1 - 15 August, 2003



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Offshore Overview OCRA - Overseas Company Registration Agents (Eastern Europe) Ltd. Partner

Offshore Overview

The opening of the former socialist countries towards the market economy and the application of the rules that govern this economy, as well as the attempts of the former socialist countries to integrate in this system, together with the observance of the integration conditions, inherently generated at the level of these countries a series of problems, among which there are those related to taxes and duties.

Nevertheless, at the same time, the private businessmen most of those who also develop external relationships proved a special interest in the international matters related to taxation. This may be also due to the very high level of taxation in the country of origin.

This desire to diminish the taxes existed and occurred simultaneously with the levying of the tax. The are various and at the same time numerous methods of avoiding the tax due, but the most legal and efficient method used by businessmen is the utilisation of an offshore company (firm).

Half a century ago there were quite a few offshore jurisdictions and the utilisation of most of them was surrounded by mystery. Due to the huge progress achieved further to the technology and communications revolution, the access to the facilities offered by the offshore companies became much easier. Today, offshore jurisdictions are used at a global level, daily, 24 hours out of 24, as an important and integral part of the world financial system.

What are "offshore" companies?

Certain countries, territories called "fiscal paradises" or "offshore financial centres", have introduced a system of taxation in which companies incorporated in the respective territory shall not be taxed company revenues tax, value added tax, physical entity revenues tax, inheritance tax, donations tax, etc. or, at most, the tax shall be very low, provided that certain conditions are fulfilled.

These jurisdictions also offer foreign investors, besides exemption from taxation and political security, the liberalisation of foreign currency transactions and a well-developed monetary system - banking system, insurance, stock exchange companies.

Offshore firms are companies that do not develop and do not realise revenues in the jurisdiction where they were incorporated, as the revenues realised are exempted in part or in whole depending upon the conditions of the chosen jurisdiction. This jurisdiction has to be one those presented in the table.

It happens very often, especially in Eastern Europe, that the purpose of the formation of an "offshore" company may be not only the exemption from taxes, but it may also be that of enabling the opening towards exterior, as well as of creating a better image in the country of origin of the autochthonous investors in the name of a company incorporated in a jurisdiction with a high prestige. Oftentimes, persons who start their business under the name of a foreign company are taken more seriously than the autochthonous businessmen are.

The main reasons that lie behind the demand for offshore services from legal and physical entities are the following:

  • Minimisation of taxation;
  • Protection of goods;
  • Reduction of costs;
  • Risk management;
  • Avoidance of bureaucracy and overloaded legislation.

Each jurisdiction in part requires observing and undergoing several distinct and unique stages in what regards the formation of an offshore company. Being acquainted with the regulations of the Fiscal Paradises and of the Offshore Financial Centres from all over the world, we are ready to provide you with the necessary information and data so as you may choose the jurisdiction in which you can have your own offshore company.

In conclusion, the "offshore" companies are in fact nothing more than a legal business instrument for the fiscal optimisation and for the security of your business and of your investments, regardless of the domain of activity and of the jurisdiction in which it is incorporated or it is already functioning.

OFFSHORE JURISDICTIONS (FISCAL HEAVENS)

The countries (jurisdictions) known as fiscal heavens have a fiscal legislation which guarantees and offer conditions of taxation that are advantageous for offshore companies, provided that they observe certain conditions.

The fiscal system regulated and applied in these countries is a strictly defined one.

These countries also propose and offer to investors, besides the fiscal advantages in the field of taxation, a series of other facilities, namely: the guarantee and liberalisation of foreign currency transactions; in many such countries, there is not a compulsory regulation with respect to book-keeping.

CLASSIFICATION OF FISCAL HEAVENS

Fiscal heavens may be classified in several categories depending upon:

  1. The system of taxation:
    • Jurisdictions (countries) where an annual fixed tax is paid. In these countries, the revenues realised abroad are totally exempted from the payment of the profit tax (for example, in Seychelles an annual fix tax amounting to 100 USD has to be paid; in the British Virgin Islands an annual fixed tax amounting to 300 USD has to be paid, etc.);
    • Jurisdictions where the basis for taxation consists of the value of the registered capital of the company and not the realised profit (for example, in Liechtenstein the tax amounts to 0,1% of the net value of the patrimony of the company and the dividends tax amounts to 4%);
    • Jurisdictions where a linear (percental) taxation is applied to the realised revenue (for example, in Cyprus, the tax to be paid equals 4,25% of the realised revenue).
  2. The obligation of book-keeping:
    • Jurisdictions where the annual balance sheet does not have to be submitted to any authority, while the book-keeping is a mere formality and not an obligation (for example, in Bahamas, the state of Delaware the United States of America, etc.);
    • Jurisdiction where the book-keeping for offshore companies is obligatory and has to be approved by an expert accountant from the respective country (for example, in Cyprus, Madeira, Switzerland).
  3. The consignment of the registered capital at the disposal of the offshore company:
    • Countries where the consignment of the registered capital is not obligatory (for example in Bahamas);
    • Countries where the registered capital has to be consigned (paid) at the disposal of the firm (for example in Washington D.C.)

     

THE PRESENTATION OF THE SPECIFIC CONDITIONS OF EACH JURISDICTION

GENERAL INFORMATION:

  • The application of the treaties for the avoidance of double taxation;
  • Political stability.

    Details on the Conditions offered by each Jurisdiction (ANNEX_A)

INFORMATION REGARDING THE FORMATION AND FUNCTIONING OF THE COMPANIES:

  • Juridical form;
  • Possibility of obtaining ready made companies;
  • Anonymity of the owners;
  • Public evidence of the presidents and associates;
  • Minimum number of presidents and associates;
  • Obligation of appointing local presidents and secretaries;
  • Obligativity of the stamp of the company;
  • Type of shares;
  • Location for holding the meetings of the presidents and associates;
  • Levied tax;
  • Obligativity of book-keeping.

    Details on the Conditions offered by each Jurisdiction (ANNEX_B)

COSTS (EXPENSES)

  • Incorporation tax;
  • Annual tax for the renewal of the authorisation of functioning;
  • Optional taxes.

The localisation of the offshore JURISDICTIONS

Offshore Jurisdictions location:


Europe:
Andorra
Cyprus
Denmark
Switzerland
Gibraltar
Man Island
Iceland
Israel
Jersey
Liechtenstein
Luxembourg
British Virgin Islands
Madeira
Malta
Monaco
Holland
United Kingdom
Hungary

America:
Anguilla
Belize
Panama
Uruguay
Bahamas
Bermuda
Holland Antilles
Nevis
Cayman Islands
Turks and Cayucos Islands

Asia:
Hong Kong
Cook Islands
Marshall Islands
Singapore
Vanuatu
Africa:
Liberia
Mauritius
Seychelles
USA:
Arkansas
Delaware
New Jersey
New York
California
Florida
Oregon
Washington DC


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