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Tax Engineering

What taxes do offshore companies pay?


Question

What taxes do offshore companies pay? Can companies deduct taxes? Is it legal not to pay the tax on offshore companies?

Answer

The tax of an offshore company is a type of tax imposed by the tax office of the tax haven to the resident company registered on its territory. If the company is set up in a tax haven that has favorable tax laws for non-residents, the company will not pay any kind of tax, since the beneficiary of the offshore company is not resident in the country. If the company is in the name of a resident of a tax haven and conducts operations within the jurisdiction, the company will be taxed as any other company incorporated in a country of high taxation. The main difference between the tax regime of offshore companies and that of a country with high taxes is that in the tax haven if you are not a resident, you do not pay taxes. 

How many taxes do offshore companies pay? Offshore companies do not pay taxes if the final beneficiary is not resident in the tax haven; he not only does not pay tax and may deduct the corresponding taxes. In reference to the legality of paying or not corporate taxes, it is completely legal due to the favorable laws and tax regime for non-resident companies. 

A clear example of this kind of jurisdiction would be Belize. When a non-resident registers an offshore company in Belize local tax laws indicate that no non-resident is taxed in this country, provided that the following condition is met: it will not be able to develop any type of activity neither with Belizean companies nor with natural persons resident in Belize. Once it does not meet this requirement, the Belizean tax agency will claim the corporation tax from the Belizean company as a resident company. If the client decides to do business in Belize with resident companies and individuals, the offshore company will pay approximately the same taxes as in a taxpayer country, approximately 30% of the profits. 

The corporate taxes of offshore companies have nothing to do with the income tax. The main difference between them is that the corporate tax is applied to companies and the income tax is applied to natural persons (the beneficiaries). Legally, both figures are totally different even though the individual is the owner of the company, as the liability of a company is limited to the capital contributed in the constitution. The income taxes that a natural person should pay in its country of residence would be the benefits obtained in the offshore company as a payroll.



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