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Offshore company formation

Offshore companies have always attracted investors and entrepreneurs worldwide. The registration process is simple, capital requirements are low, there is no need for accounting reports, and taxes are exempt outside the offshore jurisdiction. This makes doing business easier and more accessible, so offshore company formation has remained an obvious choice for a long time. Is it still so in 2024?

Offshore company formation

Posted 20 May 2024

Do Offshore Jurisdictions Still Exist Today?

Considering the highly negative attitude of the international community towards offshore jurisdictions due to the harm they cause to individual states and the global economy as a whole, one might assume that measures against offshore entities would only tighten over time.

Indeed, international organizations such as the OECD, FATF, and others have been forcing offshore jurisdictions to amend their tax and corporate legislation. What were once tax-free jurisdictions now require taxation and reporting obligations; the International Business Company (IBC) structures commonly associated with offshore havens have disappeared, replaced by requirements to conduct substantial economic activity within the offshore jurisdiction. Each year, familiar “tax havens” make headlines with the introduction of new requirements for company formation, which bear little resemblance to the conditions of just five years ago.

In light of this, the question arises: do offshore jurisdictions still exist today? Is offshore company formation in 2024 a reality or a myth?

By 2020, most classic offshore jurisdictions had indeed modified their legislation to comply with international standards. Consequently, the classic offshore jurisdictions as we knew them either no longer exist or their use has become significantly more complex. However, there are still numerous options available for international business, allowing each entrepreneur to find their own personalized offshore solution that meets their key requirements.

Classic Offshore Options in 2024

What about offshore options in 2024? Offshore jurisdictions have not disappeared; they have simply changed their “rules of the game.” The necessity to comply with international organization requirements has led to the introduction of new regulations in offshore jurisdictions. However, many jurisdictions have not lost their appeal and continue to offer new solutions for businessmen. Entrepreneurs now face a choice: comply with the new requirements and register a company in a formerly classic offshore zone, or select a different, more suitable jurisdiction. Let’s consider classic offshore jurisdictions where offshore company registration is possible:

Saint Vincent and the Grenadines

For example, in Saint Vincent and the Grenadines, the International Business Company (IBC) no longer exists. Instead, there is a requirement for mandatory disclosure of directors and shareholders, corporate tax must be paid at a rate of 30% for BC companies, and there is an obligation to file annual reports. However, Saint Vincent now offers the Limited Liability Company (LLC), which provides highly favorable conditions such as:

  • There are no requirements for minimum share capital, so a company can be registered with as little as $1;
  • It is possible to establish a company with just one director, who can be either a natural person or a legal entity;
  • LLCs are not taxed in Saint Vincent.

Registering an LLC in Saint Vincent can be an excellent solution for many entrepreneurs and will allow them to implement all their business ideas. Registering an LLC in Saint Vincent and the Grenadines is very simple, and the registration process takes only 2-3 days.

Seychelles

The Seychelles has amended the International Business Act to comply with OECD anti-offshore requirements. The following rules now apply:

  1. The Seychelles operates a territorial tax system;
  2. Lifting the ban on conducting business activities in the Seychelles. Now, conducting business on the Seychelles is possible, but in this case, the company is subject to corporate income tax, as it will be considered a resident and will operate within the jurisdiction;
  3. Corporate income tax: the rate depends on where the company’s income is generated and ranges from 0% to 33% of the profit amount (income minus expenses);
  4. Offshore companies will be required to submit annual financial and audit reports to the Seychelles Registry if the companies receive taxable income in the Seychelles.

Special attention has been given to the activities of financial market organizations, as well as joint funds and hedge funds.

However, if a company registered in the Seychelles does not fall under companies with a licensed type of activity (financial market organizations, joint funds, and hedge funds), does not operate in the Seychelles, and does not generate taxable income in the Seychelles, then little has changed for it. However, now it will be necessary to take into account the territorial principle of taxation and submit reports annually. Nevertheless, with a team of qualified consultants, this is not a problem.

British Virgin Islands

The British Virgin Islands (BVI) are perhaps the jurisdiction whose legislation has undergone the most significant changes. The BVI did not follow the path of classic legislative changes in favor of EU requirements but tried to find a compromise between the requirements of the OECD and FATF and the desires of investors. The BVI is one of the few jurisdictions that, after the introduction of requirements for real presence (economic substance) of companies on the islands, still remains attractive for businessmen.

Let’s recall the main changes reflected in the Economic Substance Act, which came into force on January 1, 2020:

  1. The need to ensure economic substance in the BVI (presence of an office, employees, exercise of control or management from the territory of the BVI);
  2. The obligation to annually prepare and submit a financial report;
  3. The mandatory provision to the registered agent in the BVI of additional information about employees and their quantity, the start and end date of the financial year, the annual turnover of the company, as well as information about the company’s office, etc.

