Jurisdictions with low maintenance costs
Low maintenance cost territories are jurisdictions with especially favourable tax regimes, where the annual company maintenance expenses are lower. An effective tax planning strategy often revolves around these jurisdictions, as low taxes and maintenance costs are among the most effective and straightforward cost-reducing tools for any business.
In general, company maintenance includes any operations that ensure a business is active in its day-to-day endeavours. In addition, many favourable tax jurisdictions require every international company to undergo a company renewal procedure on an annual basis, by submitting a renewal application and paying a certain fee to the state. In terms of tax planning, company maintenance is normally understood as referring to the expenses associated with paying taxes, state fees, stamp duties, charges and any other costs that may arise from operating a company. These include, but are not limited to:
- Import/export duties
- License fees
- Office rental
- Stamp duties
- Annual renewal fee
- Notary fees
- State fees
Maintenance usually does not include any expenses directly related to business transactions, such as the cost of raw materials to be used in production or the purchase of goods for resale.
Depending on the jurisdiction, company maintenance can either be the biggest source of expenses (especially due to taxes and renewal fees) or a barely noticeable cost of conducting a profitable business. This is the main reason why jurisdictions with low maintenance costs are so popular with companies seeking to optimise their taxes.
Steps for maintaining a company
The first step in effective company maintenance is financial planning, including tax planning. A company needs to identify its biggest source of expenses and then find a way to gradually reduce these costs. One of the primary goals for maintaining a company effectively is reducing its tax burden and annual renewal fees. The second step is to choose a jurisdiction with low maintenance costs and an advantageous tax regime. Confidus Solutions will be happy to share our professional knowledge in this matter, in order to help you analyse the options and choose the best jurisdiction in which to incorporate.
The third step is relocating the actual business or incorporation to the jurisdiction of your choice. The particular details of this process may vary between jurisdictions and legal business structures, so each company should carefully assess which business structure is most advantageous in their particular case.
In the long term, maintenance costs are mainly related to wages, taxes and supplies. Wages are effectively determined by the labour costs in each jurisdiction, which, in turn, are influenced by working culture, education and skill levels, competition level, etc. Taxes depend on the legal business structure and the activities performed by a company — some will require licenses and patents, which must be regularly renewed for a fee. Finally, the supplies required will depend on each particular company, but usually include rent (supply of premises), utility bills (supply of heating, electricity, water, etc.) and operational resources, such as petrol and office supplies.
Top Five low maintenance cost jurisdictions
Out of all the low maintenance cost jurisdictions, some are more beneficial than others. We have prepared a list of the top five jurisdictions with the lowest maintenance costs.
The Seychelles is currently one of the most sought-after jurisdictions, offering a low-tax regime to international investors and entrepreneurs. The government has invested a lot of funds in order to turn the islands into the prestigious investment centre we know today. Over last few decades, the Seychelles has seen a dramatic modernisation of its legislation, which has resulted in the development of an up-to-date, but reasonably strict, tax haven. Laws governing the Seychelles’ tax regime and tax application offer excellent tools for asset protection, tax reduction and privacy protection for both individuals and companies.
Belize is a small country on the eastern coast of Central America, to the south of Mexico, formerly known as British Honduras. This jurisdiction has a lot to offer international investors as well as corporate giants, with its favourable tax regime and banking legislation. Under the provisions of the International Business Company (IBC) Act of 1990, companies registered in Belize are fully exempt from all taxes and stamp duties on income from any source. An international business company (IBC) incorporated under the laws of Belize is a perfect solution to secure your confidentiality, as nominee services are allowed, but no information on directors and shareholders is entered into the public register.
The British Virgin Islands
The British Virgin Islands (BVI) is a classic tax haven. The most common legal structure for businesses is the international business company (IBC), commonly referred to as the 'tax haven'. An IBC is normally exempt from all taxes usually applied to a company. BVI offers a flexible business structure, low requirements for reporting and record-keeping and high levels of confidentiality protection. The legal basis for this status is the BVI Business Companies Act, which came into force back in 2005.
Anguilla is one of the British Crown’s many overseas territories in the Caribbean, and as such it offers a stable political and economic situation. Unlike many other similar territories, Anguilla is actually a tax-neutral jurisdiction, as there are no taxes on income, capital gains, estates or profits, or any other forms of direct taxation applied to private individuals or businesses, whether they are resident in Anguilla or not. All of this makes Anguilla an extremely desirable location for international corporations and financial specialists.
The Commonwealth of Dominica, also commonly known simply as Dominica (not to be confused with the Dominican Republic) is an English-speaking country and a former British Colony, now an independent constitutional democracy (it gained its independence in 1978). Dominica is located in the eastern Caribbean Sea, to the north of Venezuela. Dominica-based international companies are fully exempt from all taxes for a minimum period of twenty years after incorporation. Dominica offers an extremely quick company formation process; a company can be established in 24 hours once funds and completed paperwork have been received.
Low maintenance cost company registration
The main advantages of all these jurisdictions are their low-tax regimes and relatively low annual renewal requirements. This cuts down on companies’ biggest source of expenses, allowing for cheap maintenance and greater investment in different areas of activity. Some of these jurisdictions require certain types of company to be registered in order to take fullest advantage of these benefits, and there may also be other restrictions. We therefore would strongly advise you to contact us for a full and detailed analysis of the jurisdiction of your choice.