyprus, the Netherlands, Hungary, Luxembourg, and Switzerland.

3) Onshore zones. Formally, they are not offshore, but they provide foreign companies with tax benefits, a simplified business registration regime and some confidentiality.

In this regard, they acquired the status of “onshore territories”.

It is worth noting that in some zones of this type there is a much more favorable tax regime than in prestigious offshores.

In this regard, they occupy a middle position within this classification. Examples of territories with a similar regime are England, France, and the USA.

List of offshore zones for Russia

There is no single list of offshore zones; work to control offshore zones is carried out by both the International Monetary Fund (IMF) and central banks of various countries around the world.

In Russia, a list of states and territories that provide preferential tax treatment and (or) do not provide for the disclosure and provision of information when conducting financial transactions (offshore zones) is published by the Central Bank of Russia.

The list of offshore zones is contained in Appendix No. 1 to the Directive of the Central Bank of August 7, 2003 No. 1317-U “On the procedure for authorized banks to establish correspondent relations with non-resident banks registered in states and territories that provide preferential tax treatment and (or) not providing for the disclosure and provision of information when conducting financial transactions (offshore zones)" (as amended on December 27, 2006)

The list of offshore zones for tax purposes was approved by Order of the Russian Ministry of Finance No. 108n dated November 13, 2007, the following states were included in it:

1) Anguilla

2) Andorra

3) Antigua and Barbuda

5) Commonwealth of the Bahamas

6) Kingdom of Bahrain

8) Bermuda

9) Brunei Darussalam

10) Republic of Vanuatu

11) British Virgin Islands

12) Gibraltar

13) Grenada

14) Commonwealth of Dominica

15) Republic of Cyprus (excluded from the list on January 1, 2013 by Order of the Ministry of Finance of the Russian Federation dated August 21, 2012 No. 115n)

16) People's Republic of China: Hong Kong Special Administrative Region (Hong Kong) and Macau Special Administrative Region (Aomen)

17) Union of Comoros: Anjouan Island

18) Republic of Liberia

19) Principality of Liechtenstein

20) Republic of Mauritius

21) Malaysia: Labuan Island

22) Republic of Maldives

23) Republic of Malta

24) Republic of the Marshall Islands

25) Principality of Monaco

26) Montserrat

27) Republic of Nauru

28) Netherlands Antilles

30) United Arab Emirates

31) Cayman Islands

32) Cook Islands

33) Turks and Caicos Islands

34) Republic of Palau

35) Republic of Panama

37) Republic of San Marino

41) Separate crown possessions of the British Crown: Isle of Man and Channel Islands (Guernsey, Jersey, Sark, Alderney)

Offshores are classified according to various criteria. Read more about the different types of offshore zones for doing business in this article.

Click to enlarge

Most offshore zones can be divided into three groups:

• classic offshore zones;
• low tax zones;
• other zones in which, when certain factors are combined, favorable conditions for financial and tax planning are created.

The first category includes countries, at the legislative level completely removing the tax burden from offshore companies(instead of fees, the government requires payment of a fixed amount, which ensures the renewal of the business license).

Many classic offshores very undemanding in maintaining financial records and transferring documentation to government agencies, up to complete exemption from the need to do this. Such zones include, inter alia, the British Virgin Islands and Panama. At the same time, in other classic offshore companies you need to prepare and submit all financial statements.

In the second category There are states that provide significant tax breaks for offshore organizations. At the same time, in such offshore companies it is mandatory to maintain strict financial reporting. Examples of such countries are Hungary and Cyprus.

Third category includes states or administrative units that do not formally support offshore practices. However, registration in the region allows you to use the peculiarities of legislation in order to build a competent financial scheme for minimizing actual taxation. A good example of such a country is the Netherlands. If a company registered there conducts holding or financial activities outside the state, then the tax levy will be less than 1%. It is important to remember that strict financial reporting requirements remain. One of the most popular offshore zones of the third type is England.

Offshore zones in US jurisdiction should be considered separately. In fact, they cannot be considered full-fledged offshore companies. However, individual state laws may provide virtually complete tax exemptions for companies that do business outside of the state. Financial reporting remains the same, as does the requirement to pay all federal taxes.

Each category of offshore zones has its own characteristics, so the choice of jurisdiction for an offshore company should be done extremely carefully. It is necessary to consult with a specialist before proceeding with the paperwork. This is the only way to choose the most “correct” legislative framework for your companies. In addition, this reduces the risk of possible errors in the management of non-resident organizations. An additional advantage will be the development of an optimal financial scheme that allows you to earn and save money with the help of an offshore company.

