Offshore jurisdictions include states and dependent territories enjoying tax autonomy that do not impose any taxes on foreign income. A directory of this type of jurisdiction covers more than 30 Countries and territories, and the most popular and best known include Seychelles, Panama, Cayman Islands, British Virgin Islands, Nevis, Belize, Mauritius, Vanuatu, Liberia, St. Vincent and Grenadines, United States Virgin Islands, Marshall Islands and Bahamas.
In other cases of offshore jurisdictions whose international status quo has not changed and which consistently do not sign tax exchange agreements with EU countries, the extensive use of trust institutions allows for the full anonymity and in accordance with local legislation to run almost every business.
This category also includes other countries and territories that conditionally exempt income from foreign sources (e.g. Hong Kong).
No taxation or only nominal taxation exhaustive a catalogue of benefits of offshore jurisdictions which are not party to double taxation treaties and have not yet signed international agreements on the exchange of information in tax and carnoscar matters.
Started in 2008 The unprecedented signing of tax information exchange agreements by tax oases has not made their status uniform. While the real scope of international cooperation by offshore jurisdiction is far from that of developed countries which are party to these agreements, some tax oases (e.g.
Seychelles) have introduced certain requirements in recent years to identify the actual beneficiary of the local companies with a full or partial trust structure, accounting, and therefore to record transactions.
This has made these jurisdictions increasingly closer to those of developed countries applying preferential tax arrangements (e.g. Cyprus, Malta).
These changes resulted in the process of re-registration of many Seychelles companies into other jurisdictions (e.g. Belize).
In other cases of offshore jurisdictions whose international status quo has not changed and which consistently do not sign tax exchange agreements with EU countries, the extensive use of trust institutions allows for the full anonymity and in accordance with local legislation to run almost every business.
Typical offshore jurisdictions have no internal law obligations to record transactions, accounting and financial reporting. Furthermore, offshore companies may hold bank accounts anywhere in the world and board meetings may be held outside the country or territory of the company's headquarters, including by electronic means.
Full respect for trust mechanisms in conjunction with the lack of a publicly available register of actual beneficiaries of local companies is a typical feature of offshore jurisdiction.
In the field of income taxation, companies based on foreign capital having the character of international companies benefit from the exemption from taxation of their income, but provided that they do not engage in any activity in the territory of the jurisdiction in which they are registered.
This means that, for example, an international company in Belize may not carry out any transaction with a person resident or established in Belize, including another international company in Belize.
Unlike international companies, companies registered in offshore jurisdictions by local residents often pay income tax at a multi-percent level. This discrepancy between the legal treatment of resident and international companies based on foreign capital constitutes one with the most distinctive characteristics of tax havens.
International companies are not considered residents of the jurisdiction in which they are registered and therefore cannot receive a tax residence certificate. However, in some cases it is possible for an international company to declare the payment of a small income tax (e.g. 1% revenue from St.
Vincent and the Grenadines), so that the company acquires the status of a local tax resident and can confirm this fact by a tax residence certificate, of which the importance will be limited, however, because states (territories) having offshore jurisdiction status do not sign double taxation agreements.
Another case is the application in a given jurisdiction of a zero income tax rate, so that companies registered in such jurisdiction are considered as local tax residents and can receive a residence certificate (e.g. Isle of Man).
The proper use of offshore jurisdiction, however, is not a simple issue due to the limitations of the law of EU Member States, including Poland.
Individual developed countries usually have lists of countries (territories) applying from their perspective harmful tax competition for specific tax purposes, introducing a number of restrictions, primarily of a legal nature.
In Polish law, the list of countries (territory) applying harmful tax competition is contained in the MF regulations dated 9 April 2013 Direct payments for services to such countries (territories) from Poland are in principle charged, 20% Withholding tax and trading with companies located in such jurisdictions, it is necessary to draw up transaction price documentation in accordance with the disposition Article 25a the Personal Income Tax Act or Article 9a the Corporate Income Tax Act An offshore company should therefore never have a direct relationship with a Polish entity, but only through another company, preferably established in an EU Member State with an Anglo-Saxon legal system (e.g.
Malta, Cyprus, United Kingdom), which allows tax-neutral and free of other restrictions to transfer capital to offshore jurisdiction. Offshore companies are perfectly suited for use as an element of the British agency structures, where offshore companies act as the principal of their British agent.
Offshore companies also perform their role in multi-level trading structures, based on the mechanism of profit transfer.
A particular type of offshore companies are international companies registered in selected jurisdictions in the United States of America (e.g. Delaware). These companies do not operate in the United States, so that their profits are not taxed in the United States, provided that their partners are not American residences.
However, these companies are mostly personal companies, which means that in the event of their direct registration by a natural person, who is a Polish tax resident and not by a dedicated offshore company, this company, as a transparent tax company, should be accounted for by taxes in Poland at the level of its partners (In the proportion of shareholders - residents of the United States of America - these partners will pay the income tax proportionally attributable to their participation in such a company).
The absence of an indication of revenue from such a company in the annual tax return therefore constitutes a breach of the rules. the Personal Income Tax Act and if the authorities detect the tax equipment is subject to the criminal liability. This legal status of U.S.
international companies in conjunction with the functioning of the Polish-American exchange of information and legal assistance in tax and tax matters, has in recent years been the cause of many practical problems of Polish taxpayers who have not been able to benefit from this type of international tax avoidance solutions, which should always be used through an offshore company with a full trust structure, setting up an American unit for legal protection and anonymity.
This article is derived from the book "International tax avoidance in Polish law", which was published by Difin Publishing House