Selecting a jurisdiction

The selection of the most suitable jurisdiction for either international trade or investment can often be difficult and requires very careful consideration. Most offshore jurisdictions are free from foreign exchange controls and have introduced company legislation to cater for a diverse range of international business requirements. It is important to select a jurisdiction that is well suited to specific corporate and personal needs.

POLITICAL AND ECONOMIC STABILITY

The prerequisite requirement for anyone wishing to establish their business or private interests offshore is to select a jurisdiction that provides political and economic stability, so that business can be conducted with certainty, confidence and corporate security.

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LEGISLATION

There are now more than 50 jurisdictions worldwide providing offshore company legislation. Some jurisdictions have introduced new and modern suites of corporate legislation, specifically designed for international business whilst others have amended existing domestic legislation to cater for offshore requirements.

The most essential criteria are that the legislation is modern, flexible and well proven with respect to issues such as low share capital requirement, minimal reporting obligations, possibility to hold members and directors meetings anywhere, possibility to appoint nominee shareholders and directors, no obligations to file accounts. Furthermore, the legislation should preferably provide confidentiality and complete privacy regarding a client's business dealings.

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DESIRABLE CORPORATE CHARACTERISTICS

Many offshore and "tax planning" jurisdictions have made efforts to ensure that their company law provides the following features:

• Limited liability
• Minimisation of directors liability - directors are generally responsible for the acts of a company however in certain jurisdictions directors may seek indemnities from both the company and its beneficial owners
• Minimal or optional statutory filing obligations
• Nominee shareholders allowed
• The availability of bearer shares
• Disclosure of beneficial ownership either not required or limited to special bodies, such as offshore authorities or central banks
• Broad range of permitted company names and suffixes to denote limited liability
• Low capital requirements
• The ability to hold directors and/or shareholders meetings anywhere in the world
• The absence of or the optional requirement for the audit of accounting records

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PROFESSIONAL INFRASTRUCTURE

The ongoing administration of all offshore entities demands both legal and accounting services. Therefore, it may be important to select a jurisdiction that provides a comprehensive selection of legal and accounting firms, which can provide cost-effective services to an international standard.

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COMMUNICATIONS

It is important for a jurisdiction to have state of the art communication facilities; to include air travel, mail services and telecommunication systems in order that business can be conducted in an expeditious manner.

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LANGUAGE

Whilst offshore providers are able to provide multi-lingual services, the ability to conduct business in English is useful. This may assist in ensuring that client requirements are fully understood without the risk of mistakes.

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BANKING

Whilst offshore companies are able to bank anywhere in the world, some clients prefer to open corporate accounts in the jurisdiction where a company is domiciled. In such case, the availability of a comprehensive range of banking services and access to international banking facilities is of importance.

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DOUBLE TAXATION AVOIDANCE TREATIES

The jurisdictions around the world can be categorised as follows: 

• Treaty jurisdictions
• Non-Treaty jurisdictions

Clients seeking to take advantage of double tax treaty relief need to establish a company situated in a treaty jurisdiction. This is essential for the minimisation of withholding taxes on the payment of dividends and royalties from contracting states. Treaty jurisdictions also portray a non-offshore image and thus provide cosmetic appeal.

Non-treaty jurisdictions are mainly used because of the absence of corporate taxes on the profits of the company and usually only require companies to pay a fixed annual licence fee.

It is; therefore, important to assess the taxation implications of the business that is to be conducted, and decide whether or not a treaty jurisdiction is required. Under normal circumstances, a treaty jurisdiction would not be required for the international movement of goods and most services. Inward investment in to certain countries, however, may require a treaty jurisdiction to minimise the impact of taxation.

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