Taxation in the classic offshore jurisdictions

Taxation in the classic offshore jurisdictions

Offshore jurisdictions are often described as a country where there is no taxation. This is a wrong statement which may lead to wrong conclusions and negative consequences.

Offshore countries, the so-called offshore financial centers, provide the ability to create certain types of companies that do not have to pay income tax, as well as the possibility of residents and non-residents of some countries to be exempt from income tax. It must be emphasized that the legislation of each country differs significantly from legislation in other jurisdictions and should be read carefully with local laws before implementing certain ideas.

In the analysis of the tax treatment of offshore countries, it is necessary to divide the taxes on direct and indirect. The direct taxes include all the taxes paid by individuals and legal entities on income or property. It is this category of taxes not collected in offshore countries, or its rate is much lower than in onshore jurisdictions.

Indirect taxes – those taxes that are added to goods and services in the form of a surcharge to the cost of chatelaine product. These taxes are charged in offshore countries and their rates are quite high. This is often explained by the geographical location of the classic offshore jurisdictions are located on islands, and hence transportation and logistics costs are high. offshore governments receive the highest return it from the payment of indirect taxes and private legal entities and revenue authorities onshore jurisdictions, in turn, depends mainly on direct taxation.

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