Offshore Companies Tax

Offshore companies, such as Panama companies, are tax free entities that are capable of carrying on business in any part of the world with the exception of the country of registration. Partly as a form of providing offshore tax incentives to foreign investors and relieving corporations and individuals from tax burdens, offshore tax havens do not impose offshore company taxes.

Offshore companies incorporated in a zero tax offshore shore tax haven is not subject to taxes on offshore income such as withholding tax, capital gains tax and other direct and indirect taxes that are enforced domestically in the country of incorporation. But in the jurisdictions where some form of offshore company taxation is applied, offshore companies tax may range from zero to eighteen percent depending on the offshore jurisdiction. With the exception of offshore jurisdictions that provide tax exemptions to offshore companies that carry on business locally, offshore company tax is applicable.

Offshore company taxes however may be applicable in the countries where offshore companies operate as well as where the company’s members may reside. But this depends on whether offshore company taxes are imposed by the country of residence such as in the United States and United Kingdom where taxes on offshore income are levied, as well as if the country where business is conducted by the offshore tax free company provides offshore tax incentives for offshore and or foreign companies.

There are many ways in which an offshore company can save on offshore company taxes, but this requires systematic planning in terms of targeting countries where incentives and exemptions are given to offshore companies. In this way, by doing business in another offshore tax haven where very low or zero taxes are imposed on offshore companies, enormous amounts of money can be saved on offshore company taxes. Additionally, by setting up certain offshore entities such as trusts and foundations, tax on offshore income can be deferred.

Despite the fact that offshore company taxes are not imposed by offshore tax havens, offshore companies are liable to paying maintenance and renewal fees which are normally payable on a yearly basis. In some jurisdictions, these fees increase in accordance with the company’s share capital. For example, in the Bahamas where annual fees for offshore companies tend to be lower for companies with higher amounts of share capital, while in Anguilla and the British Virgin Islands, yearly renewal fees are fixed if the share capital is between USD$100 and 50,000, but increase accordingly if the share capital exceeds 50,000.

In Barbados an offshore company corporate tax is applied to the amount of profit made by the company. Hence, international business companies with profits of up to Barbadian dollars $10,000 pay a tax rate of 2.5%, companies with profits of between 10,000 and 20,000 pay 2.0%, between 20,000 and 30,000 pay 1.5% and over 30,000 are liable to 1.0% offshore company tax. These offshore company tax rates may be altered by according to the Minister’s discretion, but rates will not be waivered to below 1.0%. tax on offshore companies that are registered outside of Barbados are liable to offshore company taxes only on locally generated income and not on income generated overseas.

Back to top