Offshore meaning. What are offshore zones? Types and list of offshore zones

19.05.2024

(aka offshore or offshore company) is a company that has preferential taxation and is registered outside the country in which the main business of its owner is conducted. The emphasis in the word “offshore” is on the second “o”.

The purpose of creating offshore companies is save money on taxes, to escape the control of the state in which the business is conducted, and sometimes to “launder” money that was not entirely earned kosher from the point of view of the legislation of the “home” country. Word Offshore translated from English means “far from the coast”, which in most cases is true: many Russian offshore companies are registered in Cyprus, Bermuda and the like.

There are several in the world "offshore havens"- cozy and warm countries where you can open (or buy a ready-made) company with low taxes, convenient infrastructure and qualified legal support. Most offshore companies are registered in these countries.

Many states are making attempts to combat offshore companies by introducing all sorts of bans. The goal of these countermeasures is to bring the money “home” and establish tighter control over the business.

Listed:

From the moment when commodity-money relations developed instead of natural exchange, there were constantly both those who wanted to make a profit and those who wanted this gain to be shared with them. The first were represented by traders and merchants of various sizes, and on the other side was the state or its ruling elite.

Back in Ancient Greece, attempts were made to introduce a tax on the import and export of products, as Athens did, which gave rise to the first offshore zones. These are nearby islands where goods could be imported and exported, as well as trade transactions carried out without duty.

Taxes in the ancient world

Attempts to hide part of the income from the state or its rulers and obtain any benefits to reduce taxes have been known since ancient times. In all countries of the ancient world there were one-time payments or, as they were called, sacrifices. Citizens of the country contributed them during critical periods for the country, for example during the war. Later payments became regular and were directed towards the development of the state.

The emergence of the taxation system was caused by the formation of such institutions of power as the army, courts and officials at various levels. The collection of sacrifices in those days was more spontaneous in nature, and the payment could be either a part of the harvest or goods produced, or personal services, for example, participation in a military campaign, service in the manor’s house, and others.

There were areas where taxes were either minimal or not collected at all. These are the ones that are now called “offshore zones”. For example, the island of Apollo, whose main port was Delos in 146 BC. e. was declared free, where overseas merchants could trade duty free. It was the first documented free zone in the world. Offshore companies received their greatest development both from the legal and financial sides in the 18th and 19th centuries.

History of the emergence of preferential tax territories

Offshore zones are entire states or some part of them, where legislation provides the opportunity to open companies with a preferential tax policy.

The root cause of its occurrence was the requirement of the French kings, who took out loans from Swiss bankers, to maintain secrecy about these facts. This was due to the fact that the royalty, being Catholics, did not want it publicized that they were borrowing money from Protestants.

Thus, the concept of secrecy of loans and deposits arose, which led to the fact that in 1713 a law on banking secrecy was passed by the great city council in Geneva. According to it, bankers were required to keep records of their clients and their financial transactions without the right to disclose this information to third parties.

It was Switzerland that created the first model of financial secrecy for foreign capital and was the European center for the exchange of money. Until 1934, the main concern of bankers in this country was maintaining confidentiality, which was guaranteed to clients on the basis of civil and labor laws.

Since 1934, new measures have been taken, the main ones being the protection of personal data of clients and the introduction of numbered accounts. Thus, Switzerland is the first offshore zone, which, after the abolition of limits on the purchase of currency and the introduction of mutual convertibility of monetary units of all countries, began to provide banks with the opportunity to conduct monetary transactions in the markets of other countries. This allowed international firms and corporations to expand their activities by relying on credit that was not limited by national ties.

The laws adopted in this country make it possible to hide customer data even before the state. This rule has been fixed and has become the main one in offshore zones not only for individuals or legal entities, but also for their trusts, companies and funds. It is almost impossible to find out who is the founder of a company opened in such a zone.

Development of offshore zones in the 20th century

Offshore economic zones have become one of the ways to attract foreign capital to countries with underdeveloped economies. For example, in the mid-20th century, some of the British colonies gained independence, and some, remaining part of the United Kingdom, were deprived of government subsidies to further support their economy. Therefore, laws were passed in these countries that allowed the registration of foreign offshore companies.

An example of such a company is the Liberian fleet, which was the most numerous at that time.

