Factors
influencing the choice of the jurisdiction
Usually we advise our customers to consider the following issues when selecting the jurisdiction and planning further actions:
1. When the company shall be considered to be resident for tax purposes or having principal place of business in a country where it has business activities, for example, there is a number of criteria, when the activity of foreign company is considered as permanent representation for tax purposes in Latvia.
2. Activities of international organizations to fight money laundering and tax evasion.
3. Tax regime in the country of incorporation. Description of each jurisdiction includes basic taxation issues of the certain country.
4. Favorable corporate law:
- limited liability
- availability of nominee shareholders
- necessity to pay authorized share capital
- necessity of accountancy and audit
- possibility to hold the meeting of directors and shareholders outside of the country of incorporation
- disclosure of information about a beneficial owner of the company and other confidential information (Cyprus, UK, Guernsey, Ireland, Liechtenstein, Switzerland) (Bahamas, Belize, Mauritius, Panama, British Virgin Islands, Samoa)
- availability of bearer shares.
5. Political stability is very important, especially if there is a bank account opened and assets of the company will be invested, for example, to immovable property in the appropriate jurisdiction.
6. The possibility to transfer your business from one jurisdiction to another. An important factor enabling to re-register your company in another jurisdiction due to possible unfavorable change in tax legislation.
7. Existence of a control over money transfers. Possibility to move your money and assets without any limits is the fundamental basis when creating any schemes. As a rule, is not used in relation to offshore companies.
8. Country participation in international organizations.
9. Double tax treaties. As a rule, such treaties are concluded with high tax countries, and its main purpose is to avoid double taxation of income received by the resident of one country in territory of another country. In each treaty the method of elimination of double taxation is used as: " a method of crediting " and/or " a method of tax exemption ". The essence of " the method of clearing " is the income received in one country, is not subject to the taxation in the second country – the participant of the treaty. The essence of " the Method of crediting " is that the amount of tax payable is reduced to the amount of the same tax paid in another country. On the other hand, double tax treaties can considerably assist in tax planning. With its assistance it is possible to plan tax reduction at the source, such as dividends, a royalty and interests.
10. Presence and absence of the country in " black lists ", where the company will carry out trading and investment activity. " Black lists " are lists of countries, on operation with which certain restrictions (for example, tax or currency) are imposed. We offer for your attention current “black lists” approved by the state authorities in Latvia, Lithuania, Russia, Byelorussia, Hungary, Ukraine and Kazakhstan