2.1 Classification of offshore zones by region of the world

Based on territorial principle, offshore zones or, as they are sometimes called, “tax havens” can be divided into three groups.

There are about ten offshore jurisdictions registered in Europe. They are located in the UK and its islands, as well as in Denmark, the Netherlands, Switzerland, Liechtenstein, Luxembourg, Ireland, Cyprus and Gibraltar. The peculiarity of European offshores is that they are not classic offshores, since the legislation of European states still obliges the administration of offshore zones located in Europe to provide tax authorities with information about who the founders and shareholders of the registered offshore are, as well as to report all ongoing financial transactions.

An exception to these rules is the offshore zone in Gibraltar and Cyprus. The level of confidentiality of information and advantages of the company is not comparable with Caribbean offshore companies, but the owner of an offshore company registered, for example, in Gibraltar, which is part of the European Union, receives a company that is no different in status from a real European company. However, companies are deprived of the right to issue bearer shares, and there are strict reporting requirements. In addition, information about the real owner of an offshore company can be provided to the tax authorities of any country.

Another European offshore zone is Cyprus. The advantage of Cypriot offshore companies is that an agreement on the avoidance of double taxation has been signed between Russia and Cyprus, therefore those who seek to implement tax minimization schemes often purchase offshore companies in Cyprus. Of all the existing offshore jurisdictions, Cyprus provides the fewest benefits.

Island offshore zones. The Caribbean countries are a recognized offshore paradise; almost half of all offshore jurisdictions are registered here. Small island states often have only one way to supplement the state budget - by providing offshore services. Therefore, the conditions under which offshore companies are registered in this region are very favorable. However, this became the reason for the inclusion of Caribbean offshore zones in the international list of “black offshore zones”.

The offshore jurisdictions of the Caribbean region are widely known - Panama, Belize, Turks and Caicos Islands, Bahamas, Dominica, Saint Kitts and Nevis, British Virgin Islands, as well as Saint Vincent and the Grenadines. The most popular destinations are Dominica, Belize and the British Virgin Islands.

The main advantages of this type of offshore are: the absolute absence of taxes, the absence of special requirements regarding accounting, reasonable fixed payments, confidentiality and anonymity regarding information about company owners. But at the same time, organizations registered here often enjoy a dubious reputation and, accordingly, have a rather low prestige, sometimes arousing various suspicions among their counterparties in advance.

The British Virgin Islands is a self-governing colony of Great Britain. This territory has been operating as an offshore zone for a long time, and their reputation is reliable and proven. The owner of an offshore company registered in the British Virgin Islands receives the following advantages: he is completely exempt from paying taxes, he is guaranteed anonymity and confidentiality when doing business. Here, the appointment of a nominee director and nominee shareholders is permitted; in addition, there are no requirements for contributing the authorized capital and maintaining and submitting financial statements. Registering an offshore company in this jurisdiction costs about $1,500.

Asian offshore jurisdictions. In Asia, compared to other continents, there are not so many offshore jurisdictions - these are the Seychelles, Mauritius, Maldives, Hong Kong and Singapore. The most popular are the Seychelles and Hong Kong. Offshore in the Seychelles is a classic offshore, with all the benefits and benefits, and the conditions for registration and activity are the most favorable. Disadvantage - Seychelles jurisdiction is included in the list of “black offshores”. Hong Kong is a “white offshore”, therefore, despite all the tax benefits and preferences, complete confidentiality and anonymity are not guaranteed.

The Seychelles is a group of islands, most of which are uninhabited. The Seychelles used to be a haven for pirates, but now significant capital is laundered here through offshore companies. In Seychelles you can open an offshore company of the IBC (International Business Company) category. Seychelles offshore companies are completely exempt from taxes; the company name can be registered in any language. The identities of the real director, founder and shareholders are kept completely confidential, the contribution of the authorized capital is not necessary, the same applies to the submission of financial statements, holding meetings of shareholders and audits.

Hong Kong offshore jurisdiction is different from Seychelles. Here, offshore companies are also exempt from taxes, and there are no exchange controls. However, the anonymity of the real owners of the company does not guarantee, and the annual submission of financial statements, an audit and an annual meeting of shareholders are mandatory conditions.

