Company with Substance for 0% Tax
In the realm of offshore business, the concept of a company with substance has gained traction. This refers to a company that has a genuine physical presence in its jurisdiction, such as employees, office space, and tangible business activities. The goal is to establish a legitimate business entity that can potentially benefit from a 0% tax rate. This article delves into the intricacies of setting up such a company and the considerations involved.
Understanding Substance
Substance, in the context of offshore companies, pertains to the tangible presence and activities of a company in its jurisdiction. It's not just about registering a company; it's about demonstrating that the company has real operations, employees, and office space in that location.
A Practical Example: BVI Company
Let's consider a company set up in the British Virgin Islands (BVI) in the Infrastructure - Investment Field:
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Employment: The minimum salary in BVI is $6 per hour. You could employ someone to work a few hours a day, for tasks such as:
- Watching interviews from the day or the previous day, taking notes, and highlighting important periods. This would cost around $300 a month, assuming 1.5 hours of work daily.
- Conducting research on projects or companies in the field and compiling notes, which would cost about $400 a month.
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Office Space: Renting local office space is essential. This could be the residence of the local employee, and you could cover the utilities for the office space, ensuring they have a conducive environment to work.
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Taxes: If there are any taxes, such as payroll taxes in BVI, ensure they are paid. The rate might be around 10% or more.
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Business Operations: In today's digital age, many businesses are web-based. Ensure all your business bills are directed to the BVI address, and the company operates from there. Calls should also be managed from this location.
Seychelles: A Changing Landscape
While Seychelles was once a popular destination for offshore companies, it has reportedly become more challenging since 2020. New regulations mandate the employment of local directors. This shift underscores the importance of staying updated with the latest regulations and requirements in any chosen jurisdiction.
Conclusion
Setting up a company with substance in a 0% tax jurisdiction is a strategic move for many business owners. However, it's crucial to ensure that the company genuinely operates from that location, employing local talent, and adhering to all regulatory requirements. By doing so, businesses can potentially enjoy tax benefits while maintaining a legitimate and compliant offshore presence.
Disclaimer: Always speak directly to an attorney; blog posts are not a sufficient source of information to make decisions, may not be appropriate for your situation, may not be well researched, and may not be current at the time you read them, always speak directly with an attorney.
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