Legislative provisions in Mauritius

Mauritius Offshore Companies

There used to be one main source of 'offshore' regime in Mauritius, the Mauritius Offshore Business Activities Authority (MOBAA) constituted under the Mauritius Offshore Business Activities Act 1992 (MOBA Act 1992), which supervised almost all types of offshore entity other than banks, including the Free Port, and the Export Processing Zone.  In May 2000 Mauritius wrote a 'commitment letter' to the OECD in order to avoid inclusion on the OECD's list of jurisdictions which offer 'unfair' tax competition. Partly as a result of this commitment, the Government passed a range of replacement legislation in 2001 including the Financial Services Development Act 2001, which set up a Financial Services Commission to replace MOBAA.  Most existing offshore legislation has been 'grandfathered' into the new regime. As a result of the introduction of new legislation, Mauritius offers two types of offshore companies most frequently used by international investors: Global Business Company Category 1 (GBC1) and Global Business Company Category 2 (GBC2).

Global Business Company Category 1 (GBC1)

Legal form: The Global Business Company Category 1 (GBC1) replaced the old Offshore Company under the Companies Act 2001. In terms of the Financial Services Development Act 2001, a GBC1 is defined as a company engaged in qualified global business and which is carried on from within Mauritius with persons all of whom are resident outside Mauritius and where business is conducted in a currency other than the Mauritian Rupee. A GBC1 may be locally incorporated or may be registered as a branch of a foreign company. The business of an GBC1 Company must be conducted in foreign currency other than for day-to-day transactions; and GBC1 companies must not do business inMauritius, other than to take professional advice, employ local labour, and to rent property.

Name of the company: Mauritius GBC names must end with one of the following words, or their relevant abbreviations - Limited, Corporation, Incorporated, Societe Anonyme, Sociedad Anonima.  The following names to be used, require licensing: Bank, Insurance, Assurance, Re-Insurance, Trust, Trustee, Savings, Royal, Asset management, Fund Management, Investment Fund, Building Society, Municipal, Chartered. Names denoting any connection to local, state or national Governments are generally prohibited. Names can be in any language which uses the Latin alphabet.

Memorandum and Articles of Association: Once name approval has been obtained, three copies of the Memorandum and Articles of Association are submitted, together with a notice of the First Directors, Secretary and location of the Registered Office, and consent forms signed by the Officers. Companies holding Category 1 Global Business License can undertake banking or insurance business or solicit funds from the public, if the relevant authorities have licensed them. The legislation is in English and French whilst documentation may be expressed in any language but must be accompanied by a certified English translation.

Shareholders: Companies holding Category 1 Global Business License require a minimum of one shareholder and the same rule applies if the company is to be a wholly owned subsidiary.

The share capital: The usual authorized share capital is US$ 1 million with all of the shares having a par value. The minimum issued share capital is two shares of par value. Registered shares, preference shares, redeemable shares and shares with or without voting rights are permitted.

Directors of the company:  Companies holding Category 1 Global Business License require a minimum of one Director who must be a natural person. Treaty access requires a minimum of two local directors.

Registered office and local agent/secretary: Mauritius GBC must have a Registered Agent and a Registered Office in Mauritius. The Registered Agent must be qualified to act as such, such as a Lawyer, licensed Management Company, etc. Companies holding Category 1 Global Business License require the appointment of a qualified company secretary, who must be resident in Mauritius.

Taxation: Companies holding a Category 1 Global Business License - such companies are tax resident, subject to 15% income, but with an automatic tax credit making the effective rate 1.5% (3% as from 2003) and if they are correctly structured and managed may access Mauritius' tax treaty network. Neither capital gains nor withholding taxes are levied.

Audit and financial returns: Companies holding Category 1 Global Business License are required to prepare audited financial statements, which must be filed with the Financial Services Commission.

Meetings: The directors and the shareholders meetings need not be held in Mauritius as there is no requirement or an Annual General Meeting. All meetings may be held outside Mauritius, by telephone or other electronic means. Alternatively, directors and shareholders may vote by proxy. The registers and minutes of meetings must be kept at the registered office.

Time needed for formation: Usually it is up to 3  weeks, but we need extra 7 working days for legalization of the documents and delivery by courier.

