Tax haven and oasis - offshore companies can hear such words. What are they in practice? What is the mechanism of their functioning? How can I open an offshore? Do they exist in the vastness of the Russian Federation? These issues, as well as many others will be considered by us in the framework of this article.
What is called offshore?
This is the name of economic zones in which currency and tax laws are very flexible or almost not felt at all. In them, taxation may reach the level of complete absence of direct payments. Most often, the role of offshore is played by
free economic zones, small states or their individual territories, where local and foreign entrepreneurs can be registered, falling under the preferential tax regime. Almost any country in a certain area can act as a kind of refuge for those who want to pay less. The name “offshore company” is used to designate such enterprises.
Legislation
Offshore jurisdiction is based on the principle of company residency. It is based on a geographical feature. Companies with this status conduct their business activities abroad of the territory where it is registered. An important advantage that these subjects of economic life receive is the ease of tax burden. But this is not the only advantage. So,
offshore companies have currency autonomy, as well as a number of privileges in the customs, registration and administrative-control sphere. This is all done to provide
confidential information about the current owner, as well as the scope of the company.
The importance of offshore
What are these subjects, we have figured out. What role do they play? In order to understand the extent of this phenomenon, we give a few figures. In total there are over 100 offshore centers. The largest of them:
- Panama. At the moment, more than 340 thousand companies are registered.
- Virgin Islands. Currently, over 200 thousand companies are registered.
- Ireland. At the moment, more than 150 thousand companies are registered.
About half of the total world capital turnover is due to the use of the services of offshore centers. One level of net investment exceeds $ 500 billion! Each cent has its own specialization. So, for banks choose Luxembourg, Switzerland or Hong Kong, while for holdings - the Netherlands or Liechtenstein. Centers are selected based on cost optimization parameters for entrepreneurial activity.
Are offshore companies useful for the Russian Federation?
It should be noted that such zones bring income only to the state in which they are created. Thus, losses due to the withdrawal of tax-free profits amount to hundreds of billions of rubles. Now they are talking with confidence about the tens of thousands of offshore companies that were founded by immigrants from the Russian Federation. According to some reports, the amount of these subjects can be expressed as a number ten times higher than official statistics.
Is the use of this mechanism legal?
The legislation of the Russian Federation gives foreign legal entities the right to carry out entrepreneurial activity on a par with local companies. Therefore, in the Russian Federation, the activities of offshore companies are completely legal. If we focus on the data of the state statistics service, then confirmation of this is the constant increase in the number and volume of transactions with them. Directly, the activities of offshore centers are regulated by international law. Of course, they must comply with national acts, but with their conflict, the former have an advantage. In addition, the use of an offshore mechanism not only helps protect company assets and minimize taxes, but also helps with access to international markets.
Why register an offshore?
Growing economic and political instability, globalization processes and rising taxes are the main reasons businessmen have chosen such places to protect their assets and investments. And given that this is also a legal way to reduce taxes, it also allows you to receive benefits and advantages that are not available in their native countries. In addition, there are still positive aspects:
- The lack of red tape.
- Confidentiality.
- Management of risks.
Therefore, many entrepreneurs are interested in how to register an offshore.
Legal framework
A feature of offshore companies is the limited liability of investors. The legislation, which provides for the restriction of an enterprise as a legal entity in the sphere of responsibility as a separate representative, was first introduced as early as the 19th century. To this day, the delineation of the company from owners and directors can reduce the losses that people incur in unsuccessful economic activities. This principle is also used in minimizing taxes. Therefore, residents of countries with a high level of taxes also use offshore companies to get more income, because they will be taxed according to the legislation of the registrar country.
Which jurisdiction is best to choose?
In total there are over 100 financial centers. And the choice of a suitable jurisdiction requires a careful approach to this issue. First of all, it is necessary to give priority to countries in which a stable political situation and economic stability are observed. If important, it is necessary to ensure that the law ensures the confidentiality of the owner. As other factors, you can choose the requirements for reporting and auditing, the presence of currency control, as well as a developed banking system. It is also very important to have existing agreements to avoid
double taxation of offshore with the country where the business is planned. An auxiliary group of factors includes the cost of registering a company, as well as obtaining the necessary professional services.
How is an offshore company registered?
The name is initially checked. It is considered a good manners rule to make it look like none of the well-known brands. The registrar in this case may simply refuse. There are also bans on the use of certain words: royal, government, and so on. Some others require a license: bank, insurance, finance and more. There may also be restrictions on paid-up share capital: on the Isle of Man you will need an amount of one hundred thousand British pounds. You can deposit a large amount. But annual fees are often provided, which are deducted from the capital, so it is advisable not to substitute much. Management is through stocks. They are of two types: registered and bearer. In the first case, the certificate indicates who the owner is. Bearer allows you to provide greater confidentiality, but if you lose the document it will be difficult to prove that you are the owner of the company. This is what offshore companies are. What are these subjects, we have already considered. This was general information. Now let's look at offshore in Russia.
The situation in the Russian Federation
The advantages of working in our offshore companies are that it does not matter where the business is conducted - taxes are paid at the place of registration. If everything would be so simple, but, alas, it is not. In reality, you have to face a number of difficulties and problems:
- When creating a Russian offshore, do not think that everything will be as simple as with foreign counterparts. One cannot hope for any significant reduction in the tax burden or confidentiality. In general, if we compare with the classic understanding of offshore, the designation is their strongest relationship.
- Problems with local tax authorities. If the company does not operate at the place of registration, then it will be necessary to give explanations regarding the scheme of work to local officials. Moreover, given the dislike for the withdrawal of amounts from the local budget to distant subjects of the federation, it is necessary to prepare for their significant resistance to this process.
- Due to the fact that the company is considered a Russian legal entity, quarterly reporting is mandatory. All this will need to be done, and at the place of registration!
- Despite the positive aspect, such as lower tax rates, it will be necessary to make quarterly fixed payments. Their size varies depending on the economic zone.
- Often you can hear complaints that opening a normal foreign currency account in order to run a full-fledged business is as difficult as a regular Russian legal entity.
From all this we can conclude that opening a company in a special economic zone within the country does not have such advantages as abroad. Therefore, one can often hear that an offshore is being liquidated in the Russian Federation, and instead an enterprise is being opened abroad.
What financial centers exist?
Finally, we suggest finding out which offshore countries exist. You may have to open your own company in them sometime. So, the list of offshore:
- Classic offshore. Panama, Dominica, Seychelles, Belize, Mauritius, Saint Kitts and Nevis.
- European jurisdictions. Czech Republic, Slovakia, Holland, Bulgaria, Switzerland, United Kingdom, Poland, Estonia, Latvia.
- Asian jurisdictions. Hong Kong, Singapore.
- Specific jurisdictions. USA, Canada, New Zealand, South Africa.
In general, everything is clear, but let's talk a little about specific offshore companies. What is a regular financial center? This is a low tax area. In the fourth group, they are quite high. But it is possible to lower taxes through the use of various mechanisms. In the final result, tax legislation will not differ much from what it is in classic offshore companies, although they cannot be reached.