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Tax systems in countries differ, including the level of the tax rate. For example, the highest corporate tax rates for businesses can be found in countries such as Venezuela, Iraq, and Malta. However, if you follow the corporate world, you know that in Malta, you can reduce the tax from 35% to an effective 5-10%. That is why it can be challenging to understand in which country to start a business to take advantage of tax breaks.
However, there are countries where the tax is not just low (a tax of up to 12.5% is usually considered low) but zero. There are states like Vanuatu, where the tax is not collected in principle, and there are states like the UAE, where the rate itself can be high, but under certain conditions, the tax is reduced to zero.
Experts from International Wealth, a leader in the offshore industry, told us about the best tax-free jurisdictions with the cheapest incorporation of offshore companies.
So, let’s move on to a review of the countries with the most favorable taxes for business.
1. Bahamas
The Bahamas has been a popular offshore destination for many years, partly thanks to its tax policy. There is no corporate, capital gains, dividend payment, gift, inheritance, and personal income tax in the country.
Businesses are required to pay only for a license, real estate, and VAT. At the same time, the country provides a high level of protection of personal information.
2. British Virgin Islands
This is another classic offshore zone – a place where business does not pay taxes. Despite the fact that this is a dependent territory of Great Britain, the country uses US dollars due to its close connection with another offshore jurisdiction – the US Virgin Islands.
In addition, it is possible to register a business remotely.
3. Vanuatu
The small island nation in the Caribbean Sea, Vanuatu, is known not only as a business center but also as a country offering citizenship by investment. This is perhaps the most affordable second passport program. In addition, the Vanuatu passport allows you to travel to 100 countries without a visa.
In addition to offering offshore business services, Vanuatu attracts tourists and engages in agricultural activities. Taxes on income (global), like many others, are not collected from businesses in this country.
4. Saint Kitts and Nevis
Saint Kitts and Nevis is considered a classic offshore zone, but in practice, there are taxes here, and they are pretty high. For example, corporate tax is 33% for both residents and non-residents.
However, everything is decided by the nuances: business tax is collected only from income received in the country. If you receive income outside of St. Kitts and Nevis, there is no corporate tax. Withholding tax (royalties, dividends, interest) is 15% for non-resident companies, but again, only if income is received in the country.
In addition to offshore companies, St. Kitts offers the oldest and most respected citizenship by investment.
5. Bahrain
Bahrain is a tiny oil-producing country. Due to this, it does not need to introduce income tax for businesses and individuals. There are no taxes on dividends, gifts, or inheritance. An exception for oil companies – the tax is 46%.
If you wish, you can obtain a residence permit here.
6. Bermuda
Bermuda is one of the oldest zero-tax offshore zones. Business has been registering companies in this country for decades, and the largest enterprises in the world often have at least one representative office here.
Bermuda is popular as a tourist destination, but 85% of its GDP is in the insurance and financial services sector.
There is no corporate tax for business, as well as VAT, capital gains tax, withholding tax, and inheritance tax.
7. Guernsey
This is a dependent territory of Great Britain, concurrently, one of the most respected and expensive offshores in Europe and the world. Corporate tax in Guernsey is 0%. The exception is the financial sector – 10%, and companies involved in real estate and oil – 20%.
There is also no capital gains tax, withholding tax, and inheritance tax.
8. United Arab Emirates (UAE)
For many years in the UAE, only oil producing and processing companies (55%) and branches of foreign banks (20%) paid taxes. The rest of the business in the country was exempt from taxes. Free zones were popular among foreigners, in which, in addition to zero tax, it was possible to 100% own a company (outside free zones, 51% had to be given to a citizen of the UAE).
However, it should be borne in mind that from June 1, 2023, the country will introduce a corporate tax of 9% on income over AED 375,000 (USD 102,000). If the income is below the specified threshold, or the business falls under the Qualifying Income of a Qualifying Free Zone Person exemption, then the tax rate will remain zero.
9. Panama
In fact, business taxes in Panama are 25%. Why is the country on this list? Because Panama has a territorial principle of taxation: income received by a business outside the country is not taxed.
This, plus a developed banking sector and a convenient location, make Panama an advantageous place for registering companies and starting international businesses.
Value Added Tax (VAT) is 7%, which is, on average lower than VAT in other countries of the world.
It is also possible to obtain permanent residence by investment here.
10. Monaco
Monaco is often called the playground for the rich as the country has no income tax for individuals. For legal entities, the conditions are somewhat different.
The country has a territorial principle of taxation: business profits received outside the country are not taxed. The internal tax is 25%. Taxes are paid by companies, regardless of their legal form, carrying out industrial or commercial activities in Monaco if at least 25% of their income comes from operations carried out directly or indirectly outside Monaco.