Global Business Company Category 2 (GBC2)

Legal form: The Global Business Company Category 2 (GBC2) replaced the old International Company under the Companies Act 2001. The International Company (IC) is the Mauritian equivalent of the International Business Company found in many offshore jurisdictions. It was established by the International Companies Act 1994, but is now constituted under the Companies Act 2001. The GBC2 is ideal for international trading, invoicing, licensing, international consultancy business and is often used to hold investments or other assets. An GBC2 can take any of the forms permitted under the Companies Act 1984 (now the Companies Act 2001). There are a number of  restrictions on GBC2s, they may not: raise capital by public subscription; carry on banking or insurance business; own  real estate in Mauritius; own or manage a collective investment fund; provide nominee services, or provide trustee services to more than three trusts.

Name of the company: Mauritius GBC names must end with one of the following words, or their relevant abbreviations - Limited, Corporation, Incorporated, Societe Anonyme, Sociedad Anonima.  The following names to be used, require licensing: Bank, Insurance, Assurance, Re-Insurance, Trust, Trustee, Savings, Royal, Asset management, Fund Management, Investment Fund, Building Society, Municipal, Chartered. Names denoting any connection to local, state or national Governments are generally prohibited. Names can be in any language which uses the Latin alphabet.

Memorandum and Articles of Association: In order to incorporate GBC in Mauritius, a Memorandum  and Articles of Association must be filed with the Registrar. The application must be supported by a Legal Certificate issued by a local Lawyer certifying that local requirements have been complied with. Finally, directors and shareholders must execute consent forms and these must be filed with the Registrar of Companies. Companies holding a Category 2 Global Business License cannot trade within the Republic of Mauritius.  The legislation is in English and French whilst documentation may be expressed in any language but must be accompanied by a certified English translation.            

Shareholders: A minimum of one shareholder is required, who may be an individual or a corporate body.

The share capital: There is no minimum capital requirement although at least one share must be issued and paid up. Registered shares and a variety of shares such as preferred, redeemable, and fractional are allowed. Shares may be issued with or without par value. Redeemable preference shares may be issued.

Directors of the company:  The GBC 2 must have at least one director, which can either be an individual or another corporation. Directors can be of any nationality or residence, and need not also be shareholders.

Registered office and local agent/secretary: Every GBC must have a Registered Agent and a Registered Office in  Mauritius. The Registered Agent must be qualified to act as such, such as a Lawyer, licensed Management Company, etc.

Taxation: A Company holding a Category 2 Global Business License does not pay any tax on its world-wide profits to the Republic ofMauritius authorities.

Audit and financial returns: Whilst there is no requirement to file audited accounts or annual returns with the authorities, a company is required to keep financial records, which should reflect the financial position of a company.

Meetings: The directors and the shareholders meetings need not be held in Mauritius as there is no requirement for an Annual General Meeting. All meetings may be held outside Mauritius, by telephone or other electronic means. Alternatively, directors and shareholders may vote by proxy. The registers and minutes of meetings must be kept at the registered office.

Time needed for formation: Usually it is 3 working days, but we need up to 10 working days for legalization of the documents and delivery by courier.

Offshore Company in UAE

1. Why The United Arab Emirates

The U.A.E are politically stable, economically strong and socially open minded. An excellent business infrastructure, a zero tax environment and a liberal labor law complete the U.A.E.'s profile for an ideal business location. The U.A.E with its member Emirates Dubai and Abu Dhabi are centrally located in the middle of the Gulf region . Dubai International Airport ranks top in the provision of worldwide direct flight connections. Travel distances (hours of flight) from and to major places of business are within comfortable reach.

-  Europe 6 hours

-  Hong kong 8 hours

-  Bombay 2 hours

2. Legal Framework

When contrasted with other Arab states, such as Saudi Arabia for instance, the UAE has comparatively very liberal laws. The country has a civil law jurisdiction. However, Shari's or Islamic Law is applied to aspects of family law, inheritance and certain criminal acts. A federal court system applies yo all emirates except Dubai and Ras Al Khaimah, which are not fully integrated into the federal judicial system. All emirates have secular courts to rule about criminal, civil, and commercial matters, and religious disputes.

