Offshore jurisdictions in Europe

Are There Offshore Zones in Europe?

A business company can gain some serious competitive advantages if it is registered in an offshore country. In particular, many states in the Caribbean do not levy any taxes on the income made abroad. Register a company in Panama or Nevis, for example, use it to earn money in other countries, and pay nothing in taxes in the country of your company domiciliation. We don’t mean to say that your income is going to be totally tax-exempt: you will be taxed in the countries where the income is made. However, you can save on the corporate tax that can be substantial in some jurisdictions.

Most countries that offer special advantages to foreign entrepreneurs registering companies there are located in remote parts of the world such as the Caribbean Sea in the Atlantic or Oceania in the Pacific. But do you always have to go very far to find a place that offers beneficial conditions for doing business? Not necessarily. There are several offshore zones in Europe and we discuss them below.

Isle of Man

The Isle of Man is formally part of the UK but it is a highly independent jurisdiction with its own Parliament (one of the oldest Parliaments in the world, by the way) and its own Government. The local authorities have the freedom to set their own rules, which includes setting their own tax rates. The Isle of Man is also one of the oldest offshore jurisdictions in the world: it has been offering special conditions to businesses domiciled there since the 1960s. Essentially, the Isle of Man is an offshore zone with a good reputation.

What benefits would you find if you set up an offshore company in the Isle of Man? First, some taxes are not charged in the jurisdiction. These include the capital gains tax, the capital transfer tax, the property tax, the gift tax, and the inheritance tax.

The standard profit tax is 10% for most companies. Trusts registered in the Isle of Man, however, have to pay the profit tax at the highest rate of 18%. Companies engaged in certain spheres such as child seat import/ export or housing and utility services pay the profit tax at a reduced rate of 5%. A zero profit tax is payable by companies providing financial, insurance, educational, healthcare, and other types of services. The zero tax rate also applies to construction companies, clothes retailers, and so on. The personal income tax is also 10% unless the annual income exceeds 10,500 pounds. If this is the case, an 18% tax is payable on the outstanding amount.

When a company is incorporated in the Isle of Man, it does not have to have any registered capital at all. Annual financial reporting is not obligatory. Only joint-stock companies undergo audits. At the same time, all companies have to keep financial records and they have to submit them on request from the local authorities.

Gibraltar

Gibraltar is a tiny overseas territory of Great Britain sitting at the southern top of the Iberian Peninsula overlooking Africa. The jurisdiction has only one main street and the airport runway crosses the street perpendicularly.

Small as it is, Gibraltar is an attractive European offshore zone. The corporate tax rate there is 10%, which is low compared to all other Western European countries. At the same time, Gibraltar is not blacklisted by any international organization such as the OECD or FATF. Since 2014, the legislation of the territory is in compliance with all international norms so it’s a ‘white’ offshore jurisdiction.

The most important advantages that you will find if you incorporate an offshore company in Gibraltar are as follows. There are no state tax audits nor currency control in the jurisdiction. You can use nominee services when registering a company in Gibraltar (this opportunity is not available in some offshore zones such as the Isle of Man, for instance). A non-resident Gibraltarian company is going to have no trouble setting up a corporate bank account in any country of the world: the jurisdiction is quite reputable. Gibraltar issues gambling licenses to companies registered there, which is also a rare opportunity. Forming a company in Gibraltar is fast and easy.

Channel Islands

The bailiwicks of Jersey and Guernsey together with a few small islands around them are often referred to as ‘Channel Islands’ because they are located in the English Channel between France and Great Britain. These are independent jurisdictions but the UK guarantees their military protection. Jersey and Guernsey are two separate countries but they have a couple of common government bodies.

The jurisdictions have their own national currencies even though both pounds sterling and euros are widely used there. What makes these offshore zones particularly attractive for registering a business company there is their lack of membership in international organizations. Neither Jersey nor Guernsey is an EU member state, which means that they do not have to follow the common rules and they can offer some more relaxed conditions to foreign business people wishing to do business from their territories.

Both jurisdictions are long-established financial centers. Financial services is the sector of the economy that brings the largest portion of income to the national budgets of both Jersey and Guernsey. Taxes are low in both countries: no VAT is payable in Jersey and many Guernsey-based companies pay no taxes whatsoever. The company registration process is going to be simple no matter which of the bailiwicks you choose.

Other offshore zones in Europe

There are other offshore zones in Europe if by an ‘offshore zone’ you mean a country or territory that offers special perks to foreign entrepreneurs. For example, you can consider registering a company in Cyprus or Malta, two island states in the Mediterranean Sea. Besides, some European countries have Free Economic Zones offering huge tax incentives. As you can see, you don’t have to go very far to register an offshore company.