The global network of offshore centers is unevenly distributed across continents: 7 of them are in North America, 25 in South and Central America, 28 in Europe, 19 in Asia, 7 in Africa and 14 in Oceania. This location of offshore centers indicates their attraction to the three leading financial centers - New York, London and Tokyo and some regional financial centers. In general, a global network of offshore centers has already been established, although several new centers may be opened in the future, including in Central America, Oceania and the republics of the former USSR. The emerging configuration of offshore zones indicates that financial capital has become as important an element of the global economic system as commercial and productive capital. Pavlov P.V. Offshore activities: issues of legal regulation//Journal of Russian Law No. 5, 2011.-p.32

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offshore taxation fee zone

An offshore zone is the territory of a state with low taxation. An offshore zone is a “tax paradise”, “tax haven”, “tax haven”.

The terms “offshore jurisdiction” and “offshore” came into Russian from the English language, where “off-shore” literally means “offshore”, “on the high seas”, “isolated”. In modern economic literature, this term denotes one of the varieties of special economic zones, a specific form of a commercial company. In the most general form, offshore jurisdictions refer to countries and/or territories that register companies whose activities are subject to preferential tax treatment. Organizations registered in offshore centers are under the jurisdiction of the host country and are required to strictly comply with local legislation.

Offshore jurisdictions provide the following advantages to the enterprises/companies using them: tax benefits, significant freedom in maintaining accounting records, virtual absence of exchange controls, the ability to conduct transactions with residents in any foreign currency, write-off of costs on the spot, anonymity, secrecy of financial transactions (mainly valid only a requirement to inform the authorities about dubious transactions related to drug trafficking). At the same time, the internal market for loan capital of the zone is isolated from the accounts of residents. The classic version of an offshore zone involves economic and financial activities in an offshore jurisdiction only by non-residents. Many people mistakenly believe that offshore jurisdictions and offshore zones are the same thing. In fact, these are completely different concepts. An offshore jurisdiction is an organization that operates not in the country in which it is registered, but in an offshore zone. An offshore zone is a country that offers tax benefits to foreign companies registered on its territory. From the above it follows that “offshore” is an economic and organizational concept and is by no means a legal one. It's just a way of doing business, a tax planning tool.

The term offshore zone came into use in the fifties of the last century in America. Then one of the American financial firms moved its activities to a territory with a favorable tax climate outside the American jurisdiction.

One of the main advantages of offshore zones is a high degree of confidentiality and privacy of doing business. The largest fleet in the world was at one time Liberia, now Panama.

Features of offshore zones

In the offshore zone, the registration process of non-residents has been simplified and accelerated, in which a purely symbolic amount is paid (for example, in Panama it is not necessary to indicate the founders of the organization; a small fee is also paid for annual re-registration); Non-residents pay taxes on profits and personal income tax at reduced rates. persons; The confidentiality of the activities of offshore companies is guaranteed, they are exempt from state currency control. In order to protect national business, offshore companies are prohibited from engaging in any business activities within the offshore jurisdiction. The main income of offshore jurisdictions comes from fees for registration and re-registration, tax revenues, and the costs of offshore companies for maintaining their permanent representative offices (secretary offices) in the zone.

Historically, the island states - the Bahamas, the British Virgin Islands, the Isle of Man, Cyprus and others - were the first to carry out a policy of attracting a foreign language by reducing taxes and liberalizing foreign economic activity. Later they were joined by Liechtenstein, Luke, Gibraltar, Panama and others. In the future, the world practice is that offshore zones can also be located within a single state, for example, Geneva in Switzerland or the states of Delaware, Wyoming and others in the USA. The prerequisites for the emergence of offshore jurisdictions were the intensive development of high-tech industries. As a result, there was a change in the balance of forces in the global economy, entire industries appeared and disappeared, and the process of integration of national economies into the world intensified.

Offshore zones are those countries or territories of single states where, at the state level, significant tax benefits are established for certain types of companies owned by foreigners, accounting and auditing requirements are reduced or absent, and customs and trade authorities are partially or completely removed. The decisive factors for classifying a particular region as offshore are the maximum liberality of its tax legislation, as well as the possibility of registering a non-resident company in it. Political and economic stability in this region is of no small importance.

