Offshore Tax Shelters

OFFSHORE TAX SHELTERS

Offshore Tax Shelters. Benefits of forming a Company in Offshore Tax Shelters and opening bank accounts.

KGN specializes in Company Formation in Offshore Tax Shelters.

An offshore tax shelter is perhaps the smartest way for individuals and corporations to reduce their tax liability. This is because tax shelters are the only perfectly legal way of avoiding unfairly high taxes. Yes, despite the bad press which tax shelters get, they are perfectly legal under US, EU and international law.

This is why almost all Fortune 500 companies use popular offshore tax shelters like Bermuda, the Cayman Islands, Bahamas, British Virgin Islands, and others. These companies use offshore tax shelters because it is 100% legal.

The most important thing is to understand how to go about utilizing an offshore tax shelter. We shall look at how to open an offshore company in a tax shelter shortly. First, let us consider who can benefit from an offshore tax shelter.

Who Needs An Offshore Tax Shelter

Any individual or corporation interested in circumventing unfair tax policies can benefit from a tax shelter. However, the benefits of offshore tax shelters move beyond taxes (more on this later).

The categories of individuals and corporations who can benefit from tax shelters include the following:

Investors interested in setting up an international business
Wealthy individuals who desire to protect their assets
Corporate agencies which desire to maximize their profits
Individuals and Companies who desire to minimize their tax liability
Individuals interested in investing in a company or purchasing an asset anonymously (i.e. without being directly linked to it)
Startups interested in setting up an offshore base to expand their operations
Companies looking for strategic bases to tap into new market

The bottom line is that offshore tax shelters can serve the needs of a myriad of individuals and corporate agencies. This is why offshore tax shelters currently serve a broad spectrum of entities including Fortune 500 companies, startups, celebrities, international businesses, politicians, and even royals.

These different categories of entities use a number of offshore tax shelters including Belize, Bahamas, British Virgin Islands, Seychelles, Vanuatu, Bermuda, the Cayman Islands, Ras Al Khaimah (RAK) and Mauritius. Each of these has its own unique attractions, as we shall find out later. But first, let’s explore how to benefit from tax shelters.

How To Benefit From Tax Shelters

To enjoy the benefits of a tax shelter, all that is needed is to register a corporate entity within the jurisdiction of the tax shelter. The most common entities are corporations (companies) and trusts. An offshore company is best suited for those who intend to use the offshore location as part of their business operations. This includes both existing companies which need an offshore subsidiary and new companies which need an offshore base.

The specific categories of corporations and trusts which can be registered vary from one tax shelter to another. Most shelters offer a myriad of options designed to serve the needs of various types of individuals and corporations.

For the sake of brevity, we shall not examine the different types of corporations and trusts here. Whoever desires more information about the different types available in a specific tax shelter should click here

For now, let us proceeds to the actual benefits of having an offshore company in an offshore tax shelter.

Key Benefits Of Offshore Tax Shelters

Offshore tax shelters typically have laws which provide a number of advantages to individuals and corporations. For an outsider to enjoy these advantages, they need an offshore company within the jurisdiction. The advantages of tax shelters include the following:

Minimal or No Taxes

The most common reason why individuals and corporations seek tax shelters is to minimize their tax liability. The undeniable fact is that most countries use progressive taxation systems which unfairly tax high earners. In such countries, there is no legal way to minimize taxes.

Offshore tax shelters provide the perfect remedy for minimizing taxes. This is because these tax shelters tend to have extremely low or even non-existent taxes. A perfect example of this is the Cayman Islands. This tiny British territory has a law which permits corporations to be formed and own assets without paying any taxes.

As a result, the Cayman Islands has no corporate tax. This has made it a favored offshore location for multinationals. In fact, many Fortune 500 companies have subsidiaries in the Cayman, which they use to legally minimize their tax bill.

