Jurisdictions with preferential taxation

In jurisdictions with preferential taxation, the level of income tax is lower in comparison with other jurisdictions. At the same time, in some jurisdictions, when receiving income from other countries, some of these jurisdictions apply a system of unique tax benefits. Moreover, tax rates at the source on the distribution of dividends, royalties, interest in these jurisdictions are very low or equal to zero.

Countries with preferential taxation include: Andorra, Bermuda, Great Britain, Scotland, Hungary, Hong Kong, Ireland, Cyprus, Latvia, Lithuania, Liechtenstein, Luxembourg, Madeira, Macao, Malta, Monaco, New Zealand, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, Uruguay, the Czech Republic, Switzerland and Estonia.

Applicable in tax planning schemes of jurisdiction, can be divided into the following categories:

1. States with zero taxes, also called Classic Offshore. Such countries are characterized by a low level of economic development, while these jurisdictions are politically stable. In such courts, the income tax is absent. In many classical offshore jurisdictions, there is no requirement for filing financial statements; the only condition that the state makes is to pay an annual fixed fee to the treasury. These jurisdictions also apply maximum measures to preserve the confidentiality of information about the ultimate beneficiaries of companies.

2. Countries with low taxes. The establishment of low fees in such countries is carried out to stimulate the economy and attract foreign capital. Offshore such jurisdictions are not, because companies in their territories pay taxes and submit accounting reports.

3. Countries with a national tax system. In the states of this category, the level of taxation is affected by the place of origin of the income. To prove eligibility, companies are audited every year and submit financial statements. In some jurisdictions, the application of tax rates depends on whether the funds were transferred in any way to “home” jurisdiction, or not.

4. High-tax countries with exclusive benefits. In such jurisdictions, the location of the source of income does not affect taxes. It is possible to distinguish rather high tax rates, as well as mandatory financial statements. Several organizational and legal forms of business are fully exempted from taxes (corporate):

• LLC company;
• Limited partnerships (LP, LLP, SLP);
• Specialized companies.

5. Countries with special economic zones. Some states create special economic zones to achieve individual goals. Residents of economic zones are taxed at preferential rates or exempted from taxation in general. Among such countries can be identified as UAE, Georgia, Belarus, Russia.