Offshore zones have common criteria:

• - locality of the territory and restriction of access to it by unauthorized persons and the local population;
• - the operation of a more preferential legal, financial and economic regime in such a territory;
• - presence of specialization of economic activity (for example, offshore banking, offshore insurance, etc.);

The goals pursued by the countries on whose territory the zone is created may vary depending on the level of economic development of the country, the socio-economic situation, and other characteristics of the countries: for example, for developed countries when creating a free offshore zone, the problem of creating new jobs for their population is relevant , whereas for developing countries. Priority is placed on attracting high technologies, developing production infrastructure, the country's export potential, and increasing the level of qualifications of the workforce.

Foreign enterprises operating in offshore zones are provided with export-import, customs, tax and other benefits, which allows them to increase the profitability of such enterprises. This is what is attractive to foreign companies.

The main advantages of offshore zones are:

exemption of non-residents operating in a given territory from taxes or - provision of tax benefits to them.

preservation of capital from the political instability of the country in which they are located, and the ability to freely dispose of them, moving them around the world.

simplification of document flow, acceleration of financial flows and optimization of taxes.

concealing information about the real owner of capital and maintaining complete confidentiality of commercial information.

the ability to conduct your transactions in any currency.

for Russian organizations: acquiring the status of a foreign company, which, accordingly, increases its prestige in the domestic market.

There are also a number of disadvantages:

In such zones it is difficult to insure against changes in tax legislation, therefore, it is important to take full responsibility when choosing the country where the company will be located.

Many Western organizations are wary of opaque offshore companies, which may make it difficult for the latter to form new partnerships.

Many regulatory authorities treat offshore companies as a way to evade taxes, which is partly justified.

Offshore zones can be used by a variety of companies. In accordance with the purposes of their creation, the following are distinguished:

• - offshore companies used to minimize tax payments.
• - offshore companies created for the accumulation of capital and international payments.
• - offshore companies created for the purpose of subsequent resale.

The main income of the offshore zone consists of:

• - registration and re-registration fees;
• - tax revenues;
• - expenses of offshore companies for maintaining their permanent representative offices in the zone (secretary offices that are obliged to provide a solution to the employment problem by providing jobs to the local population).

At the moment there are about 50 offshore zones around the world. There is no single list of offshore zones.

There are 3 types of offshore zones:

Classic (with no taxes and not requiring reporting) - in the territory of classic offshore zones, companies pay the state only a fixed fee for issuing a license to operate, after which they are completely exempt from all taxes (Bahamas, Panama, Virgin Islands, etc.)

Low tax zone (zone of increased respectability) - companies registered on its territory can enjoy significant tax benefits, but must annually submit financial statements to regulatory authorities (Hungary, Cyprus, etc.);

Other zones in which favorable conditions for taxation and financial planning are established (UK).

There are quite a lot of offshore activity schemes. The main ones are:

• 1. Transfer of profits during import and export. This method assumes that the main income from the transaction is generated not in a country with high taxation, but in an offshore zone. For example, a Russian company will sell a product whose costs are equal to $100 to an offshore company at the minimum price ($101), after which it will sell this product to a foreign company for $110. Thus, the profit will be the same $10, but the tax will have to be paid only from 1$.
• 2. Transit trade. A product is purchased in one country and sold in another. Without the participation of offshore companies, you will have to pay VAT when crossing borders. If you do this on behalf of an offshore organization, the goods will cross the border under transit conditions and, at the same time, all profits will be generated in a tax-free zone.
• 3. Scheme used in production activities.

Offshores are special financial centers that attract foreign capital through tax benefits. In some countries, other terms may be used to refer to such zones, for example, “tax haven”, “tax haven” and so on. Literally, “off shore” is translated from English as “outside the shore.” In this article we will talk about what offshore companies are in simple terms, we will analyze their classification, work patterns, advantages and disadvantages.

What offshore is was first written by one of the American newspapers in the mid-20th century. In the article, the term referred to a company that, by registering in another country, avoided government control by US authorities. In other words, the organization moved its business to an area with more favorable tax conditions. Despite the fact that this term appeared more than half a century ago, there is still no consensus among experts about what exactly can be considered an offshore.

The de facto process of tax evasion cannot be attributed only to modern times. Back in the days of ancient Athens, merchants were looking for trade routes that would help them get rid of import and export taxes. So, during the times of Ancient Greece, small islands began to be actively used, where smuggled products were brought.

Nowadays, islands are most often classified as offshore. For them, this is the only opportunity to replenish the state budget, since there are no other sources of income. Therefore, they are trying to create the most favorable conditions for foreign business.

