Are you considering setting up an import-export company or another international business and wondering what the benefits of an offshore company might be?
The advantages vary from one jurisdiction to another. The offshore model may offer a more favorable tax framework, but you need to carefully compare the rules, costs, and restrictions of each territory.
Different advantages from one jurisdiction to another
In Dubai: no corporate tax, no wealth tax, no taxes on profits, no taxes on capital gains, and no withholding tax on distributed dividends.
In Florida, the situation is different: the company is taxed at a rate of 5.5% if its net profits exceed 50,000 dollars. However, there is no income tax.
Benefits therefore vary from one offshore jurisdiction to another.
The main advantages
Tax benefits
Regardless of the tax haven chosen, an offshore company can enable significant tax savings.
For comparison, corporate tax in France is 30% of the company's profit.
VAT
Offshore companies are exempt from VAT in the vast majority of cases, depending on the jurisdiction concerned.
Privacy
An offshore company can offer a certain level of confidentiality. For example, the principal’s name does not appear on documents when a transaction is carried out on behalf of the company.
Quick creation and low cost
The simplicity of the procedures, the speed of incorporation, and the relatively low cost of the structure are among the main advantages of an offshore company.
Privacy… with greater transparency
Confidentiality is often associated with an offshore company, but the rules have changed.
Automatic exchange of information (AEOI) has been in place since 2017, and more than 100 countries have signed this agreement.
A French resident using a legal offshore structure must therefore comply with their reporting obligations: confidentiality does not mean a lack of transparency toward the relevant authorities.
A quick and inexpensive procedure
An offshore company is an attractive solution for business leaders seeking a structure that is relatively simple, quick to establish, and inexpensive to operate.
Many jurisdictions streamline administrative procedures to attract foreign entrepreneurs, and low operating costs can complement the expected tax savings.
Setting up an offshore company: what are the drawbacks?
Repatriation of profits
If you wish to repatriate the profits of your offshore company, you must declare them to remain compliant with the law. This income may then be taxed in your country of residence.
Privacy and financing
The level of confidentiality of an offshore structure can become a disadvantage when a company seeks financial assistance or external investment.
Jurisdictional restrictions
Some jurisdictions impose restrictions on permitted activities. This is particularly the case with import-export, which is not possible everywhere.
Why is it important to study the jurisdiction carefully before getting started?
Creating an offshore company offers many advantages, but it also involves disadvantages and restrictions that vary by jurisdiction.
Merritt assists executives who wish to explore setting up an offshore company in Dubai and choose a structure suited to their business.