In the UAE the establishment of the civil and criminal courts resulted in diminishing the role of the Sharia Courts. Nevertheless, the competence of the Sharia Courts in some emirates, particularly Abu Dhabi, was substantially expanded later on to include, in addition to matters of personal status, all types of civil and commercial disputes as well as serious criminal offences. Therefore, in addition to the Civil Courts. each of the seven emirates maintains a parallel system of Sharia Courts which are organised and supervised locally.

3. Banking

There are around 50 banks in the U.A.E. international as well as local banks, as HSBC, Citibank, Standard Chartered, Barclay's, Deutsche Bank, EmiratesNBD, National Bank of Abu Dhabi, offering large range of state of the art banking services. The U.A.E. have no restrictions on import and export funds to and from the country.

4. Financial Regulatory Authority

The Central Bank Law establishes five principal categories of institutions in the UAE - commercial banks, investment banks, financial establishments, financial intermediaries, and monetary intermediaries - all of which must be licensed by both the central bank and the local licencing authorities. In addition to these five categories, current practice in the individual Emirates permits the licencing of financial or investment consultants. These consultants are not required to obtain a central Bank Licence.

5. Taxation

5. a. Corporate Tax

There is no corporate taxation with in the UAE except for foreign bank branches, oil and petrochemical companies.

5. b. Personal Tax Rates

There is no personal tax with in the UAE.

5. c. Social Security

There is no social security system with in the UAE. The only mandatory insurance is a medical insurance for the employees of the company.

Research incentives - In case any UAE National is employed in the private sector, then the employer must pay monthly contribution to a pension fund at the rate of 17.5% of the contribution salary (12.5% by the employer and 5% by thew employee).

5. d. Customs & Excise Duties

Under the terms of the Gulf Co-operation Council (GCC) regulations (comprising the member states of UAE, Saudi Arabia, Qatar, Oman, Kuwait and Bahrain), a unified customs tariff of 5% of the c.i.f. value applies to the taxable imports. All existing taxes and duties on imports with in the GCC member states have been abolished. Tobacco and tobacco products are subject to a 100% customs duty, and for alcohol the rate is 50%. There is no Central Excise Duty.

5. e. V.A.T.

There is no VAT in the U.A.E.

5. f. Tax  Incentives

Free Zones - There are more then 25 Free zone with in the U.A.E offering various benefits such as: 

- 100% foreign ownership

- 100% capital and profit repatriation

- no import or export (outside the GCC)

- guarantee of no personal or corporate income tax for 15/50 years (renewable)

- no foreign exchange controls 

- no trade barriers or quotas

- liberal labour laws

Offshore Company - For offshore companies there is no taxation at all. They are not allowed to carry out business activities within the U.A.E.

6. Main Types Of Corporate Forms

Limited Liability Companies (LLC) is the most common form for a local company. Free zone companies are usually Free zone Company (FZCO - two or more shareholders). Since several years some of the emirates allowing the incorporation of Offshore Companies (LTD). The LLC is a legal person, its partners (at least 51% UAE Nationals) are not personally liable for the company or the other partners. The share capital has to amount to a minimum of AED 150,000 depending on the Emirates, each share has to amount to AED 1,000.

       The FZE or FZCO are legal persons with in one of the U.A.E.'s Free zone, shareholders are not liable for the company, the share capital has to amount to minimum of AED 150,000 according to the regulations of the Free zone.

       The LTD is a legal person with in one of the U.A.E.'s Free zones allowing the registration of Offshore Companies, Shareholders are not liable for the company, the share capital has to amount to minimum of AED 10,000 according to the regulations of the Free zone. Shares can have nominal values. Bearer shares are not allowed.

7. Company Incorporation

The LLC legally comes into being with the entry into the corporate register. Next to an application form containing all company-relevant information, signed by all shareholders and attested to by notary, several documents are necessary such as the articles of association. After the notarial attestation are signed, the entry of the LLC in the corporate register takes one to two weeks.