The poor African country, by creating an offshore on its territory and providing numerous foreign ships with the opportunity to register and sail under the Liberian flag, was able to raise and develop its economy.

To date, such international offshore zones have been created by Panama, Malta, China, Hong Kong and Singapore. Due to the fact that paperwork is quick and easy, and the tax rate is kept to a minimum, these countries have the largest number of merchant ships in the world. Most of the ships belong to owners from other countries, but this does not prevent them from flying the flag of the state where the offshore zone is registered.

Sharing financial responsibility

Countries where the legal separation of the company as a legal entity and its owner, the subject of physical activity, began to be especially popular among business representatives.

This allowed the manufacturer, in the event of his company being declared bankrupt, to retain his property, and the payment of debts had to be made by the company as a legal entity. In most countries, in the event of the bankruptcy of any production or company, banks recovered damages from the owner, describing his personal property. The person then became completely bankrupt.

In Great Britain, a law was passed according to which the country from which the business was managed was considered the residence of the company. The company could be registered in another country, but since it did not produce anything there, and its owner was considered a non-resident, taxes were not paid at the place of registration.

The territories where such registrations were carried out are the offshore zones of the country. This process began with Britain on its colonial islands, but today not only small and economically underdeveloped countries, but also large states are introducing similar policies.

Free economic zone

In order for an influx of foreign investment to begin in the country, it is enough to create favorable conditions for doing business in it and enshrine all this in legislation.

A free economic zone is a part of the country where preferential conditions apply for foreign capital in the following matters:

exchange rate regime – maintaining the exchange rate in accordance with its global indicators;
taxation must be minimal;
customs rates should be extremely low;
labor legislation.

The country wins in many respects in the development of its own economy by creating free economic zones. Offshore zones serve certain purposes:

mutual investments of countries in the development of any industry or production;
familiarization with the latest foreign technologies and their application;
attracting a large influx of foreign currency;
introduction of new systems for organizing and conducting production;
creating new jobs and developing exports;
bringing social, business and economic infrastructure to a new level of development.

All this leads to an improvement in the economic situation in the selected region and throughout the country as a whole.

SEZ classification

Due to the fact that many countries began to organize offshore zones on their territories, this led to the need to streamline and classify them. Nowadays, several SEZs are distinguished according to the characteristics that underlie them:

What is the investment aimed at - the development of the external or internal market.
Economic motives - in some regions, where the economy is very weak, tax incentives are introduced for the growth of small and medium-sized businesses, which revive it, in others they create favorable conditions for foreign investment, which leads to an influx of foreign capital.
Development of a specific industry.
Ownership entities – private, public or mixed type companies.

This classification allows business owners to choose where exactly to open their business or where to invest their money.

The advantage of creating a SEZ

Today, opening or purchasing a ready-made offshore company is beneficial for several reasons:

Such a company expects minimal taxation.
The security of the businessman's assets is ensured.
Complete confidentiality of information about the owner and shareholders of the company.
Safety of funds in reliable foreign banks.”
Economic stability of countries with offshore zones.

Under such favorable conditions, many businessmen prefer to open their companies in free economic regions.

List of SEZ countries

Global offshore zones today can be represented either by an entire state or by any part or region of it. In the USA, each state has its own jurisdiction, and some of them are free economic zones (for example, Delaware and Oregon). Also in Switzerland, a number of cantons provide incentives for doing business in the form of low tax rates.

Since there are many economically free zones in the world today, it is sometimes difficult to choose exactly where to open your enterprise so that it not only receives maximum profit, but is also legally protected. Therefore, political, economic and social stability in the state should be taken into account.

The full list of offshore zones includes 26 countries on whose territory the most comfortable conditions for doing business have been created, including Andorra, Monaco, Liberia, Switzerland, Panama, New Zealand and others. In some countries, SEZs have been created in certain regions, for example in Germany, Canada, the USA and other countries.

Offshore registration

Before deciding where to register your company, you should know that a non-resident pays a tiny percentage of business costs to maintain it abroad. To transfer companies to offshore zones, register them, or purchase a ready-made business, you only need to take a few steps:

Select a region with the most favorable conditions for the operation of production. Non-resident activities include:

insurance, banking and finance;
export and import operations;
mutual settlements between partner companies;
asset allocation and tax optimization.

