Offshore Companies Tax

Offshore companies tax in essence really does not exist if the offshore company in question is incorporated in a fully fledged tax haven where offshore companies are not taxed. In some countries, however, offshore company taxes are applied even if very minimally so that offshore companies are not given any preferential treatment over domestic companies.

This said, offshore companies are generally tax free entities if they are not made subject to any offshore company tax, income tax, gift tax or withholding tax, which is the case in offshore jurisdictions such as St. Kitts and Nevis, the Bahamas, the Cayman Islands, Anguilla, Dominica, the Seychelles, Panama and Bermuda.

In Barbados, however, an offshore company tax is levied on a reducing basis whereby an offshore company tax of 1% to 2.5% on a sliding scale is imposed on the profits generated by Barbados offshore companies. Hence, 1% offshore company tax is paid on profits that exceed USD30 million; 1.5% offshore companies tax is imposed on profits exceeding USD20 million but that has not gone over USD30 million; 2% offshore company tax is imposed on profits of more than USD10million but that has not exceeded USD20million; and 2,5% offshore companies tax is payable on profits of up to USD10million.

Unlike classic tax havens, Barbados also imposes a 2% offshore companies tax pm exempt insurance companies upon completion of their fifteen (15 year) tax break. This offshore company tax is payable on the first USD250,000 of taxable income and all other amounts that are over USD250,000 are exempted from offshore company tax. Besides this, most offshore jurisdictions do not impose any form of offshore company taxation on offshore insurance companies.

Although not a corporation or considered an offshore corporation or company, the offshore trust is generally treated as a fully tax free entity. The same also applies for offshore trust companies or Private Trust Companies (PTC) which are offshore companies that are set up to manage the affairs of a particular offshore trust or specific group of offshore trusts.

Due to the general absence of tax on offshore companies, offshore companies are commonly used in international trade and asset management and planning strategies. Offshore corporation tax can defeat the purpose for which an offshore company was formed for and utilized as an international offshore tax planning tool in the first place. Most offshore jurisdictions require offshore companies to pay an annual maintenance fee which is paid through the registered agent but this is not an offshore company tax.

Offshore companies are therefore capable of establishing holding structures to reduce overall international tax liability where the offshore company is the parent of one or more subsidiaries. Additionally, exemption from offshore companies tax further allows offshore corporations and other types of international entities to make full use of offshore banks and to design offshore tax planning and asset protection strategies.

The absence of offshore company taxes is one of the major incentives that offshore corporation enjoy. This is effective from the time of offshore company launching, like Dominica company formation, and throughout the entire existence of an offshore company. Because of these preferential tax regimes of offshore companies, offshore companies are able to fully offer the advantages that they are created for.

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