Other tax shelters have similar laws to the Cayman Islands. Most of them don’t have a corporate tax, capital gains tax, personal income tax, inheritance tax, gift tax, and even stamp duty. Some like Ras Al Khaimah (RAK) don’t have any personal or corporate taxes. This basically means that those who have companies in such tax shelters don’t incur the cost of taxes.

The minimal or zero taxes make offshore tax shelters perfect for individuals who are eager to reduce their tax bill. It makes them especially great for companies which desire to maximize profits or start-ups which desire to minimize costs. The absence of taxes means that such corporations can meet their goals with ease.

Maximum Privacy

Offshore tax shelters provide maximum privacy for individuals and corporations. This is because most of them don’t keep publicly accessible company or bank account information. As such, an individual or company which assets channeled through the shelter are safe from prying eyes.

In Bermuda, for instance, it is illegal for banks to release the details of account holders to third-parties. Not even the government of Bermuda can access this information. This means that those who keep their funds in Bermuda are 100% assured of their privacy.

Another great example of offshore tax shelter privacy is Ras Al Khaimah (RAK). In RAK, there is no public registry of companies. There is also no available record of company shareholders and directors. As such it is virtually impossible to know which companies are operating there. This can protect a company and its directors from a public backlash following revelations of their use of the tax shelter.

Such a level of privacy isn’t available in European tax shelters like Ireland and Luxembourg. The information on companies using such tax shelters is readily available. Over the past year, Amazon and Google have come under fire for channeling their funds through Luxembourg and Ireland respectively and have had to pull out due to a public backlash.

Such a backlash cannot occur in an offshore tax shelter because it is virtually impossible for such information to come out. Therefore, any individual or company looking for the most secretive avenue for keeping their money would be best served by an offshore tax shelter.

Security

Security is a big deal for anyone searching for a tax shelter. This is because in the US and most EU countries, not paying due taxes is a crime. Being found out can lead to hefty fines and other punishments. As such, people are always looking for the most secure tax shelters possible.

In this respect, offshore tax shelters are the most secure tax shelters in the world. There are two reasons for this. The first is that offshore shelters are often outside the jurisdiction of US and EU regulatory authorities. As such, they are outside the reach of the EU, US Internal Revenue Service, OECD, FAFT and similar bodies.

This means that even if these agencies and bodies suspect an individual or company of storing the assets in the tax shelter, it is difficult for them to investigate. This is because they don’t have access to the relevant financial records.

The second reason is that most offshore tax shelters usually don’t have Tax Information Exchange Agreements (TIEAs) with the EU and US. As such, there is no legal framework for them to apply pressure on the tax shelters, even if they suspect that their citizens of using them to avoid taxes. This basically reduces the likelihood of those who use offshore tax shelters of ever being found out.

Convenience

Perhaps the greatest advantage of offshore tax shelters is that they are extremely convenient to use. Setting up an offshore company is incredibly easy. In most tax shelters, the process can be completed within 2 to 4 working days. The cost of registration is extremely low, with some tax shelters making it possible to register a company for $500 or less. To make it even more convenient, most tax shelters make it possible for people to register companies without even visiting the country.

The convenience isn’t just at registration level. Tax shelters typically make operating offshore companies extremely easy. For instance, in RAK, companies don’t have to prepare and submit tax returns. There are also no exchange controls – meaning that moving money in and out of accounts is hustle-free. Many offshore tax shelters have similar features which are designed to simplify starting and operating businesses.

The bottom line is that offshore tax shelters offer a number of benefits to both individuals and corporations. The exact benefits actually vary from one tax shelter to another. To get a clearer picture of what offshore tax shelters typically offer here is a brief look at a few of them.

A Snapshot of A Few Offshore Tax Shelters

Cayman Islands

This is one of the most popular offshore tax shelters. The Cayman Islands is popular because its law permits corporations to be formed and hold assets without paying any taxes. This means that any assets stashed away in the Cayman Islands are basically untaxed. This is precisely why Fortune 500 companies channel their profits there and save billions of dollars in corporate taxes.

