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The rate of tax which a company currently has to pay isn’t the only available option if they want to cease paying tax altogether. Although there are many ways in which this can be done in the country which a business is currently in, such as claiming all legitimate expenses, it might not reduce a bill entirely. Consequently, a lot of money still has to be paid for a tax bill. By starting a company abroad, the amount of tax which a business is liable for reduces. So, how is this possible?
The rate of Corporation Tax for UK businesses whose profits are above £300,000 is 20%; when profits are more than £1.5 million, a 23% rate of Corporation Tax has to be paid. However, the amount of tax that’s applied in a tax haven is considerably less. In fact, some tax havens expect foreign businesses to pay no tax whatsoever. There are many tax havens in the Caribbean such as the British Virgin Islands, the Cayman Islands and Barbados. Other tax havens include Jersey, Hong Kong, Dubai and Gibraltar. When a business chooses Dubai offshore formation or in any other tax haven, the Corporation Tax that doesn’t have to be paid can be reinvested in order to expand it. It could also be used as staff bonuses.
A tax haven also expects businesses to pay less income tax. When a company is moving abroad and it will be hiring staff from the local area, the salary package that it puts together should be very attractive. Courtesy of a Dubai offshore formation, or in other tax haven, no tax on personal income has to be paid. When a company doesn’t have to pay tax on employee wages, there will be less paperwork.
Many companies prefer to pay directors through dividends rather than salary on grounds of tax. This is because the rate of tax that has to be paid on dividends is much lower than a salary. In the UK, a 10% rate of tax is applicable on dividends which are less than £32,010. The highest rate of tax on dividends is 37.5% for those that exceed £150,000. In tax havens, this rate of tax doesn’t have to be paid at all because this form of income is not subject to tax; this is a considerable saving. If a company has many directors that are paid a high dividend every tax year, they can save a small fortune when they operate from an offshore site and not in a non-tax haven.
Minimal restrictions imposed on what can be withdrawn from a bank account
Some tax havens have no restrictions on how much money can be taken out of a bank account that is specifically for an offshore company. Although a company cannot save tax, it could use tax-free money for reinvesting in their headquarters which are in another country. Even if thousands of dollars are withdrawn from an offshore bank account, every cent can be transferred to another bank account which is in an entirely different country.
With much to recommend offshore formation in a tax haven, why not consider it for your business? If a tax bill for a recent tax year was too high, offshore formation should be viewed as being a viable option in order to help your company’s finances. By getting in touch with a formation agent, they can discuss the entire process and will keep you updated at all times. Consequently, you won’t be unsure about what is happening.
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