The Seychelles, San Marino, Andorra, the Bahamas, Jersey and Cyprus plus many others are classified as tax havens. Laws have been passed by the governments in each tax haven so that they are more appealing to overseas investors. So, what actually is a tax haven and why have thousands of businesses decided to have an offshore site there?
The income that employees earn at an offshore site in countries which are classified as tax havens is subject to minimal tax. In fact, some tax havens don’t charge any tax at all on income. If employees are paid a large salary, they will receive all of it and no tax will be applied as well as on dividends which aren’t normally taxed either. In the UK, the highest tax band of 37.5% is applied to dividend payments which exceed £150,000. 32.5% is taxed on dividends which are less than £150,000 and 10% is deducted from a dividend payment at or below £32,010. However, the person who receives a dividend payout by an offshore site will never be taxed.
Low Rate of Tax Deducted from Profits
When a business reports high profits, they might regret doing so because of the amount of tax which they are expected to pay. However, this won’t happen in a tax haven. A low or non-existent rate of tax applies to offshore sites which are in tax havens. Courtesy of a Seychelles company formation, no tax will be charged on profits no matter how significant they are.
Tax havens Guarantee Secrecy
There are many tax havens which guarantee the secrecy of the offshore sites that are registered there. Information about who is on a board of directors cannot be found because there is no public register. Consequently, it is impossible to know of the directors or shareholders which are at an offshore site. Tax havens pride themselves on maintaining the secrecy of their offshore sites and laws have been passed to make sure that this happens. If a business wants to attract investors but they don’t want their association to become public knowledge, this will happen in a tax haven.
Low Set up Fees
It doesn’t necessarily cost a lot of money to set up an offshore site in the Seychelles, Dubai or any other tax haven. A business might only have to pay tens of thousands of dollars to set up an offshore site. Although a business can be responsible for doing so, they should ask for help from a Formation Agent. With in-depth knowledge of the laws in many tax havens, a Formation Agent can play an active role in starting an offshore site on behalf of their clients.
Setting up an Offshore Formation doesn’t Take a While
Many businesses believe that the Seychelles company formation process is arduous. However, it is very easy to establish an offshore presence in the Seychelles or another country which is regarded as a tax haven. The process of doing so is very straightforward and it can sometimes take no more than 72 hours to assess an application.