Top 10 Jurisdictions to Set Up your Tax Effective Corporate Structure

| 31 Jul 2012 | 2 Comments

Large multinational companies have been taking advantage of effective tax planning and favorable corporate structures for years in order to optimize profitability. With the debt crisis pushing countries to introduce tax reforms, a number of companies are seen looking to benefit from the best tax planning solutions. Whether you register in the BVI for tax exemption or in Cyprus for EU status, it is imperative to scout the most suitable corporate structure for your business needs.

corporate structure

It is important to find the most effective tax structure that meets your specific business needs

The shocking collapse of Lehman Brothers in 2008 and the recession forced a number of individuals and companies to reconsider their corporate structuring and tax planning strategies. It has become imperative to locate the most favorable jurisdiction and corporate structure to meet the exact business needs to secure assets and wealth against the unstable financial climate.  As an increasing number of business professionals seek improved asset protection and tax effective corporate structures, it is no surprise that a growing number of countries are filling this requirement by offering effective tax planning solutions.

Here is a short list of the top ten jurisdictions to set up a tax effective corporate structure to protect your assets as well as enhance profitability:

British Virgin Islands

The British Virgin Islands (BVI) offers individuals and companies the opportunity to establish their business entity in a long-standing and reputable business center, with the popularity of this location evident in the estimated 1.7 million companies registered in the BVI.  All companies are registered under the BVI Business Companies Act of 2004 which is largely based on English law. The sophisticated legislation offer investors a modern, flexible and stable environment to conduct their business activity.

Furthermore, BVI companies are exempt from corporate tax, tax on dividends, interest, royalties, compensations and other amounts that companies are required to pay. The minimum share capital can be as low as $1 – with a minimum of one shareholder and one director.

Cayman Islands

Another location highly favored by business professionals based in the Americas is the Cayman Islands. The primary reason behind this is the location as well as the favorable company law governing corporate structures on the island. There are four main types of companies that can be registered: Ordinary Resident Company, Non-Resident Ordinary Company, Exempt Company and Exempt Limited Duration Company, with the most popular structure being the Cayman Exempt Company (as amended in 1990 and 1995)

As indicated by its name, the Cayman Exempt Company offers complete tax exemption in the Cayman Islands. This type of company is issued a tax exemption certificate that grants 20 years of tax immunity, safeguarding the company from any changes in the Cayman Islands tax regime. All companies must have at least one shareholder and one company director, and are registered under the Companies Law 1961.

Delaware

Delaware enables entrepreneurs and business professionals to register an offshore company within the United States whilst being exempt from paying US income or federal tax. These companies follow the corporate structure of a Limited Liability Company (LLC) that is based on the combination of a corporate and a partnership structure, therefore offering members improved asset protection.

The flexible business formation and registration procedure contributes to the factors making Delaware a popular jurisdiction to incorporate a business entity. Allegedly Delaware houses more companies than people, with 60% of the Fortune 500 companies based there. This corporate structure attracts persons from across the globe to register a US-based company without having to comply with the stringent US tax regime.

Gibraltar

Gibraltar offers a distinctive tax regime to offshore business investors. The corporate structure of the popular Non-Resident Company in Gibraltar is based on private limited company limited by shares.

In order to establish a non-resident company, persons are required to obtain non-resident status. The main requirements for this are:

  • Company must be owned by non-residents, with no residents or Gibraltarians investing in shares in the company
  • The director of the company can be of any nationality, provided they do not reside in Gibraltar
  • Effective management and control must be exercised outside Gibraltar

Once you have qualified as a non-resident, the procedure to set up a Gibraltar Non-Resident Company is relatively simple. This type of company is immune to local taxes and is favored by business professionals in the UK, Ireland and surrounding countries.

                 Cyprus

asset protection

By finding the most suitable corporate structure you can benefit from improved asset protection opportunities

As a member of the European Union, Cyprus is considered to be a prime location for company registration as it offers unrestricted trade between the 27 EU member states. Its favorable location at the crossroads of 3 continents reiterates its popularity amongst business professionals from Asia, Africa and Europe, with an estimated 300, 000 companies registered on the island. In addition to the above factors, a company established in Cyprus is able to benefit from a 10% corporate tax rate – the lowest in the EU.