The Cayman Islands are best suited for corporations or individuals with costly assets. It is especially suited for those from tax jurisdictions which levy high taxes on assets. The Cayman Islands can provide a safe avenue for owning assets without incurring any taxes.

Bahamas

The Bahamas is also a renowned tax shelter. This is thanks to its lack of personal income tax, capital gains tax, gift tax, and inheritance tax. This makes it extremely popular with both corporations and individuals. According to the Citizens for Tax Justice, around 5% of Fortune 500 companies have subsidiaries in the Bahamas.

The Bahamas is best suited for wealthy individuals eager to minimize their taxes. It is especially perfect for older people who are eager to limit taxes on the inheritance due to their children. The absence of inheritance and gift tax means that they can give away their money without significant portions of it being siphoned off in taxes.

Bermuda

This is another popular offshore tax shelter. This is because it offers two advantages. First of all, it levies no corporate tax at all. Secondly, its banks have a reputation for secrecy which rivals that of Swiss banks. These two factors have made Bermuda a prime choice for US companies. According to Citizens for Tax Justice, in 2014, almost 25% of all Fortune 500 companies had subsidiaries in Bermuda.

Bermuda’s zero corporate tax makes it perfect for both existing corporations and startups. This can reduce operational costs which could have been spiked by corporate taxes. Its secretive banking culture also makes it perfect for individuals who want to protect their wealth from prying eyes.

Mauritius

Mauritius is a popular tax shelter for companies which are targeting the Indian market. This is thanks to its strategic location in the India Ocean. However, its location aside, it is the country’s tax laws which make it popular.

Unlike other offshore tax shelters, Mauritius actually levies a 15% corporate tax. However, companies’ resident on the island can benefit from its double tax treaties. This grants tax breaks for almost all companies originating in the US and EU. To add to the tax breaks, Mauritius also charges no capital gains tax.

Mauritius’ strategic location makes it best suited for companies which are targeting the Indian subcontinent. It can provide a safe location from which to run business operations. This makes it perfect for companies eager to expand into India.

Other Offshore Tax Shelters

In a nutshell, that is a snapshot at some of the popular offshore tax shelters in the world. Other offshore tax shelters include the British Virgin Islands, Belize, Vanuatu, and Seychelles.

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People Also Ask

Is offshore tax sheltering legal?

Yes, offshore tax sheltering is legal. There are times that tax sheltering is misperceived as tax evasion, which is a crime, but they’re different from each other.

What is an offshore tax haven?

An offshore tax haven is a specific means of tax sheltering. It’s a place where people can opt to place assets and avoid high taxable income.

How does an offshore tax haven work?

With an offshore tax haven, the tax you’d need to pay for your asset, or investment, or property is little to none. Generally, it works as a way of minimizing current and future liabilities.

How do offshore accounts avoid taxes?

Offshore accounts are legal and are recognized by the government. Offshore accounts are made and handled with strategies used to defer or dodge tax liabilities by putting off payments.

Do offshore companies pay taxes?

No, they don’t. Corporations are allowed to avoid paying taxes, especially on foreign profits, unless they’re in their home country.

Which country is the best for an offshore company?

BVI or Cayman Islands would be the best option. They have low incorporation fees and corporate tax rate of 0%.

Services in Offshore Tax Shelters

KGN provides the following services in Offshore Tax Shelters:

Company Formation
Registered Office and Agent Services
Company Secretarial Services
Nominee Shareholder / Nominee Director
Opening of Bank Accounts
Full Company Administration Services
Mailing Address
Virtual Office
Trademark Registration
Yacht Registration

Start Your Company with an Offshore Tax Shelter

If you’ve ever heard of an offshore tax shelter, there’s still a good chance you’re confused as to what it really is. How do offshore tax shelters work? The meanings of tax shelters and tax havens are often mixed up, causing confusion to a lot of people. Yet both of them serve the same purpose, which is to minimize tax liabilities.