However, the new requirements apply only to certain types of activities (“Relevant activities”), including:

  • Provision of services and distribution;
  • Banking;
  • Freight forwarding;
  • Insurance;
  • Holding activities;
  • Management of funds;
  • Management of intellectual property;
  • And others.

Moreover, the new law still allows the presence of companies that do not operate in the BVI. And for such companies, nothing has particularly changed. Non-resident companies that are tax residents of another country (except countries on the EU “blacklist”) are not required to comply with the above rules on ensuring economic substance.

Mauritius

Despite Mauritius never being considered a classic offshore, it can be an excellent choice in 2024. Mauritius successfully meets the requirements of FATF and even earned “praise” in the form of a Report adopted by ESAAMLG (Eastern and Southern Africa Anti-Money Laundering Group) in September 2019. The Report outlined Mauritius’s achievements in improving corporate and tax legislation, as well as strengthening measures to combat money laundering and terrorist financing.

While Mauritius is obligated to adhere to corporate income tax regulations and reporting obligations, among other requirements, it does not fall under the classification of “offshore.” Nonetheless, Mauritius provides all the necessary conditions for establishing and advancing a company.

  1. Firstly, Mauritius allows conducting activities outside the island. For such activities, a new specifically created form of company may be suitable — Authorized Company. Authorized companies are suitable for activities such as:
    • Investment holding;
    • Real estate ownership;
    • International trade;
    • Management and consulting;
    • IT services;
    • Logistics;
    • Marketing;
    • Financial services;
    • And others.
  2. Secondly, companies that operate outside Mauritius and earn taxable income there may be exempted from paying corporate income tax at the rate of 15% in Mauritius. To qualify for exemption, it is necessary to prove that the company has already paid corporate income tax in the country where it operates.
  3. Thirdly, Mauritius does not have a tax on dividends, regardless of whether the recipient is a resident or non-resident of Mauritius.

Thus, Mauritius can also be an excellent option for starting a business.

Want to get further insights?

Schedule your free consultation with our expert!

Diane

Diane, partner of GFLO Consultancy

Alternatives of Offshore Zones in 2024

If offshore company formation in a classic offshore jurisdiction is not suitable, what other countries can you choose? What are the alternatives to offshore zones in 2024? Among the most attractive non-offshore jurisdictions are the following:

USA

Advantages:

  • Access to USA domestic market;
  • Low tax rates in some states (Washington, Wyoming, Delaware, and others);
  • In many US states, there is no requirement to disclose information about the company’s founders.

Learn more about doing business in the USA.

UAE

Advantages:

  • An option to incorporate a company in a Free Zone, which allows for various tax incentives, e.g. to corporate income tax;
  • Low taxes, namely a 5% VAT;
  • Closed register of participants;
  • Under certain conditions, avoidance of CRS exchange;
  • Possibility to open a company and accounts in one country;
  • Corporate income tax of only 9% with a large number of incentives.

Learn more about company registration in the UAE.

Cyprus

Advantages:

  • The corporate income tax rate is considered one of the lowest in Europe and is 12.5% of the organization’s profit;
  • Extremely simple company registration procedure;
  • English law;
  • Possibility to access the European market.

Learn more about company registration in Cyprus.

Malta

Advantages:

  • High level of confidentiality of information;
  • Favorable taxation: various types of corporate tax refunds are provided in Malta, resulting in an effective corporate income tax rate of around 5%;
  • Various tax incentives.

Singapore

Advantages:

  • Territorial taxation principle (profit earned outside Singapore and not remitted to Singapore is not taxed);
  • Corporate income tax rate of 17% in Singapore is considered low by global standards.

Learn more about company registration in Singapore.

Hong Kong

Advantages:

  • Information confidentiality;
  • Territorial taxation principle (only profit earned in Hong Kong is taxed);
  • According to reputable publications, it is recognized as one of the best jurisdictions for initial public offerings (IPOs) and mergers and acquisitions.

Learn more about company registration in Hong Kong.

Conclusion

Of course, these are not all the options for countries where offshore company formation is possible in 2024. There are many options for starting a business. Registering an offshore company in 2024 is possible, however, the options for countries have changed, and it is necessary to approach the choice of the future place of business registration more responsibly. Moreover, there are many alternatives that may suit you specifically. You just need to set your goals correctly and look for a jurisdiction that meets your main expectations.

GFLO Consultancy experts are pleased to assist and help you with any inquiries, just get in touch or leave a request through the form right below.

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