      The FZE or FZCO legally comes into being with the entry into the corporate register. Next to an application form containing all company-relevant information, signed by all shareholders (there is no need for a notarization; for an FZCO the articles of association are necessary). The entry of the FZE or FZCO in the corporate register takes several days.
    The LTD legally comes into being registered with the regulator. The entry of the LTD in the corporate register takes 1 day.

8. Reporting & Auditing

Local Companies have to have the annual financial statement audited and reported to the Government. Most Free zones require an audited financial statement submitted to the Free zone Authority.

Offshore Company in Mauritius

Offshore Company in Mauritius

1. Why Mauritius?

The attraction to Mauritius comes as a premium to the level of business that can be done on the island or through its system. It has about 37 Double Taxation Avoidance Treaties amongst which growth nations such as India, China, South Africa and mature economies such as UK, France And Germany. In its annual survey the World Bank has ranked Mauritius 17th and number 1 in Africa as the place to do business.

2. Legal Framework

Mauritius has the Legal system that is derived from the British. The Legal framework is a mix of British and France texts. Most laws are in English, including the Mauritius constitution. The Civil Code is based on the old French Law, the ' Code Napoleon '.

3. Banking

The banking sector is regulated by the Bank of Mauritius. The globally known banks such as Barclay's, HSBC, Standard Bank, Standard Chartered, Caissed'Epargne, Deutsche Bank are present Banking regulations follows Basle II model.

4. Financial Regulatory Authority

The Financial Services Commission (FSC) is the regulator for all non-banking Financial Services.

5. Taxation

5. a. Corporate Tax

Domestic companies having activities in Mauritius 15%, global companies which are tax resident 3% , international companies which are not tax resident are exempt from Income Tax.

5. b. Personal Tax Rates

15% Individuals are exempt annually Rs 255,000 and Rs 465,000 varying on number of dependents.

5. c. Social Security

Employers' contribution of basic salary up to Rs 975. Employees contribution of basic salary up to Rs 459.

5. d. Custom & Excise Duties

Luxury goods can attract up to 100% customs duty. Electronic goods between 15% & 30%. No VAT on basic essential foodstuff.

5. e. V.A.T.

VAT is 15%.

5. f. Tax Incentives

Companies having a Global Business Licence have an automatic tax credit of 80% on the base tax of 15%, hence leaving a rate of tax payable of 3%. Domestic tax Law may also recognize as credit all actual foreign tax paid.

6. Main Types Of Corporate Forms

• Company limited by shares
• Company limited by guarantee
• Limited life company
• Protected cell company
• Company with a Global Business Licence 1 (offshore)
• Company with a Global Business Licence 2 (international co)
• Partnership
• Trust

7. Company Incorporation

It takes minimum 3 days to incorporate a domestic company which can trade and have activities on the island. The cost of setting up is around Euro 700. For a Global Business Licence 1 (GBL 1) (cannot trade on the island) company it takes about 3 weeks to incorporate with a cost of about EUR 6,000. A Global Business Licence 2 (GBL 2) company (international company) is incorporated with in about 2 weeks at cost of about Eur 3,000.

8. Reporting & Auditing

Mauritius has been one of the first countries in the world to adopt IFRS since 2001. Domestic companies with turnover of less than Rs 50m ( Eur 1.25m) need not prepare full financial statements under IFRS. GBL 1 need full IFRS compliant financial statement. However, GBL 2 need prepare only a prescribed financial summary. The Auditing framework is International Standards on Auditing.

9. Special Notes / Country Update

Mauritius is the Largest medium for FDI into India because of the double tax avoidance treaty agreement which it has with India. The main incentive with this being that the company investing in India is not Liable to Capital Gains Tax. The Mauritius Rupee is stable vis a vis the major currencies such as the US Dollar (US D 1 : Rs 30) and EURO (Eur 1: Rs 40). There is no exchange control in Mauritius. 

