You can register an international trading business in many countries around the world, but the United Arab Emirates is a particularly attractive area for this. Opening an offshore in the UAE will be beneficial for both large and novice managers, since the country has the most favorable tax conditions and all conditions have been created for convenient doing business.
From this article you will learn:
- What is offshore?
- Why are offshore companies needed?
- Types of offshore companies
- 5 schemes for using offshore companies
- Advantages and disadvantages of offshore companies
- How to open a company offshore?
- Offshores and Russian legislation
Will the withdrawal of money from the country stop?
Offshore | Publication date: 2022.07.08 | Update date: 2020.03.19 |
Turning on a well-known talk show once again, you can observe how the audience is indignant at the fact that some oligarch took the “people’s” money offshore or the news says that a company withdrew money through offshores. It would seem that we should also be indignant, but it becomes more interesting to find out what an offshore is and maybe it’s worth withdrawing your money there? This article will explain what offshore companies are in simple terms.
CHOICE OF BANK
In principle, you can become an offshore account holder in any other country. For example, if you are Russian, then your bank account in Kazakhstan will be considered offshore. Of course, this does not mean that it will be beneficial for you. Therefore, the country in which you want to open a bank account must be chosen carefully and wisely. In order to make the right choice, professionals recommend, first of all, to decide for what purpose you are opening an account and what funds you have. The fact is that in some countries it is more profitable to open business accounts, while in others it is optimal to open a personal account. When choosing a bank, the economic and political situation in the country, liquidity, reliability of the banking institution, loyalty of legislation to non-residents and other significant factors are of great importance.
For a long time, Europe was considered a favorable place for investing and opening offshore bank accounts. However, recently the economic growth of European countries has slowed significantly, bureaucracy has grown, and many EU banks no longer look so attractive. Therefore, if you need a European offshore account, contact us at RECHTSANWALT, and we will help you not make a mistake and choose a truly worthy financial and credit institution.
Geographically, it is customary to distinguish banks:
- Europe;
- Switzerland;
- Caribbean region;
- Asia;
- America.
In each direction you can find many interesting and profitable offers. However, there are not only pros, but also cons, so you need to select a bank to open an offshore account with the help of professionals.
After you decide on the jurisdiction, you need to choose a financial institution directly. The cost of opening an account, the list of required documents, deadlines and other nuances of opening an account and working with it will depend on which bank you choose.
What is offshore?
An offshore, or more precisely, an offshore zone, is the territory of a state in which special tax conditions apply to foreign companies (there may be no taxes at all).
In addition, offshore companies do not require company owners to make financial statements or conduct any audits. Another advantage is the confidentiality of all data about the company, that is, it will not be possible to find out the true owners and the amount of funds spent through the company simply out of curiosity. It is clear that there are quite a few advantages; they will be discussed in more detail later. It is worth noting that due to such advantages, almost 10% of all money on the planet is stored in these zones. For Russia, these statistics are even more depressing: 90% of large Russian businesses and the same amount of the fleet with Russian ship owners are offshore. This will also be discussed further below.
Classic “offshore schemes”
The popularity of transferring business to offshore zones is associated with the ease of use of these companies in various areas of activity. Regardless of whether the trade sector or consulting is chosen, the company’s work can bring significantly more profit than with traditional registration on the territory of the Russian Federation.
The profitability of a business depends on the competent use of offshore opportunities.
Typical schemes for using offshore companies look like this:
- The “offshore” company is the founder/shareholder of another organization. Under the terms of dividend payments, the second legal entity can be located and conduct business in any country in the world.
- Trade in the field of import/export. Despite the presence of a markup on goods sold, the organization does not pay taxes, since the main business is localized outside the “registrar state”.
- Investment sphere. Raised funds can be invested without restrictions in any line of business (own or third-party).
This also includes shipowners and aircraft fleet owners. Transferring such companies to offshore makes it easier to enter the international market and obtain cheap loans for the purchase of new ships and aircraft. When working in the service sector, horizons for reducing taxes open up for an enterprise, even in “offshore” conditions like Cyprus. The level of work performed can be significantly reduced by taking into account the costs of a particular company.