Offshore Tax Shelter

Tax shelters are the only legal way of avoiding high taxes. An offshore tax shelter is probably the best method for individuals and corporations who want their tax liabilities reduced. There’s no need to worry because tax shelters are legal under the United States, European, and international law even if they do receive a lot of negative press.

What Are Offshore Tax Shelters

A tax shelter is a method of lessening the burden of paying unfairly high taxes on an individual or corporation with the use of some certain types or strategies of investment. This method is all legal and can be an investment with favourable tax treatment or activities that lower taxable income with the use of deductions or credits.

Is it Legal?

Offshore tax shelters are legal. Although most people believe them to be tax evasion, they are actually completely legal, especially in places where they’re implemented and accepted. Tax shelters might have received bad feedback and opinions from a lot of people, but they are an officially legal means of tax liability reduction.

Best Offshore Tax Shelters

For people who want to minimize their taxable income and liabilities, a tax shelter can be helpful. How do tax shelters work? Technically speaking, and according to financial terminology, they are investments, finance strategies, and resources that help in lowering tax bills.

Some common tax shelters include:

Employer-sponsored 401(k) retirement plans
Assets
Municipal bonds
Investments
Retirement accounts
Tax havens

Offshore Tax Havens

Offshore tax havens meaning is often interchanged with offshore tax shelters. Tax havens are specific means of tax sheltering. The technical offshore tax havens definition is that it’s a locale, a territory, or an area where there are less-than-stringent tax laws. So, when you happen to read something that mentions offshore tax shelter countries, it’s pertaining to offshore tax haven countries.

What Are Offshore Tax Havens

You might be wondering what an offshore tax haven is when you encounter a reference to tax shelters. Offshore tax havens are legal, and their usage is very common, especially for people who want to start and form a company with less tax obligations.

Who Can Benefit from Offshore Tax Havens?

For consistency, tax shelter countries mean tax havens, so tax shelters can also mean places to put assets to avoid current or future tax liabilities. People who can greatly benefit from this method of minimizing tax liability are the following:

People interested in investing in international businesses
Corporate agencies who want to increase their profits
Companies that want to tap into new markets
Individuals and corporations who want to minimize their current and future liabilities

Offshore Tax Havens List

Offshore tax havens UK are some of the best offshore tax havens there are. Unbelievably, despite the bad press they receive, there are many places which are tax shelters. The list includes places such as:

The British Virgin Islands (BVI)
The Cayman Islands
Bermuda
Mauritius
Bahamas
Vanuatu
Seychelles
Belize
Dominica
Nevis
Marshall islands
Samoa

Starting a Company with Tax Shelters

Building and forming companies with the use of tax shelters, or tax havens, is beneficial, especially for those who are new to these kinds of investments. Benefits include:

Excellent Security and Privacy

Maximum privacy is expected when dealing with offshore tax shelters since tax shelter countries don’t keep publicly accessible information, such as bank account details. Also, most countries in the US and EU perceive not paying tax as a crime, so having tax shelters legally allows people either not to pay, or to pay a small amount of tax.

None to Minimal Taxes

Usually, this is how offshore tax havens work, reducing tax for you because tax shelters are known to have extremely low to non-existent tax rates.

Convenience

This is one of the greatest benefits of tax shelters. Starting an offshore company is incredibly easy since, with most tax shelters, the whole process can be completed within 2 to 4 working days.

How Much Money Is in Offshore Tax Havens?

Since tax havens are popular for people who want a reduction in their liabilities, and for people involved in businesses, how much money is in it? A lot. Tax reductions allow the supposedly taxable money to be used for other purposes, such as starting more businesses or investing, or just for saving purposes. Also, when you have a company or a business under a tax haven, you can get your profit as a whole or with little reduction due to taxation. With these benefits alone, it is safe to say that there is a good amount of money in offshore tax havens. Another piece of evidence of this is the number of people or corporations who tend to tax havens and shelters.

KGN | Offshore Tax Shelters