New Tax Laws and Regulations in the Offshore Company Formation Service Industry

Do you know the International offshore company formation industry is about to take advantage of local and international corporate tax laws? Not only this, but the industry is also capitalizing on the opportunities provided by the multi-jurisdictional corporation. 

In spite of the new policies and regulations, the offshore company formation industry is thriving. However, there are some changes that require a lot of understanding mainly :

  • More transparent financial accounts
  • Harder to achieve complete anonymity because of tax residency and global push towards financial tax transparency.

The International Offshore financial industry has been changing dramatically since 2010. Most of the offshore tax havens are now a party to many of the external tax agreements. They are monitored by international financial regulatory bodies. The policies such as the  Common Reporting Standard (CRS) regulation and Foreign Account Tax Compliant Act are radically reshaping the industry. All these new regulations are originating from high-tax jurisdictions and the external organizations serving them visualize the offshore financial centres as an existential threat to global order. It is because they compromise the authority of governments and regulators of high-tax countries from collecting their fair share of taxes what they believe it to be theirs. 

Details on the New Tax Laws and Regulations in some of the Most Popular Offshore Centres

Belize

According to the new regulations, the International Business Companies(IBCs) can now be incorporated by both the residents and the non-residents of Belize. They can do business locally and along with the residents too. They can even own land in Belize and also hold shares in Belize domestic companies. All the IBCs doing business in Belize will be subjected to 1.75% of the chargeable income that amounts to a sum equal to 3 million BZD. The IBCs whose income is obtained outside of Belize shall not be liable for payment of income tax in Belize. All the interests, dividends and capital profits received will be free from taxation.

Nevis

According to the Nevis Business Corporate Amendment, 2018 and the Nevis Limited Liability Company Amendment, LLCs and corporations can enjoy full tax exemptions until June 30, 2021, provided that they don’t carry out business in Nevis. LLCs and companies will be subjected to the local tax regime, i.e. currently 33% tax on worldwide income. Nevis has also introduced additional legislation to implement a local tax system for the LLCs and corporations. Hence, the income derived from foreign sources won’t be subjected to taxation.

Seychelles

The IBCs act in 2018 permits all the IBCs in Seychelles to conduct business that can be owned both by residents and non-residents. IBCs in Seychelles are now subjected to the local tax regime. As of the Business Tax Amendment, Income obtained from a local source is subjected to tax, and foreign source income is free from taxation. Payments, Interests, dividends made by Seychelles IBCs would be free from taxation till these are derived from income that is not a source in Seychelles. There will be no capital profit taxes. The Companies Act, 2018 has removed the 1.5% business tax rate and thereby withholding all the exemptions of taxes for the companies.

Mauritius

According to the new regulations, a Mauritius company will be required to seek an authorized company status when the company is incorporated by non-residents of Mauritius where its place of effective management is outside of Mauritius. The companies which have their place of effective management outside Mauritius and allowed the status of authorized companies will be deemed non-resident for tax purposes in Mauritius. Previously, the global business companies were eligible for an external foreign credit of 80% tax on all types of income. Hence, this is reducing the effective income tax rate to 3%. Now the companies are subjected to local taxes at a rate of 15%.

The British Virgin Islands

All the business companies in British Virgin islands must provide information on an annual basis to enable the International Tax Authority to determine and assess if a business is carrying out relevant activities and is meeting the economic substance requirements. If it is found that an entity is not complying with the economic substance requirements, automatic exchange of information will be made to relevant foreign competent authorities. In case of a failure to comply with substance requirements, it may lead to a minimum penalty of $ 5,000 US and to a maximum penalty of $ 50,000 US.

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