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Tax Havens May be Told to Recover Dues From Indians

Tax Havens May be Told to Recover Dues From Indians

Going All Out After Evaders: Govt. to also keep tabs on those frequenting such tax jurisdictions

THE government will ask tax havens to recover taxes from Indian nationals who have stashed undeclared income there as it intensifies efforts to tackle the menace of black money. It is also keeping tabs on those frequenting such tax jurisdictions. "We can ask these countries to recover taxes, "a finance ministry official said. The tax information exchange agreements and revised double taxation avoidance agreements (DTAAs) entered into with some of these jurisdictions have a provision for providing assistance in recovery and the income-tax department plans to use this provision. The Central Board of Direct Taxes has opened income-tax units in some of these jurisdictions to facilitate information exchange and coordinate recovery of taxes. Two such income-tax units have been set up within Indian missions in Singapore and Mauritius and one each is proposed to be set up in the US, the UK, the Netherlands, Japan, Cyprus, Germany, France and the UAE. Further, income tax officials are also being posted in some of the tax havens. India recently signed tax information exchange agreements with Bahamas, Bermuda, British Virgin Islands and Isle of Man for access to information on bank accounts of Indian nationals there. Based on the information received, the department will step up the recovery process here. Those found to have evaded taxes will have to pay 100% interest on the tax and penalty up to 300%.Back home, the department is keeping a close watch on visits by Indian nationals to tax havens and those suspected to have bank accounts there. Investigation directorates have collected data from agents and officials of foreign banks offering services and soliciting opening of foreign banks accounts. They are also receiving data from the financial intelligence unit in India that has begun to receive data from other FIUs. As part of the drive against black money, the income-tax department had recently issued show-cause notices to some of the foreign account holders in addition to those in the list given by Liechtenstein. Black money has taken political center stage with the BJP launching a scathing attack on the UPA and the Supreme Court calling the menace a "plunder of the nation". Different estimates like the one by a BJP task force pegged the amount of black money between $500 billion and $1.4 trillion while another international estimate placed such flows at $462 billion.

No Escaping at Home or Abroad

Some provisions that will turn up heat on tax evaders

On Domestic Front


Dedicated info exchange in works Online info exchange with treaty partners Foreign Tax Division collect info about citizens having bank accounts abroad New plan for taxation, transfer pricing

On International Front

India joins Financial Action Task Force Taken membership of the Eurasian Group Upgrading Double Taxation Avoidance Agreements and signing Tax Information Exchange Agreements

Under the New DTC

A reporting requirement to make it obligatory to furnish details of ones investment and interest in any entity outside India Taxable assets to include deposits in banks located abroad

Offshore Company in United States of America (USA)

1. Why the United States Of America

The US as a country is the largest economy in the world.

2. Legal Framework

Although the US legal system is based on English common law, it has several layers such as the Constitution, statutes, treaties, and administrative regulations. The US federalism system provides specific powers to the federal government, allowing the 50 states to retain significant autonomy and authority. Thus, laws can be made at both federal and state levels. A company therefore, must comply with the state law of where it chooses to incorporate or does business. However, public-traded corporations must also comply with federal securities law.

3. Banking

The Federal Reverse System is the central bank of the US. It conducts the US's monetary policy, supervises and regulates banking institutions, maintains stability of the US financial system  and provides financial services to depository institutions, the US government and foreign official institutions.

4. Financial Regulatory Authority

Many governmental agencies are charged with various aspects of the US financial system, including US Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), Federal Reverse System, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), National Credit Union Administration (NSUA) and Office of Thrift Supervision (OTS).

5. Taxation

5. a. Corporate Tax

US corporations (corporations formed under the laws of one of the 50 states or the District of Columbia) are generally subject to a federal corporate level income tax on their world-wide income at rates ranging from 15% to 35%, subject to applicable foreign tax credits. Dividends received from US corporations are eligible for dividend received deductions. Dividend distributions to shareholders are not deductible against corporate income. Anti-deferral regime exists for income generated by non-US corporations controlled by US persons.

5. b. Personal Tax Rates

US tax residents are taxed on their world wide income, subject to applicable foreign tax credits. US citizens are always subject to US income tax regardless of the location of the actual residence or the time spent in the US. The federal personal income tax rates on ordinary income currently range from 15% to 35% and the current maximum long-term capital gains (gains on capital assets held for over one year) rate is 15%.

