In 2020, tax evasion led to European states’ treasuries (according to official data) “missing” up to 32 trillion dollars. Some representatives of small, medium, and large businesses try to save money this way by violating various laws.
Agree: it’s easier to move your business to an offshore jurisdiction than to fear debt prison every day. In Europe alone, there are about 14 offshore tax havens.
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Offshore states offer favorable conditions for income, corporate, and profit taxes. These countries have attracted large companies along with wealthy private investors. Offshore zones significantly reduce or even eliminate taxes.
Below, we will discuss the main places that can be considered low-tax jurisdictions. But before “jumping” on the first one you come across, it is worth consulting with specialists. They will explain how tax havens differ from each other and how suitable the one you choose is for your business.
Andorra is a principality located in the Pyrenees between France and Spain. The governments of both countries are responsible for legislation, tax calculations, and even the defense of the state. Meanwhile, Andorra itself is politically neutral.
It is a tax-free jurisdiction. Direct taxation on income, initial capital, and company registration is not levied. Therefore, for those seeking confidentiality and security, Andorra is an ideal offshore jurisdiction for company registration, management, and control.
Banks in Andorra also offer a wide range of professional services. Banking secrecy is regulated by law. Local Andorran companies can be established for local and international trade, asset ownership, and investments.
The island of Cyprus (EU member) is located in the Mediterranean Sea. It is divided into several parts. We are only interested in the southern two-thirds of the island, which are under the control of Greek Cypriots.
Cyprus has a number of key advantages over other offshore zones. Its authorities levy relatively low tax rates on companies (residents and non-residents). Double taxation agreements are in place with over 40 countries. It is beneficial to register holding and investment firms focused on emerging markets here.
Advantages include: business and physical infrastructure, transport links, high level of banking secrecy, confidentiality, and privacy. All these factors align well with the island’s status as an EU member, a legal system primarily based on English law. These benefits make the island a popular offshore jurisdiction for creating companies and conducting international banking operations.
Denmark is located north of Germany. It is an EU member and an unusual country that can be considered an offshore jurisdiction. It is not a low-tax state, but it has favorable legislation for holding companies with a local headquarters.
The business-friendly tax rules were established in the late 1990s. The country has signed numerous international agreements to avoid double taxation.
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Since January 1, 1999, a Danish holding company can potentially receive dividends and capital gains from its foreign subsidiaries without paying any fees. However, its founders must comply with certain rules. Thus, businessmen who set up their headquarters in Denmark while having their main operating assets outside the country can save money.
Germany is one of the leading countries in the EU. It cannot be called a classic offshore or low-tax territory. However, when registering a company, its directors receive certain benefits.
There is a relatively new corporate tax system in place, introduced in accordance with the requirements of “harmonization of legal provisions within the EU.” Currently, a company’s income is taxed at a lower rate. There is also a fee on dividends received by shareholders, but it is insignificant.
The legislation does not tax interest income within a holding structure. Tax is only applicable to the main profit of the company earned in the usual manner.
The reduction of the tax rate or the complete elimination of taxation depends on many factors: the location of the company or the individual who registered it, the business sector, the number and residency of employees, etc.
The reduction of the tax rate or the complete elimination of taxation depends on many factors: the location of the company or the individual who registered it, the business sector, the number and residency of employees, etc.
Gibraltar is a self-governing overseas territory of the United Kingdom. It is located partly on the southern side of the Iberian Peninsula and in Europe. The island “faces” the Mediterranean Sea and the Strait of Gibraltar.
It is quite well-known as an offshore jurisdiction. However, its tax system is not very developed and sophisticated. In recent years, this state has been losing ground due to pressure from the EU. The issue is as follows: Europe is compelling Gibraltar to disclose the lists of beneficiaries; otherwise, the Union threatens with certain sanctions. As of now, the offshore zone refuses to comply, so it is not considered by established businessmen and those looking to go international.
A company registered and owned by non-residents of Gibraltar, managed and controlled by directors outside the country, will be considered a non-resident company. It is not subject to corporate tax except for the portion of profit that is transferred to the state.
This may mean that a non-resident company can be completely exempt from corporate taxation, making this type of business quite profitable. However, caution is required when considering registering a company in Gibraltar.
Guernsey is one of the Channel Islands of the United Kingdom. It is an associated member of the European community and has a signed agreement for continuous information exchange with the Kingdom. Therefore, most residents of the UK and Europe avoid this island and register companies in other states. Before seriously considering this state as an offshore zone, it is worth conducting a thorough assessment to determine if it meets your needs.
This jurisdiction is mainly used by those who want to establish a company with a good reputation but are not residents of either the island or Britain. If the activities are conducted exclusively outside Guernsey, the founder of the company will receive tax benefits. Specifically, complete exemption from taxes, except for minimal payments (a small fixed annual corporate fee, regardless of profit).