2. Based on the chosen business, choose an offshore with the lowest tax rate; in this case, you can register the main company in one FEZ, and a subsidiary in another.

3. Study the conditions of registration and work in this region.

There is a conditional division of non-resident jurisdictions in different countries of the world.

Low tax zones

Of the five types of non-resident jurisdictions, the most popular are SEZs with low tax rates. In these states, foreign investors are provided with the most favorable conditions. These include Canada, Ireland, Scotland and the UK (for international trade), Cyprus and the Isle of Man (for banking and insurance).

Classic SEZ

There are countries that offer legal provisions for avoiding taxes while maintaining complete confidentiality of clients' personal information and protecting their assets. At the same time, they are guaranteed financial immunity.

Similar offshore zones are the BVI, Panama, Belize, Seychelles, Mauritius, Dominica, Saint Kitts and Nevis, and the island of Anguilla. Supervision of the legality of the activities of these economically free regions is monitored by special institutions and the IMF.

European SEZs

In Europe, offshore zones are more tied to specific business niches. For example, in Latvia there are favorable conditions for registering IT companies, in Holland and Switzerland there are holding companies and banks, in the Czech Republic, Slovakia and Bulgaria there are significant benefits for the development of tourism and agriculture.

Opening such a company in a European country is prestigious, respectable and reliable, although accounting will have to be done, since this is a classic type of offshore.

Offshore zones in Russia were abolished in 2004, after a decree abolishing income tax benefits came into force.

Asian SEZs

In Asia, offshore is based on “three pillars” – Hong Kong, Singapore and China. In these countries, only financial transactions carried out directly at the place of registration are taxed. Otherwise, these are extremely favorable regions for conducting trade and intellectual business related to innovative developments and research.

Tax paradise and oasis - these are the words offshore companies may hear about themselves. What are they like in practice? What is the mechanism of their functioning? How can you open an offshore company? Do they exist in the vastness of the Russian Federation? These questions, as well as many others, will be discussed by us in this article.

What is called offshore?

This is the name given to economic zones in which currency and tax legislation is very flexible or practically non-existent at all. In them, taxation can reach the level of a complete absence of direct payments. Most often, small states or their individual territories act as offshore companies, where local and foreign entrepreneurs can register, falling under a preferential tax regime. Almost any country in a certain area can act as a kind of refuge for those who want to pay less. To designate such enterprises, the name “offshore company” is used.

Legislation

Offshore jurisdiction is based on the principle of residence of the company. It is based on a geographical feature. Companies with this status conduct their business activities outside the territory where they are registered. An important advantage that these economic entities receive is the lightness of the tax burden. But this is not the only advantage. Thus, they have currency autonomy, as well as a number of benefits in the customs, registration and administrative control spheres. This is all done to provide information about the real owner, as well as the scope of the company.

The importance of offshore companies

We have figured out what these subjects are. What role do they play? To help you understand the scale of this phenomenon, let’s give some numbers. There are over 100 offshore centers in total. The largest of them:

Panama. At the moment, more than 340 thousand companies are registered.
Virgin Islands. At the moment, over 200 thousand companies are registered.
Ireland. At the moment, more than 150 thousand companies are registered.

Approximately half of the world's capital turnover occurs through the use of the services of offshore centers. One level exceeds 500 billion dollars! Each cent has its own specialization. Thus, for banks they choose Luxembourg, Switzerland or Hong Kong, while for holding companies they choose the Netherlands or Liechtenstein. Centers are selected based on cost optimization parameters for business activities.

Are offshore companies useful for the Russian Federation?

It should be noted that such zones generate income only for the state in which they are created. Thus, losses due to the withdrawal of untaxed profits amount to hundreds of billions of rubles. Now they speak with confidence about tens of thousands of offshore companies that were founded by immigrants from the Russian Federation. According to some reports, the number of these subjects can be expressed as ten times higher than official statistics.

Is it legal to use this mechanism?

The legislation of the Russian Federation grants foreign legal entities the right to carry out business activities on an equal basis with local companies. Therefore, in the Russian Federation, offshore activities are completely legal. If we rely on data from the state statistics service, this is confirmed by the constant increase in the number and volume of transactions with them. The activities of offshore centers are directly regulated by international law. Of course, they must also comply with national acts, but in the event of a conflict, the former have the advantage. In addition, the use of an offshore mechanism not only allows you to protect the company’s assets and minimize taxes, but also helps with access to international markets.