5. c. Social Security

All employed and self-employed individuals are required to participate in the US social security system. The social security tax for 2010 is 6.2% of the wages up to $ 106,800 for employees and employers and 12.4% of the earnings up to $ 106,800 for self-employed individuals. A separate Medicare tax for 2010 is 1.45% on wages for employees & for employers and 2.9% of the earnings for self-employed individuals. In essence, an employer pays 50% of its employee's social security tax and Medicare tax while a self-employed individual pays 100% of the applicable taxes.

5. d. Customs & Excise Duties

Many items imported into the US commerce are subject to an import tariff at rates provided in the official harmonized tariff schedule.

5. e. V.A.T.

The US does not charge a VAT, though many states and local governments imposes a sales/use tax on the purchasers of taxable goods and services.

5. f. Tax Incentives

Many tax incentives currently in force are geared towards economic stimulus such as credits for hiring certain new employees, exclusion of gains on the sale of small business shares and accelerated depreciation schedules and certain incentives for renewable energy. In addition, many established tax incentives reflect US social philosophies such as charitable gift deductions, home mortgage interest deductions and limited exclusion of gains on the sale of primary residences.

6. Main Types of Corporate Forms

• Corporations, limited liability Companies and Partnerships are the most common corporate forms.
• Corporations are most commonly used and can have any number of shareholders whose assets are protected from the company's creditors. A shareholder's liability is limited to the amount of the investment in the company.
• Corporations are, however, subject to double taxation's profits are taxed first as income to the corporation and then as income to the shareholder when distributed as dividends. Corporations with no more than 100 shareholders can elect S-Corporation status and are generally not subject to a corporate level tax; instead, income is "passed-through" to shareholders.

Shareholders in S-Corporations must be US citizens or residents individuals, and in limited circumstances, certain trusts. Limited Liability Companies (LLCs) combine the corporate advantages of limited liability with the partnership advantage of pass-Through taxation. Members of an LLC can be managers of the company while not exposing their personal assets to claim of general creditors of  the LLC.

LLCs may be treated as corporations, partnerships or disregarded entities for US tax purposes depending on the number of members or the existence of an entity classification election (commonly known as the check-the-box election). LLCs also provide a greater level of flexibility in terms of management and the allocation of profits and losses if they are treated as partnerships for tax purposes. LLCs are also not subject to the ownership restrictions of S-Corporations, so they are potentially ideal for foreign investors. Partnerships fall into 3 general forms General Partnerships, Limited Partnerships and Limited Liability Partnerships. In a general partnership, general partners share equal rights and responsibilities in connection with management of the business, and any individual general partner can bind the entire group to a legal obligation. Each individual general partner assumes full responsibility for all of the business's debts and obligations.

Limited partnerships allow each partner to restrict his or her liability to the amount of his or her investment, however, at least one participant must accept general partnership status, meaning full personal liability for the partnership's debts and obligations. Limited partners do not participate in management decisions. Limited liability partnerships have the tax advantages of the partnership form, but offer personal liability protection to the participants. In some states only certain specified professions may use the limited liability partnership form.

7. Company Incorporation

Entities can be formed in any US state, however, Delaware continues to be the forum of choice for formation - Delaware has a well established and accepted body  of laws and regulations which are regularly updated. Formation of any type of entity can usually be achieved in 24-48 hours and typically limited information is required. Post formation, shareholder agreements in the case of C Corporations and LLC Agreements in the case of LLCs may be entered into, neither of which is filed with the state. There may be circumstances when formation in another state is warranted and determinations such as that are made based on the facts and in consultation with a US adviser.

8. Reporting & Auditing

All US corporations, partnerships or sole proprietorship's are required to file an annual income tax return with the Internal Revenue Service may select random taxpayers for audit depending on its current audit priorities.

9. Special Notes / Country Update

The maximum personal income tax rates are expected to be 39.6% for ordinary income and 20% for long term capital gains starting 2011. The Internal Revenue Service continues to focus on US taxpayers with unreported offshore bank or financial accounts and corresponding unreported non-US sourced income.