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Guernsey is home to the largest insurance sector in Europe, with reputable banking institutions, investment, and trust funds registered. The island boasts an excellent advisory and financial infrastructure. Moreover, the Channel Islands Stock Exchange is located in Guernsey. All of this demonstrates the country’s authority.
Few entrepreneurs outside the financial services sector know that the conditions for registering a company in Ireland’s offshore zone have recently become quite favorable. This EU member state manages to successfully combine low corporate tax rates with effective treasury filling.
Using the “International Financial Services Centre” and the Schengen Free Zone allows companies located in Ireland or operating in Europe to reduce taxes. Therefore, the country attracts huge international investments and small, medium, and large businesses.
In recent months, this island has been linked to a huge scandal — the bankruptcy of Kaupthing, Singer & Friedlander. But the system is not to blame. Therefore, dismissing the state entirely is not advisable. The Isle of Man is one of the most important and respected offshore jurisdictions not only in Europe but worldwide.
The country offers low tax rates for individuals and corporations, with some being completely exempt from payments to the treasury. The state is a major center for banking and investment. It has a system of full protection for investors and beneficiaries. No taxes are levied on profits up to £48,000.
The second of the Channel Islands, serving as an offshore tax haven. Jersey has a particularly developed financial sector, investment, and trust funds. It also has a well-developed advisory infrastructure.
The island’s government has devised a range of business formats with low taxes. This has led to a record net asset value of companies registered there last year — £241.2 billion. This even exceeds the level of banking deposits placed in the state.
Typically, this country is not considered an ideal place for British and European entrepreneurs to register a business. The reason is that there is a double taxation agreement with the UK. However, if you do not plan to engage in any illegal activities, there is absolutely nothing to fear.
Located between Switzerland and Austria, Liechtenstein is politically neutral. The main sectors registering in the country are banking and financial (insurance, investment).
The principality has a strictly guarded control of secrecy and confidentiality of beneficiaries’ identities. This has led to a high level of business activity. But it’s not so simple. The country faces pressure from the EU and OECD. Representatives from other states want Liechtenstein to sign information exchange agreements. Otherwise, Europe promises to impose certain sanctions.
This has shaken the principality’s position in offshore rankings. However, it is still considered a safe and efficient zone in terms of taxation.
Luxembourg is actually a country with very high taxes. It is one of the wealthiest countries in the world based on GDP figures. However, some types of Luxembourg companies may not pay taxes at all. There is a specific table for international tax planning when certain criteria are met. You can learn more about it from our consultants.
For example, there are restrictions on the activities a company can undertake to benefit from a reduced tax rate. One of the advantages of setting up a company in the country is its developed banking sector (one of the largest in Europe), which provides beneficiaries of any business with good dividends.
Of course, Luxembourg’s competitiveness has decreased in recent years due to its EU membership, but it is still worth considering.
The Netherlands is not a classic offshore zone. However, the country’s legislation allows for tax reductions for companies engaged in international activities. One condition is that the headquarters be located in the country and all financial operations be structured there.
The country has nearly 80 double taxation agreements. The tax on interest and royalties from earned income is 0%. The regulation of business operations fully complies with OECD standards.
In 2020, the corporate tax rate was significantly reduced for every registered company, regardless of its sector. Therefore, any company meeting certain legislative requirements can potentially benefit.
Switzerland is not an EU member. However, it is renowned worldwide as one of the most stable countries. This country is one of the safest in terms of beneficiary data confidentiality. Switzerland continues to thrive even though the EU and OECD pressure it to open its investor base and comply with all client information exchange directives.
It is considered that this confederation has the best and most efficient banking system in the world. Therefore, if you are looking for a place for offshore business or a simple investment, definitely consider Switzerland. Its system operates according to EU and OECD requirements as needed. But since the country is not an EU member, international interference in business is significantly limited.
London is the European capital of “tax havens” for foreigners. Well-established business systems are trusted by beneficiaries from almost all countries in the world. Small and large companies benefit from a relatively low corporate tax rate of 20%.
British legislation allows foreigners to protect their assets, set up businesses with no taxes or reduced tax rates. No wonder the country is particularly popular among billionaires and owners of the most reputable companies in the world.
Above is a guide to the main offshore countries in Europe. But it is far from complete. And it is not certain that any of the mentioned states will suit you. Everything depends on the business sector, desired tax rate, and reputation in the global market.
If you need specific information on where to buy an established small business in Europe, our consultants will be happy to answer all your questions and provide guidance. We not only offer informational support but also provide a list of registered and reputable firms. With us, buying an established business in Europe is easy.