Offshore jurisdictions are distinct areas with special economic status. In the traditional sense – it is the territory of the state, where the registered foreign companies are given tax breaks, and the procedure of submission of the financial reporting to the regulatory authorities is simplified to the maximum.
Typically, such jurisdictions are the small island state, for which the main source of revenues into the budget are the established fees for registration and annual renewal of the company's activities. Today, the offshore jurisdictions exist almost all over the world, in the Indian ocean and the Caribbean basin, in the Middle East, in Asia and in Europe.
Classification of offshore jurisdictions
In international practice it is accepted to differentiate such jurisdictions according to the specific parameters, in particular:
- Grounds for exemption from the corporate taxation – tax benefits according to the current legislation, no tax resident status, withholding of tax from incomes gained on the territory of the state, and etc.;
- Available types of registration of legal entities and possibilities of their use on praxis.
- Working terms for the offshore entities – requirements on the composition of the founders and company executives, the minimum threshold for the share capital, the costs of registration, maintenance and further prolongation of the activities;
- International reputation and status of the jurisdiction – compliance of the existing legislation with the requirements of the international organizations (FATF, OECD), presence in the offshore black lists, confidentiality of the information about the ultimate beneficiaries;
- Stability of the legal base.
It is important to note that. Apart of the offshore ones, there are jurisdictions of the mixed type. These are not island states and are not considered to be offshore jurisdictions as such, whereby they also offer the option of registration of companies with lower of zero level of tax.
An example of such jurisdiction which offers offshore as well as onshore companies are the UAE. This country is unique by itself as the advantageous tax treatment is applicable practically to all types of companies. On the other side this jurisdiction is not considered an offshore one and has the large list of countries which have signed the double tax treaties.