Why register an offshore company?

Growing economic and political instability, globalization processes and rising taxes are the main reasons for businessmen choosing such places to protect their assets and investments. And given that this is also a legal way to reduce taxes, it also allows you to receive benefits and advantages that are not available in your home countries. Besides this, there are other positive aspects:

Lack of bureaucracy.
Confidentiality.
Management of risks.

Therefore, many entrepreneurs are interested in how to register an offshore company.

Legal basis

A special feature is the limited liability of investors. Legislation that provides for the limitation of an enterprise as a legal entity in the area of responsibility as an individual representative was first introduced back in the 19th century. To this day, the separation of the company from the owners and directors makes it possible to reduce the losses that people suffer when economic activity fails. This principle is also used in minimizing taxes. Therefore, residents of countries with a high level of taxes use offshore companies to get more income, because they will be taxed according to the laws of the registrar country.

Which jurisdiction is best to choose?

There are over 100 financial centers in total. And choosing the appropriate jurisdiction requires a careful approach to this issue. First of all, it is necessary to give preference to countries that have a stable political situation and economic stability. If it is important, it is necessary to ensure that the legislation ensures the confidentiality of the owner. Other factors include requirements for reporting and auditing, the presence of exchange controls, and a developed banking system. It is also very important to have existing agreements on avoiding offshore with the country where business activities are planned. An auxiliary group of factors includes the cost of registering a company, as well as obtaining the necessary professional services.

How is an offshore company registered?

Initially, the title is checked. It is considered a good rule of thumb to ensure that it does not resemble any of the popular brands. In this case, the registrar may simply refuse. There are also prohibitions on the use of certain words: royal, government, and so on. Some others require a license: banking, insurance, finance, etc. There may also be restrictions on the paid-up share capital: in the Isle of Man you will need an amount of one hundred thousand British pounds. You can deposit a larger amount. But there are often annual duties that are removed from the capital, so it is advisable not to expose yourself too much. Management is carried out through shares. They come in two types: registered and bearer. In the first case, the certificate indicates who the owner is. Bearer documents allow for greater confidentiality, but if the document is lost, it will be difficult to prove that you are the owner of the company. This is what offshore companies are. We have already looked at what these subjects are. This was general information. Now let's look at offshore in Russia.

The situation in the Russian Federation

The advantages of working in our offshore companies are that it does not matter where the activity is carried out - taxes are paid at the place of registration. If only everything were so simple, but, alas, it is not. In reality, we have to face a number of difficulties and problems:

When creating a Russian offshore, do not think that everything will be as simple as with foreign analogues. There is no hope for any significant reduction in the tax burden or confidentiality. In general, if we compare with the classical understanding of offshore, the designation is their strongest relationship.
Problems with local tax authorities. If the company does not operate at the place of registration, then it will be necessary to provide explanations regarding the work scheme to local officials. Moreover, given the dislike for the transfer of funds from the local budget to distant regions of the federation, it is necessary to prepare for their significant resistance to this process.
Due to the fact that the company is considered a Russian legal entity, quarterly reporting is required. All this will need to be done, and at the place of registration!
Despite the positive aspects, such as lower tax rates, quarterly fixed payments will need to be made. Their size varies depending on the economic zone.
You can often hear complaints that opening a normal business to run a full-fledged business is just as difficult as for an ordinary Russian legal entity.

From all this we can conclude that opening a company in a special economic zone within the country does not have the same advantages as abroad. Therefore, you can often hear that an offshore company in the Russian Federation is being liquidated, and in its place an enterprise is being opened abroad.

What financial centers exist?

Finally, we suggest finding out what offshore countries exist. You may someday have to open your own company there. So, the list of offshore companies:

Classic offshores. Panama, Dominica, Seychelles, Belize, Mauritius, Saint Kitts and Nevis.
European jurisdictions. Czech Republic, Slovakia, Holland, Bulgaria, Switzerland, Great Britain, Poland, Estonia, Latvia.
Asian jurisdictions. Hong Kong, Singapore.
Specific jurisdictions. USA, Canada, New Zealand, South Africa.