In Russia, they first became acquainted with the term offshore zones back in 1991. Then the first office of the Swiss company Riggs Walmet Group opened in Moscow. With the formation of this company, offshore registration became available to Russian entrepreneurs.

Cyprus is one of the most popular respectable offshores

Features of offshore zones

Offshore zones have their own characteristic features. Among them are:

• the process of registering a new company is greatly simplified; it is not necessary to indicate the founders;
• non-residents pay income tax at a reduced rate;
• there is no state currency control;
• Confidentiality of data on the activities of offshore companies is guaranteed.

It is important to note that in offshore zones, companies are prohibited from engaging in any activities within the state itself. Despite this, they still have a positive impact on the country’s economy, since they pay funds for registration, re-registration, maintenance, and so on.

In some cases, governments of offshore zones require entrepreneurs to employ local residents. Thus, the problem of unemployment is solved.

Mostly representatives of medium and large businesses register in offshore areas. For small entrepreneurs, registration and maintenance costs are too expensive and in most cases do not pay for themselves. Therefore, it is much easier and more profitable for them to organize a business in their country of residence.

Classification of offshore zones

There is no single list or rating of offshore companies. According to some estimates, there are more than 50 offshore zones in the world. Naturally, there are characteristic differences between them. First of all, it is worth noting that they are a subsystem of service free economic zones, but they have their own differences.

The difference between a classic offshore zone and a special (free) economic zone

If we talk about classic offshores, they differ from SEZs. Among the main differences are the following:

• in offshore companies there is no opportunity to conduct activities in the country;
• in offshore areas there is no possibility of obtaining resident status;
• in offshore companies an annual fixed service fee is paid regardless of the scale of activity.

Types of offshore zones depending on taxation

The concept of offshore still remains rather vague, since even those countries that are not offshore are included in it. Therefore, depending on taxation, various types of offshore companies have appeared:

• countries with moderate taxation (onshore-offshore countries) - these include states that have high taxes on business activities, but you can get certain benefits when working in a specific area;
• classic offshores - non-residents of states receive preferential taxation, but they do not have the right to conduct activities within the country;
• tax oases are a certain territory within the country where companies are provided with preferential taxation, and they must conduct activities outside this zone.

Unofficial classification of offshore companies

There is also an unofficial classification of offshore zones, which also conditionally divides countries into 3 different types. Among them it is worth highlighting:

1. States without taxes and reports.

This group mainly includes third world countries. Among the most famous offshore zones are the following states:

• Bahamas;
• British Virgin Islands;
• Cayman islands;
• Belize;

In most cases, the activities of companies in these countries are not regulated in any way by law. Therefore, reputable firms and banking institutions do not want to do financial business with them. No one can provide guarantees that an offshore company will fulfill its obligations.

1. Offshores of increased respectability (low-tax zones).

In such countries, companies are required to submit financial statements, but in return they are offered favorable tax conditions. In the jurisdictions of these countries, tighter controls are exercised over the activities of organizations. This list of offshore zones includes the following states:

• Ireland;
• Gibraltar;
• Isle Of Man;
• Hong Kong and others.

1. Non-standard offshore companies.

This group includes countries that only have free economic zones for non-residents of the state. Tax benefits can only be obtained if the non-resident does not derive income from the territory where he is registered. The list of states also includes the Russian Federation (Kaliningrad region). In some cases, such zones are used for the development of promising investment projects.

Offshore operating schemes

Companies use offshore companies for one purpose - to reduce taxes. Depending on the area in which the organization operates and what specific task it sets for itself, it should choose a specific country to develop its business. Below we will talk about how offshore companies work.

Construction diagram

Let's say a customer wants to carry out a certain list of large construction works in Russia. In order for the bulk of the profit to remain directly with the performer, who acts as a contractor, it is enough for him to be registered in a suitable offshore zone. The customer transfers funds for the work performed to the account of a foreign company, which allows saving money due to more favorable taxation.

The offshore company, in turn, can agree on construction work with a subcontractor. Since the main financial flows associated with wages and supplies will still pass through offshore, this will allow part of the profit to be saved abroad.

Semi-annual loan

The bank can issue a loan to a resident of the country for 180 days for prepayment in accordance with a foreign economic contract. The funds received are then placed at the disposal of the offshore company, which can use them at its discretion for six months.