Where are offshore companies located?
It should be noted that there is no exact list of offshore zones, since they differ in conditions, and different countries where cash flows come from may treat these zones differently. There are several classifications of offshore zones.
Conditional classification:
- Island offshores, where there are no taxes and where accounting reporting is not required. These include the following states: Bahamas, British Virgin Islands, Cayman Islands, Belize. The conditions offered in such zones guarantee complete confidentiality about operations and their owners. As a result, the zones have a dubious reputation, since criminal operations for money laundering or promoting terrorism can take place through them.
- Offshore zones of increased status. These include Liechtenstein, Monaco, Gibraltar, Hong Kong, Macau. These countries have good tax incentives for some activities, require financial reporting, and disclose ownership information upon request. But companies registered in these zones are much more trusted by partners.
- Some zones in countries where there are tax incentives for companies not resident in that zone. For example, in Russia, this is the Kaliningrad region, where there are benefits for companies registered in special economic zones. Otherwise, the requirements for companies are the same as for all other companies registered in this country.
There is also a classification by the Organization for Economic Co-operation and Development (OECD), which includes the most developed economies in the world. This classification takes into account how countries with tax havens apply tax standards proposed by the OECD. As a result, all countries are divided into two categories: the “grey” list and the “white” list. The “gray” countries include those countries that have decided to apply international tax standards, but have not yet sufficiently implemented them: the island states of Nauru and Niue. The “white” list now includes all other zones with tax benefits.
The Financial Action Task Force (FATF), an intergovernmental organization that develops global standards in the field of combating money laundering and the financing of terrorism, has developed its classification of offshore zones. It has a black list that includes Iran and North Korea, countries with the highest risk of money laundering and terrorist financing. The “dark gray” list includes countries that have national regimes that have failed in terms of strategy, or those countries that do not implement FATF recommendations. The list includes: Vietnam, Indonesia, Yemen, Kenya, Myanmar, Pakistan, Sao Tome and Principe, Syria, Tanzania, Turkey, Ecuador, Ethiopia.
Functions of "offshore zones"
What forces you to register a business offshore is, as a rule, the reluctance of its owners to agree to the conditions offered by the state. The motivation can be different - from an attempt to avoid high taxes to the desire to ensure maximum confidentiality of commercial information.
Most entrepreneurs expect offshore companies to increase business profitability.
Typical functions of “offshore zones”:
- Investment. Investment channels are being created in risky markets.
- International trade. Minimum taxation creates favorable conditions for attracting large cash flows and cheap loans.
- Registration of aircraft/ships. Particularly popular are Panama, Seychelles, Bermuda, and the Bahamas.
- Banking. Many offshore zones, such as the Cayman Islands or the Bahamas, provide banking licensing services.
- Insurance. Bermuda is a leader in this area of activity. A significant reduction in the tax burden makes insurance transfers very popular.
Organizations are registered in the zone where more favorable conditions are provided for conducting a specific business, but one should keep in mind the possibility of partners being wary of this way of doing business. In some cases, offshore companies can harm a joint business if, for example, a certain registrar is blacklisted.
The situation with offshore companies in Russia
Since there is no official list of offshore zones, the Central Bank of Russia publishes a list of such territories.
Since 2009 the list looks like this:
| Caribbean countries: | Pacific countries: | European countries: | Indian Ocean and Persian Gulf: |
| Anguilla | Brunei | Andorra | Kingdom of Bahrain |
| Antigua and Barbuda | Republic of Vanuatu | Gibraltar | Union of Comoros |
| Aruba | British Virgin Islands | Principality of Liechtenstein | Republic of Mauritius |
| Commonwealth of the Bahamas | Hong Kong | Republic of Malta | Republic of Maldives |
| Belize | Macau | Principality of Monaco | United Arab Emirates |
| Bermuda | Republic of the Marshall Islands | Republic of San Marino | Republic of Seychelles |
| Grenada | Montserrat | Isle Of Man | Liberia (Africa) |
| Commonwealth of Dominica | Labuan | Channel Islands | |
| Netherlands Antilles | Republic of Nauru | ||
| Saint Vincent and the Grenadines | Niue | ||
| Saint Kitts and Nevis | Cook Islands | ||
| Saint Lucia | Republic of Palau | ||
| Turks and Caicos Islands | Samoa | ||
| Cayman Islands |
The accounts of offshore companies registered in these territories contain many billions of dollars withdrawn from the Russian Federation. Why does this happen?