10. Double Taxation Agreement

USA has double taxation treaty with the following countries:

• Austria
• Bulgaria
• China
• Cyprus
• Czech Rep.
• France
• Germany
• Hungry
• India
• Indonesia
• Israel
• Italy
• Japan
• Mexico
• Morocco
• Netherlands
• Poland
• Portugal
• Romania
• Russia
• Slovenia
• Spain
• Switzerland
• Tunisia
• Turkey
• UK
• Venezuela

Offshore Company in United Kingdom (UK)

1. Why The United Kingdom

The World Bank has ranked the UK as one of the top European countries in which to operate a business. It takes only 13 days to set up a business in the UK, compared to the European average of 32 days. There are already more than 2.6 million registered companies in the UK and over 350.000 new companies are registered each year. There is relatively minimal red tape involved in forming and running a UK offers ease of access to many overseas markets. In particular, as the business gateway to the European Union, the UK is a very attractive place to set up and do business and serves as a springboard for global growth.

2. Legal Framework

The UK has three systems. English law and Northern Ireland law are based on common-law principles. Scotland has a pluralistic system based on civil-law principles, with common law elements. The UK has implemented all major EU legislation.

3. Banking

UK banking is regulated by the bank of England. Nearly all the World's banks have branches or subsidiaries in London which is one of the reasons why the UK's capital city is recognized as a world-leading financial center. The UK is not part of the Euro but business is often conducted in non-sterling currencies.

4. Financial Regulatory Authority

The Financial Regulatory Authority in the UK effectively consists of three separate bodies. The bank of England operates independently of the British government and its chief responsibility is to maintain the stability of the financial system as a whole by overseeing the operation of the UK's financial infrastructure. The FSA supervises all financial services providers and the financial services providers and the financial markets. The Treasury's responsibility is to direct the overall institutional structure of financial regulation and legislation.

5. Taxation

5. a. Corporate Tax

UK resident companies and UK branches of overseas companies are liable to Corporation Tax ("CT") on profits including cpaital gains. An overseas company may be resident in the UK if its central management and control takes place in the UK. If there is a double taxation agreement in place with the country in which a non-UK company is resident it will generally not be subject to CT unless it has a permanent establishment in the UK. The standard rate of CT is 28% once annual profits are pound 1.5m, or 21% if the profits are not more than pound 300,000. For profits between pound 300,000 and pound  1.5m the rate is 29.75%. The standard rate is due to fall by 1% per annum from April 2011 to take the rate down to 24% by 2014. The small profits rate will be reduced from 21% to 20% from April 2011. The threshold are divided by the number of associated companies. Non-UK companies are liable to income tax on UK property income at rate of 20%. There are transfer pricing provisions, rules on the allowability of interest and controlled foreign company legislation. Subject to treaty provisions and EU law, withholding taxes may apply to interest and royalty payments.

5. b. Personal Tax Rates

UK resident domiciled individuals are taxed on their world wide income and gains. Normally an individual is UK resident if days spent in the UK are at least 183 days in a tax year or average 91 days or more annually over 4 years. The UK tax year is 6 April to the following 5 April. Typically income tax is levied at 20% until income reaches the low pound 40,000s, then 40% up to pound 150,000 when a 50% rate applies. Capital gains tax is generally 28% but 10% on business assets up to pound 5m of life time gains. Non residents are liable to UK taxes on certain UK source income and gains including UK property income where 20% withholding may apply. Subject to a threshold of pound 325,000 inheritance tax is levied at 40% at death on the value of worldwide assets (but see "Special Notes" section regarding non-domiciliaries), or 20% on certain lifetime asset transfers.

5. c. Social Security

Generally employees, employers and self-employed in the UK are required to make national insurance contributions. These entitle an individual to the state pension and, for employees, certain unemployment benefits. The first pound 6,000 (approximately) is exempt, there after 11% and 8% for employees and the self-employed respectively until earnings are in the low pound 40,000s, then 1% on all further earnings. The employer's rate is 12.8% on all earnings of an employee over the pound 6,000. These rates increase by 1% from April 2011. The positions of individuals coming to the UK is complex, Can be subject to agreements between countries, and advice should always be sought.

5. d. Customs & Excise Duties 

As an EU member state, the UK normally follows EU customs procedures. In general, goods from other EU member states are subject to VAT on acquisitions, while goods from outside the EU are subject to VAT and excise duty on importation.

5. e. V.A.T.

