Tax savings is a goal for many individuals and businesses. This guide is to serve as a resource for you as an entrepreneur or investor when seeking to make the decision of where to set up operations or new markets to expand into. It will help you take advantage of tax exemptions and considerations to ensure that your entity is able to operate without heavy burdens on its revenue and overall profit.
A country (or State) in which foreign investors pay taxes at an abnormally low rate, possibly even zero is referred to as a tax haven. The tax rate to qualify as a tax haven is 10% and most are able to manage their tax burdens by storing or moving funds into or through tax havens. The best part is that residency or business presence is typically not required in order to benefit from the policies in a tax haven.
Top Tax Havens: Countries with Favorable Tax Regimes for International Businesses
The countries below are considered to be the most favourable in terms of their tax regimes with minimal or zero taxation on profits generated outside the jurisdiction.
- Andorra offers 0% income and 10% company tax which is among the lowest in Europe. However, this can be reduced to just 2% corporate tax on profits for business income derived from outside Andorra. Also, Andorran companies are not responsible for withholding tax from dividends and interest paid to non residents.
2. Antigua and Barbuda attracts hundreds of companies that register and incorporate under the International Business Corporations (IBC) Act. These companies are exempt from paying corporate income tax and tax on real estate, securities and other assets for 50 years.
3. Bahamas offers a 0% tax rate on companies’ income. However, from 1st January 2023 a levy of 0.25% will be charged, by way of a business licence, on an International Business Corporation (IBC)’s revenue attributable to operations outside the jurisdiction. A lower levy will be charged on revenues attributable to operations of an IBC within the jurisdiction.
4. Bermuda offers a 0% income tax but levies a 1.75% tax on corporate profits and 5.5% payroll tax. These tax rates have induced companies such as Google and Nike to save billions of dollars in accounts in Bermuda, thereby reducing their U.S. taxes.
5. British Virgin Islands (BVI) does not levy corporate tax, investment income tax and capital gains tax. Business Companies (BCs) are statutorily exempt from all BVI taxes. It is considered the best tax haven holding more than 5,000 times its worth in foreign investments and more than 400,000 resident companies and holds approximately $1.5 trillion (USD) in assets.
6. Cayman Islands offers 0% income tax (including interests or dividends earned on an investments) and company tax and imposes no direct taxes on residents, including property, income, and payroll taxes. It is home to subsidiaries of Fortune 500 companies such as Pepsi, Marriott and Wells Fargo.
7. Hong Kong offers companies 0% tax rate on profits and revenue earned outside the country.
8. Netherlands offers a wide tax treaty network. The corporate income tax rate is 25.8% with two taxable income brackets. The lower rate of 19% applies to the first income bracket of EUR 200,000 (EUR 395,000 in 2022) whilst the standard rate applies to the excess of the taxable income. It offers an exemption for capital gains and dividends from qualifying participations and branches. Fortune-500 companies such as Google, Fiat Chrysler, IBM run their profits through their Dutch subsidiaries.
9. Panama offers a 0% tax rate on income, corporate, capital gains, or estate taxes on Foreign-earned income. The added benefit for offshore companies is that they can engage in business locally but will be subject to taxes on their Panama-earned income.
10. Switzerland offers an 8.5% tax rate on profit but does not tax capital gains on companies income.
11. Vanuatu offers companies a twenty-year tax exemption on annual profits. There is an annual $300 license fee and VAT rate is 12.5% for most goods and services supplied and imported to Vanuatu by registered persons in the course of a taxable activity.
The above territories rank highly on the ease of doing business and the ultimate decision will depend on the type of business, the nationality of the owners and location of the parent company.
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