INSTRUCTIONS
In order to quickly and easily become an offshore account holder in one of the prestigious, safe and reliable foreign banks, contact us at the RECHTSANWALT law firm. We will advise you on all issues that interest you, help you choose a bank, collect, fill out and submit the documents required for opening. And this:
- application for opening;
- passport;
- documents that confirm the place of permanent residence/registration;
- if necessary, proof that your funds were received legally.
This is a list of basic documents, which may be longer depending on the requirements of the banking institution.
Bank employees will check the submitted documents, make a positive decision, and open the bank itself, which will take up to two months. Personal presence at the bank is not required, and you can become the owner of an offshore account remotely.
Taxes
In Russia
The basic income tax rate is 20%, dividend tax is 9%
Offshore
Taxes are low or non-existent.
In Russia
Let's say that a certain organization receives a profit for the sale of its products in the amount of 1 million rubles. The tax on this amount will be 200 thousand rubles.
Offshore
The same organization sells the same products to an offshore company (its owner is the same as that of the organization) at a reduced price with a profit of 200 thousand rubles. The remaining profit (800 thousand rubles) will be received by the offshore company by reselling the goods. In all these operations, the goods are not exported outside the country. Tax is paid only on 200 thousand rubles earned in Russia. Only 40 thousand rubles.
The bottom line: the organization saved 160 thousand rubles on taxes. Offshore schemes can be used to reduce other taxes.
How to open
If all the risks and benefits are weighed, you can begin registering your own business. The first step will be to select a business name with a unique spelling and pronunciation. The high popularity of offshore companies makes this process difficult due to the large number of registered companies. If there is a coincidence, you will either have to come up with a different name or choose another jurisdiction.
In addition to those mentioned, there are several more mandatory points:
- The name of the organization must directly indicate the form of ownership or the presence/absence of limitations on liability.
- Words indicating banking, stock or insurance activities cannot be used in the name if a business is being created in other areas.
- When changing the name, the registrar's approval will first be required, after which a meeting of the founders can be held and the documentation changed.
- The size of the authorized capital directly affects the amount of the registration fee, so they try to declare it large in order to reduce the annual payment.
- The preparation of constituent documents is usually entrusted to service companies; the charter is drawn up in printed form; other details depend on the jurisdiction.
- Accounting reporting in most offshore zones is allowed in free form.
It is necessary to ensure that you have a legal address to which requests from tax authorities and other authorities will be sent. The simplest option for creating an enterprise is to contact specialized companies that provide these services. After registering a company, you can conduct independent activities without contacting them until the decision to re-register/liquidate the legal entity.
Secrecy
In Russia
The ultimate beneficiaries of large enterprises can be found in the annual financial reports.
Offshore
The owners of the companies are not disclosed.
As a result: A rich Russian, who does not want to reveal himself, registers a company offshore. Next, this company buys shares of a Russian company. Thus, the business is protected from cases of persecution.
In addition, opening an offshore company and managing it is much easier and cheaper than in Russia.
Offshores and Russian legislation
In our country, offshore companies are considered by tax authorities as an activity to hide income for the purpose of tax evasion. Thus, in 2014, the law on controlled foreign companies was adopted, which came into force in 2015.
Violation of this law can lead to a fine of 100 thousand rubles or more, as well as up to 6 years in prison. The only way to use offshore schemes without a statement about the owner was the residence of the company owner abroad. In other cases, the offshore company is obliged to disclose information about its activities to the Russian tax authorities.