In general, everything is clear, but let’s talk a little about specific offshore companies. What is a regular financial center? This is a low tax area. In the fourth group they are quite high. But it is possible to reduce taxes through the use of various mechanisms. As a final result, tax legislation will not differ much from what exists in classic offshore companies, although it will not be possible to reach their level.

Big business, as we know, requires paying big taxes. And everyone here is trying to somehow circumvent the requirements provided for by law. Some people break the law, while others look for completely legal ways. One option for legal non-payment of taxes or reducing their amount to a minimum is offshore.

Offshore concept

There are certain territories, and even entire countries, that for their development are not averse to attracting capital from large foreign business companies practically free of charge. In return, they offer either complete tax exemption or very attractive benefits.

A company registered in such a territory usually does not carry out its activities here, but carries out its activities abroad.

An offshore zone is a kind of tax-free and financial control-free territory in which a foreign enterprise is registered, receives legal status and formally operates. At the same time, it is not exempt from paying taxes in the country where it actually conducts its business.

Offshore jurisdiction

An offshore jurisdiction is a country that provides companies registered on its territory with the legal opportunity not to pay taxes or pay them under certain benefits, as well as not to report on their activities and financial condition.

For the most part, such jurisdictions are small island states located around the world, the main source of budget funding is state fees from the registration of offshore companies and its annual renewal.

What is an offshore company and what is its essence?

Such companies are usually used to organize a trading business. We will look at its essence using a simple example of a standard purchase and sale process. If imports are organized according to the usual scheme, the input price of the imported goods will directly depend on the actual purchase price. Naturally, various customs duties, income tax, etc. will be added to it.

An offshore zone allows you to avoid unnecessary costs if you pass the goods through a company registered on its territory, indicating in the documents any convenient cost (in our case, an underestimated one is better). This will significantly reduce the amount of customs duty and income tax.

Companies are used as holding structures, as well as enterprises to obtain investment funds and accumulate various financial resources. However, the most popular option remains the usual trading activities associated with import-export operations.

Advantages of offshore

The main advantages of offshore companies include:

no mandatory payment of taxes;
availability of certain benefits upon registration;
the highest level of confidentiality about the type of activity, company structure, owners and shareholders;
no need to submit information to government authorities about your activities and profits.

In the nineties, the benefits of free economic zones were widely used in all sectors of business. Today, due to tightening control over the activities of companies, such a rush is no longer there, but offshore business continues to flourish. Of course, this is the most profitable and fastest way to withdraw funds abroad.

Any such company has several bank accounts with linked cards of founders, shareholders and members of their families. If necessary, all the money can be quietly withdrawn abroad within a few hours.

But this is not what actually gives life to offshore companies. The whole point is the lack of a unified taxation system in different states. So it turns out that one country is losing millions of dollars due to high tax rates, while another lives and prospers thanks to this.

How legal is this?

Our legislation does not prohibit establishing companies abroad or becoming their shareholders. It is also permitted to fully participate in civil legal relations with foreign companies, provided that the legislation of the Russian Federation is not violated.

In other words, if everything happens within the framework of Russian laws, then everything is legal. In essence, an offshore zone or company is just a tool for obtaining benefits that can be used both within the law and outside it.

Today, the international community is trying to pay closer attention to these corners of tax havens, taking action against some jurisdictions that refuse to cooperate transparently.

Registration Features

The procedure for registering a company in most free jurisdictions is quite simple, and does not even require the presence of its founders. It is enough to send your representatives (signatories). They will have to apply to the relevant government service for registration and also appoint a director general.

In addition, there are special bureaus that independently establish companies, without having any relation to its true owners.

A ready-made offshore business, which exists only on paper, can be purchased at a price of 10 thousand US dollars.

Offshore zones of the world and their types

But let's figure out which states are considered offshore zones. Today there are about 50 jurisdictions in the world. They are all divided into:

classic offshores (with zero taxation);
low tax zones;
offshore companies with territorial taxation;
offshores, where certain types of activities are exempt from taxes;
zones where the activities of individual legal entities are exempt from taxes.