After the expiration of the term, the money is returned to the bank because the company was unable to fulfill its obligations. The main feature of this scheme is that all profit received from borrowed funds remains with the offshore organization.

Registration of yachts and ships

Offshore zones mainly include islands and other states that have access to the sea. The process of registering a ship or yacht in these countries is significantly simplified. In addition, one of the main advantages is confidentiality. This will allow you to partially hide your property from ill-wishers.

Transfer pricing mechanism

Offshore companies can act as an intermediary between product manufacturers and the end buyer. In this case, there are two different offshore schemes:

1. When exporting.

Export products are purchased by an offshore organization at a minimal cost. After this, the product is resold to the final buyer at the maximum price. The difference is the profit that remains with the intermediary. The manufacturer (supplier) in this case pays minimum taxes in his country, based on the cost at which the intermediary purchased the products.

1. When importing.

The price of imported products is also usually underestimated, but in this case, income tax must be taken into account. If the cost of a product is too low, it may increase, which ultimately will negatively affect the company’s net profit. In each individual case, the optimal cost is deliberately selected so that the state receives the least amount of funds when paying customs duties and VAT.

Service delivery scheme

This is one of the most common offshore schemes in business. Its essence lies in the fact that an agreement is concluded between an offshore company and a resident company for the provision of certain services. The funds are then transferred to an offshore account. These costs are often written off as cost, although in fact, sometimes no services are provided. As a company's expenses increase, it must pay less taxes to the government.

In this case, you need to know the laws of the country well. To make such a scheme more convincing, it involves a prestigious company that is registered in Switzerland or another country with a stricter jurisdiction.

List of offshore zones and their comparison

We have already discussed above that there are different offshore zones. Therefore, we will divide the most popular of them into 2 groups: classic and more respectable.

Comparison of classic offshore companies

We consider classic offshore countries to be countries that meet the following criteria:

• there is no income tax;
• high level of confidentiality of founders;
• there is no mandatory reporting;
• companies pay an annual maintenance fee and so on.

Jurisdiction	British Virgin Islands	Seychelles	Belize	Panama
Type of companies	B.C.	IBS	IBS	Corporation, Foundation, Trust
Registration period	1 Week	1 Week	1 Week	1 Week
Registration fee	975$	810$	915$	1640$
Annual Maintenance	810$	745$	765$	1190$
Registration fee (advanced package)	1530$	1270$	1215$	2640$
Annual maintenance (extended package)	1440$	1215$	1080$	2080$
Authorized capital	50 000$	100 000$	50 000$	10 000$
Year of adoption of offshore legislation	2004	1994	1990	1927
Registration authority	http://www.bvifsc.vg/	http://www.siba.net/	http://www.ibcbelize.com/	http://www.registro-publico.gob.pa/

Respectable offshores (low tax zones)

This list of offshore zones includes countries that meet the following criteria:

• income of organizations is taxed;
• the need for regular reporting;
• organization registers are publicly available.

Jurisdiction	Cyprus	Hong Kong	Singapore	Great Britain
Type of companies	LTD, PLC	PLC	PLC	LTD, LLP
Company income tax	10%	16,5%	18%	21-28%
Registration fee	2075$	2350$	6095$	1280$
Annual Maintenance	1130$	2180$	5405$	1190$
Registration fee (extended package)	2610$	2985$	8360$	1560$
Annual Maintenance (extended package)	1920$	2880$	7670$	1440$
Registration period	1-2 weeks	2 weeks	2-3 weeks	1 Week

Advantages and disadvantages of offshore companies

The advantages of offshore zones include the following:

• quick business registration;
• no income tax or preferential taxation;
• the opportunity to conduct full-fledged activities on the international market;
• confidentiality of information about founders (for classic offshore companies);
• a large number of schemes for the withdrawal of capital from the resident country.

These are the main advantages that can be highlighted. However, offshore companies also have their disadvantages. Among the disadvantages it is worth emphasizing:

• low reputation of companies that operate from the territory of classic offshore zones;
• increased control by regulators of the country where the activity is carried out;
• offshore companies are more often denied credit;
• mistrust on the part of European companies;
• use of offshore companies for corruption purposes, money laundering, and so on.

If you are running an honest and legal business, then registering it will significantly reduce your tax burden. However, in the current environment, many countries are opposing offshore zones, trying to limit their legality. Therefore, it is worth carefully monitoring any changes in the laws of the country where the entrepreneur operates, since the offshore company where the company is registered may be blacklisted.