Business entities in Cyprus have the form of an International Business Company (IBC), which is limited by either shares or personal guarantee. All Cyprus IBCs comply with standards and regulations outlined by the European Union. Individuals and companies that wish to register a Cyprus IBC are required to have a minimum authorized share capital of €1, 000 and at least one company director, shareholder and secretary.

Dubai

As the fastest growing city in the Middle East, Dubai offers business professionals the opportunity to incorporate their company in a highly reputable location. Under the Dubai Ras al-Khaimah (RAK) legislation, there are seven categories for company incorporation with the most popular being the limited liability company.

Attracting individuals and companies from Europe, Asia and Africa, Dubai offshore business entities are exempt from tax on profit, capital gains as well as other taxes in Dubai. The registration of this type of business entity is straightforward, with the requirement of one director and no minimum capital share requirement.

Seychelles

Individuals and companies based in the African continent largely favor the Seychelles as an offshore business destination. The official form of business entities in the Seychelles is International Business Companies (IBC), which typically takes the corporate structure of a private company limited by shares.

The primary reason that a large number of business professionals opt to incorporate in Seychelles is due to the exemption from income tax, profits and other types of taxation on the island. The quick registration and establishment of a Seychelles IBC further contribute to making it a highly sought after corporate structure.

Mauritius

The Republic of Mauritius offers business investors the opportunity to register in a financially, economically and politically stable jurisdiction. There are two types of corporate structures in Mauritius, namely the Global Business Company category 1 (GBC1) and Global Business Company category 2 (GBC2).

The corporate structuring of a GBC2 is similar to that of an international business company, with the company being limited by shares or personal guarantee. With simple incorporation and a tax exempt status, the GBC2 is a corporate structure that is highly favored by business professionals, especially those originating from India and South Asian countries.

Marshall Islands

optimal profit

Careful deliberation of the jurisdiction will help businesses achieve optimal profit

The Marshall Islands’ globally recognized corporate maritime registries, and its enforcement of progressive corporate laws contribute to making it one of the most sought after locations for corporate tax planning in the world. All companies established within the Marshall Islands are exempt from all forms of local tax, including income, profits and royalties.

The most popular corporate structure is the non-resident corporation due to its simple and quick set up (usually one working day) combined with its tax exempt status and low costs. The basic requirements to establish a non-resident corporation include one shareholder, one director and secretary; shares can be issued as registered and/or to bearer and can be with or without par value.

Hong Kong

Catering to a similar market, Hong Kong offers individuals and companies a unique corporate structure through their popular Private Limited Company. This business entity is established under Common Law, which is largely based on English Common Law.  Due to the distinctive taxation structure of Hong Kong, companies are required to pay the tax according to the territory they are established within.

With tax immunity on foreign profits and capital gains, Hong Kong levies a 16.5% tax rate on sourced income. Furthermore, there is no capital requirement, and a minimum of one shareholder and director, making Hong Kong a highly sought after location to establish a tax effective corporate structure.

Selecting the best corporate structure for effective tax planning

To achieve the best results from your corporate structure, it is important to identify the most suitable region with regards to offering favorable taxation and convenience for your specific business needs. The majority of investors seeking to register an offshore company are faced with the challenge of locating the right corporate structure within their preferred region. In order to set up your offshore business in a tax effective location, it is important to consider the implications of each jurisdiction according to your specific business needs.

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Comments (2)

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  1. Carlos E. Pagano says:

    I used DeltaQuest services to open a bank account with Loyal Bank in Dominica; Natalia Lambriano’s help was invaluable.

    My question now is, what amount of money should I put aside to set up a company in Delaware? Also, how does Belize compare vis-a-vis the jurisdictions you list in your report?

    Your comments will be appreciated. Thank you.

    Sincerely,

    Carlos E. Pagno

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    • Mariam Nasir says:

      The time taken to incorporate a company is Belize is usually one day, which is the same as a Delaware company; however the latter option proves to be cheaper for investors. For more information on the pricing and requirements of establishing a Delaware company, please contact our corporate department at corporate@deltaquestgroup.com.

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