Low-tax companies: midshores

Registering companies in low-tax jurisdictions

Midshoring is a popular tool in modern business practices. Setting up companies in countries with a favourable tax climate makes it possible to save on taxation and, as a result, to make more profit without breaking the law. There are many so-called "tax havens" in the world where taxes are minimal.

But nowadays there is a strong international fight against tax evasion and, accordingly, against offshore zones. Both Ukraine and other countries, including the EU, have "black" and "grey" lists of unreliable jurisdictions. Registration of enterprises in such states is associated with shady schemes. The presence of a company in the BVI or Belize can cause a number of difficulties for a business owner:

• Problems with opening a bank account;
• incessant inspections;
• mistrust from partners, clients.

A popular alternative to the classic offshore with a not-so-positive reputation is midshores.

What is a midshorter

Mid-shoring is an intermediate jurisdiction that combines features of offshore and prestigious high-tax onshore jurisdictions. In contrast to tax havens, low-tax jurisdictions are tax havens, but on more favourable terms than territories with a regular tax regime.

Strong legal system, flexible tax rates, developed trade relations, availability of skilled workforce and a large number of double taxation treaties make midshore jurisdictions increasingly popular.

All mid-shoring jurisdictions are on the OECD "white" list and offer the possibility to open an account with any bank in the world. They adhere to international standards of tax transparency and are therefore gradually becoming a global trend, replacing the classic offshore.

Advantages of low-tax jurisdictions

Doing business in countries with reduced tax rates:

• more prestigious than a classic offshore;
• does not prevent accounts from being opened with reputable banks;
• allows the use of sophisticated proven schemes involving offshore and onshore elements;
• exempts founders from paying corporate tax in the absence of activities in the jurisdiction;
• does not threaten problems in dealing with the tax authorities;
• allows the use of nominal service.

At the same time, doing business in mid-shares requires a number of requirements to be met: filing financial statements, undergoing an annual audit, and posting information on the owners in public registers.

Which jurisdictions are classified as midshoring

The most popular midshares:

• in Europe: Estonia, Malta;
• in Asia: Hong Kong, Singapore;
• in America: some US states.

Given the rapid spread of deoffshorisation around the world, midshoring is becoming a trend in international tax planning. Moreover, many of the jurisdictions are associated with high status, prestige. The registration of companies in countries with low tax regimes makes it possible to create complex structures with classic offshore structures. Business representatives continue to find and use various ways to optimise taxation. And the stricter the regulation becomes, the more complex the structures and schemes become.