Offshore Tax Planning Strategies

Offshore tax planning strategies are an important area to address when investing offshore. Some of the specific advantages of tax planning for offshore business include: i) income earned offshore may not be subject to tax; ii) tax is not deducted from interest earned; and iii) potential of no capital gains or inheritance tax.

Offshore tax planning is an effective tool for strategic asset management. Below are practical uses for offshore tax planning:

Using an offshore company can legitimately minimise tax by properly structuring financial and business affairs. A classic example of offshore tax planning is offshore captive insurance companies. A major trading group establishes an offshore company to insure its various risks and can thereby obtain tax deductions on insurance premiums in its home jurisdiction while investing tax-exempt accumulated premiums offshore. For more information, visit our Offshore Tax Planning Strategy page. Although there has been increased attention from governments regarding offshore taxation policies, effective tax planning does still offer legitimate ways in which businesses can minimise their international tax exposure. International tax planning opportunities include restructuring your company, taking advantage of the low corporate tax rate and various tax incentives of certain jurisdictions.

Using a coherent offshore tax planning strategy, a person working overseas limits his or her tax burden by receiving, into the country in which he is working, a fixed level of remuneration. The balance is accumulated in a company.

The offshore company invests in property, stocks and shares, commodities and other assets, while providing anonymity and tax savings. Funds accumulated can be invested or deposited anywhere in the world, although the funds may be subject to the tax regimes of the countries in which the investments are located. There are countries with tax-exempt bonds or bank deposits where interest is paid gross. Healy Consultants advises of the most efficient solution to meet our client's offshore tax planning requirements.

This offshore tax planning technique takes advantage of double taxation treaties between offshore jurisdictions, and the country in which an investment is made. For example, to see a list of some of the jurisdictions whose governments have signed such treaties with Singapore, please visit the Inland Revenue Authority of Singapore (IRAS) website.

Yachts or ships may be owned by an offshore company and registered in an offshore jurisdiction which can prove a cheaper and more tax-efficient method of ownership. For more information on this offshore tax planning method, visit our Ship Registration in Singapore page.

An offshore company may hold the title of an overseas property. Sales of the property are conducted quickly and easily by the sale of company shares to the purchaser. This also saves legal fees and overseas transfer and value added taxes levied by certain foreign countries. It can also be used to successfully avoid capital gains and inheritance taxes. For more information on this offshore tax planning technique, visit our Asia Property page.

To own trade licenses and royalty rights for which the offshore company pays no tax itself on royalty receipts in the offshore jurisdiction. Our firm advises companies on the sale of patents, technical know-how, and license and franchise agreements to an offshore company, which is then owned by an offshore trust. Upon acquisition of the rights, the offshore company enters into agreements with licensees wishing to utilise the patents, technical know-how, licenses or franchises around the world. The income, subject to applicable withholding tax, is accumulated tax-free in the offshore company. By careful selection of the jurisdiction, withholding taxes can be substantially reduced by the commercial application of double taxation treaties.

Crucial to tax planning offshore, a company is deemed to be offshore-resident if it has been formed offshore; if the company's central management and administration is offshore, even if it was formed in another jurisdiction; and if the company conducts business offshore and its voting control is in the hands of resident offshore shareholders, even though it was incorporated in another jurisdiction or its central management is in another jurisdiction.

When tax planning offshore, non-resident companies are taxed only on income sourced in the jurisdiction and capital gains on the disposal of certain taxable offshore assets. Capital gains on assets acquired before that date by non-resident entities are usually received free of capital gains tax.

Depending on the jurisdiction, offshore-resident companies may be taxed on worldwide income from all sources. Consideration should be given to whether the Company can receive foreign-sourced income without being subject to local corporation tax? A successful offshore tax planning strategy will consist of offshore financial advice that can identify legal, tax-efficient jurisdictions in which to incorporate.

Depending on the jurisdiction, the offshore company may have to register for value added tax (VAT) or goods and services tax (GST). If the company is not registered for GST, it cannot issue tax invoices.

State, territory and local governments do not impose additional corporate tax, which comes into consideration when tax planning offshore. However, they do impose some taxes which might impact foreign companies operating in the country, including payroll tax (more applicable to larger employers), stamp duty and land tax.

When developing offshore tax planning strategies, it must be considered that franked dividends from an offshore subsidiary are not subject to withholding tax when paid to the foreign parent company.

There are many different ways in which investors can conduct business offshore, including corporations, branch offices, subsidiaries, joint ventures, partnerships and trusts. However, for international investors the most appropriate vehicles are usually offshore subsidiary companies or offshore branch offices. Although there is not a great deal to choose between the two (both are subject to the standard corporate tax rate), in practice most foreign companies choose to operate through a locally-established subsidiary company, as this has the added benefits of limited liability and separate legal status.

Many strategic advantages are offered to international business people. A successful offshore tax planning strategy requires taking advantage of offshore tax regulations. Healy Consultants' tax experts deliver a comprehensive offshore tax planning strategy to our clients, including advice on corporate and income tax rates and tax return submission.

Healy Consultants has a range of offshore tax planning services that are designed to meet your exact needs. Unlike many offshore corporate service providers, we take a global approach to our offshore tax planning services, thinking 'outside the box' to create the best offshore tax planning strategy which fits your needs. Our international tax professionals provide the best offshore tax planning services to organisations of all sizes.

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