Businesses are continually seeking ways to reduce costs and increase productivity. Economic troubles have adversely affected many companies, causing layoffs and cutbacks. However, there is an area that businesses can trim without sacrificing quality or manpower.
More and more companies are choosing to incorporate business at an offshore jurisdiction, and many corporations are utilizing offshore banking options. These options provide businesses with a legal, effective method of reducing their corporate tax bill.
Businesses have an obligation to their shareholders to keep profits high and taxes low. Google, for instance, only paid 2.4 percent in corporate taxes in 2010 by setting up a shell company in the Netherlands to receive all profits. Ireland does not tax profits in other European Union countries. The money was then sent to Barbados, which has no capital gains tax.
In many jurisdictions, income earned on offshore accounts is paid in whole without taxes being withheld. Corporations can transfer bank accounts from their home country to an offshore jurisdiction, as Google did, so that they can benefit from this tax reduction.
Some jurisdictions do not have Capital Gains Taxes and many have signed double tax agreements with other jurisdictions, preventing the potential for being taxed twice on the same income. Even if the bank account is held in a jurisdiction without a double tax treaty, a company can establish an Intermediary Holding Company or a shell company, as Google did in the Netherlands. This holding company can be established in a country with a suitable agreement and channel investments for the business.
The various jurisdictions each offer reductions for different types of taxes as well as breaks for different company vehicles. It is important that you review the different jurisdictions to determine which one best suits the needs of your offshore business.
A reduced corporate tax bill is not the only reason to consider an offshore bank account. Other benefits for offshore business formation jurisdiction include the protection of assets, better returns, complete confidentiality, and the ease of advancing overseas business interests.