Classic version

A classic offshore zone is a territory where a company pays an annual fee, and no taxes are levied on its activities. In addition, it is not subject to audit. The list of classic offshore zones includes:

Free zones with territorial taxation

Offshore economic zones with territorial taxation provide companies with the opportunity to pay tax only on profits received from sources located in their jurisdiction. This makes it possible to attract additional investments and significantly simplifies the export process. These areas include:

Algeria;
Brazil;
Bolivia;
Hong Kong;
Guatemala;
Kuwait;
Costa Rica;
Malaysia;
Monaco;
Morocco;
Nicaragua;
Singapore;
Paraguay;
Uruguay, etc.

Offshore zones with low taxation

Taxation in offshore zones of this type is reduced to a minimum in order to stimulate the development of its own economy and attract foreign investment. These jurisdictions include:

Jurisdictions with taxation of certain types of activities

In these zones, not all, but only some companies engaged in a certain type of business are exempt from taxes. These include:

Anguilla;
Bulgaria;
Hungary;
Denmark;
Lithuania;
Latvia;
Norway;
Slovakia;
Poland;
Switzerland, etc.

Offshore zones where some legal entities are exempt from taxation

These jurisdictions may selectively, at their discretion, exempt from taxes only certain legal entities. Such a jurisdiction, for example, is the famous offshore zone - Cyprus. It is here that many companies from Russia are registered and operate.

In accordance with Order of the Ministry of Finance of the Russian Federation dated November 13, 2007 No. 108 N, the list of offshore zones for Russian companies providing preferential tax treatment includes the following territories and states:

Andorra;
Antigua;
Antily;
Barbuda;
Bahamas;
Bahrain;
Beziz;
Brunei;
Vanuatu;
Virgin Islands;
Gibraltar;
Dominica;
Cyprus;
Liberia;
Liechtenstein;
Malta;
Marshall Islands;
Monaco;
Nauru;
Nevis;
Niue;
Channel Islands;
Cook Islands;
Palau;
Panama;
Samoa;
San Marino;
St. Vincent;
Grenadines;
Saint Kitts;
Saint Lucia;

Offshore zones of the world these are states, or parts of some countries, on the territory of which preferential taxation, registration and licensing procedures are applied to non-resident organizations, provided that their commercial activities occur outside such a zone (in other words, such areas are called “tax havens” ).

Offshore zones of the world classified according to the degree of confidentiality of constituent information, as well as according to the conditions imposed on accounting and tax reporting.

In the offshore zone, income taxes are levied at reduced interest rates, and non-resident companies are exempt from foreign exchange controls by the state, i.e. Transactions in foreign currency carried out offshore are not subject to verification in accordance with the legislation in the field of foreign exchange relations.

Offshore zones of the world on the map

In addition, the procedure for registering a company has been simplified and accelerated, in which a purely symbolic sum of money is paid (for example, in Panama you can not indicate the founders of the company, and the annual fee charged when re-registering a company is a very small amount).

At the same time, offshore zones of the world prohibit non-resident legal entities from engaging in commercial activities on their territory - this is done in order to protect and preserve their national business. A prerequisite for many offshore companies is the creation of a so-called secretarial bureau (or representative office) of a non-resident company and the employment of local residents there (in this unique way, the issue of employment of the population is resolved).

The income of offshore zones consists precisely from the maintenance of such secretarial bureaus (rent of premises, electricity, communications, wages, accommodation, food, transport, etc.), as well as from tax revenues, fees and charges for registration, re-registration, licensing and etc.

Offshore classification

Offshore territories can be divided according to official and unofficial criteria. Unofficial criteria are listed below:

States with no reporting requirements and no tax requirements. Such areas are characterized by a high degree of secrecy regarding the owners of companies, and control over their activities by the authorities is almost completely absent. For this reason, large banks and reputable organizations are not willing to work with these companies. These zones include: the Cayman, Bahamas, British and Virgin Islands. These territories are economically poorly developed, but are characterized by a high degree of political stability.
Areas of increased solidity– here companies of foreign origin are subject to stricter control, a list of shareholders and directors is required, and financial reporting is also required. The level of business trust in such organizations is much higher. At the same time, companies are offered significant tax breaks. These are the following territories: Gibraltar, Hong Kong, Ireland, o. Maine.
Non-standard offshore areas– in this case, companies are provided with partial tax advantages, these include the Kaliningrad region of the Russian Federation, Cyprus, the USA, and England.

Continuation of the article - the official classification of offshore zones, as well as more details about