Seychelles and IT-business: why IT business consider offshore as a solution?
May 24, 2016
There are about 300 of preferential jurisdictions in the world and more than 50 of them offer either low tax rate or full exemption from all taxes. Within these “tax havens” hundreds of thousands off shore companies are incorporated every year. The first question “newcomer” in the offshore business asks is as follows: which jurisdiction should be chosen?
Offshore Express Company is not beginner in the international companies’ registration. Therefore, when making educational publications for our clients, we have a balanced approach to the choice of offshore jurisdiction.
It should be noted that having enough information about the most popular offshore jurisdictions, research of our experts have been started from the Republic of Seychelles. What was the reason for such a choice, you will ask. And your question is reasonable, because every third company is registered in the BVI, Panama or Belize, today and it seems that here they are – the three pillars of the offshore market. However, the situation is not so simple.
According to the estimates of analysts, IT-companies occupy a huge segment of the market and no wonder that such companies constitute an essential part of our customers. Consequently a significant percentage of total number companies registered by our experts were in the Seychelles!
Attractiveness of jurisdiction
Seychelles attract IT-business for a variety of reasons, among them are:
1. Seychelles propose the right mix of features to make the country a great general purpose international financial centre and the first class holding entity jurisdiction.
2. A platform for “easy start” – it is quite easy to register an offshore company and start business activities in the Seychelles. Of course, there is nothing wrong, when your choice falls on a major offshore centers, but sometimes the abundance of registration agents can “overwhelm” the novice and result in difficulties in the future work with the company.
3. Relatively inexpensive cost of registration services. Thus, price of Seychelles IBC is significantly lower than a BVI Company.
4. Seychelles offer choice between full exemption from payment of any taxes and flexible low-tax system through the use of financial instruments such as international business companies (IBC) and special license companies (CSL). For instance, first, your IT-company brings capital offshore for the purpose of assets accumulation and with an increase of business opportunities it switches to a low tax mode and takes benefits from a growing portfolio of double taxation avoidance agreements.
5. The largest Chinese Embassy in the region, this demonstrates strategic importance of Seychelles for Chinese business. This means that customers who have business contacts with Chinese partners are able to assure their documents directly to Chinese officials in the Seychelles.
6. The high level of infrastructure and communications that enables the company “stay in touch” with the rest of the world via satellite links and underwater fiber-optic cable.
On the way to opportunities: whether offshore is needed?
Global IT-companies such as Google (Alphabeth), Apple and Amazon have used offshore jurisdictions for business planning purposes.
However, the main issue at the initial stage is the correlation of benefits arising from the foreign company and the cost of it. Of course, the international business company is not likely to be interested freelancer develops a couple of web sites per month. While for companies with revenues above $100,000 specially designed international scheme is acceptable.
Generally, under such schemes, the typical IT-company, which is engaged in development products for foreign customers, registers off shore company, which acts as an intermediary between clients and resident company. Thus, mutual payments with foreign customers are made via offshore company and revenues come to the company’s bank account. Further, resident company and offshore company sign IT-services agreements, for instance. Under these agreements offshore company transfers funds into the account of resident company in the amount sufficient to cover its costs, while the rest of profits accumulated in the offshore account. Eventually, IT-company receives significant tax optimization (0-1.5% income tax is cheaper than 10-20%) and assets protection.
Surely, this scheme is approximate and can be improved; however, the advantages of flexibility of international transactions clear in the initial phase.
Correlation of requirements
Suppose Your IT-company’s business environment is exceptionally virtual (e.g., foreign trade in goods through an online store, or ownership of intellectual property rights to the domains or software) and You are not going to receive direct payments from customers, issue invoices, maintain document flow and so on. In such a case, the foregoing scheme with the participation of the Seychelles IBC is enough.
The other question, your goal is not only to reduce the percentage of taxes withheld from the funds on offshore accounts, but in the “respectability” of the company and working in the “real” business environment. Then, the company in the Seychelles can be serving entity in “prestigious” European “onshore” in the UK, the Netherlands or Cyprus.
Anyway, IT-companies choose registration of business in the Seychelles on the grounds of ensuring confidentiality of ownership, using of international companies for work with foreign customers and asset protection, as well as access to the opening of accounts in external banks.