VAT must be charged on a taxable supplies of goods or services made in the course of business. The registration limit is pound 70,000, but voluntarily registration is possible if taxable  supplies are less. The standard  rate is currently 17.5% but rises to 20% on 4th January 2011. VAT is applied to imports and intra-EU acquisitions of goods.Generally supplies of services to businesses in other EU countries and to businesses  and non-businesses out side the EU are not liable to VAT, but there are exceptions, notably if the supply relates to UK Land. Likewise, generally reverse charge mechanism has to be applied to services received in the UK form businesses outside the UK.

5. f .  Tax Incentives

For business income purposes, depreciation is disallowed and instead capital allowances apply.The rate is 100% on the first pound 100,000 per group of annual expenditure on most fixed assets which amount is due to fall to pound 25,000 in April 2012.There is also a 100% rate on the acquisition of certain environmentally friendly assets with no monetary limit.Otherwise the capital allowances rate is 20% per annum on a reducing balance basis with the exception of certain long life and integral building feature assets where the rate is 10%. These rate are due to fall to 18% and 8%  respectively from April 2012.There are tax incentives for investing in certain small trading companies.

6. Main Types of Corporate Forms

These are: limited liability company (Limited Company),public limited company(PLC) and Limited Liability Partnership (LLP).For a limited company the liability of the shareholders is limited to the nominal value of the shares held. A PLC must have minimum share capital of pound 50,000 of which a quarter is required to be paid up. A PLC is perceived to have more substance to it and has greater statutory obligations than a limited company. All UK companies traded on an exchange in the UK will be PLCs. Directors of PLCs (Minimum of 2 are required compared with 1 for a limited company) have increased statutory responsibilities. Members of a LLP have their liability limited to a fixed amount and are registrable at companies house.Unlike companies,LLP is generally treated as transparent for tax purposes and the members are subject to personal taxes on their shares of the LLP's profits and capital gains.Business may also be operated by sole traders or partnerships.

Both have unlimited liabilities and in the case of partnership a partner has liability for all the liabilities and debts of the partnership.

7. Company Incorporation

Companies are incorporated at Companies House. Shelf companies are permitted. A UK company can be incorporated with in 1 day. This means that the business of the company can commence almost immediately. Certain statutory registers must be maintained. A private company need only have a minimum of 1 share which can be of any currency. A PLC must have at least 2 in issue. Shareholders and directors may be of any nationality or country of residence. LLPs are governed and by the terms of any partnership agreement.

8. Reporting & Auditing

UK company accounts must comply with either the UK companies Acts, where financial statements must comprise a balance sheet as at the last day of the financial year and a profit and loss account for the financial year, or with EU-adopted IFRS where financial statements are prepared in accordance with international accounting standards. Private companies and LLP's have 9 months and public companies 6 months, from the end of their accounting reference period to file their accounts with companies house. Generally an audit is required if the annual turnover is greater than pound 6.5m or gross assets exceed pound 3.26m or if the shareholders otherwise require one. Certain categories of company registered with the FSA automatically require an audit irrespective of level of turnover. Once a year a company must file an Annual return with Companies House. The accounts together with a CT return must be filed with her Majesty's Revenue & Customs ("HMRC") with in 12 months of the company's year end. CT has to be paid with in 9 months of the year end. Larger companies (taxable profits greater than pound 1.5m divided by 1 plus number of associated companies) pay by quarterly installment. HMRC has 1 year from the filing date to inquire into the return, although this can be later if a 'discovery' is made. LLP and partnership returns must be submitted to HMRC for each tax year ended 5 April by the following 31 January if submitted online. Partners disclose their profit share on their individual tax returns or on the CT return if a member is a company and pay tax directly to HMRC.

9. Special Notes / Country Update

Holding Companies : With certain exceptions, UK and foreign dividends are exempt from CT. The substantial shareholding exemption means there is no CT on gains arising from the disposal of shareholdings in trading companies - a  minimum holding of 10% is required and the shares must have been owned for at least 12 months. There is no withholding tax on dividends paid to shareholders. All in all, UK is an attractive location to set up a holding company to own foreign trading subsidiaries.


Domicile : In the UK domicile, different from residence, refers in basic terms to the country which an individual regards as his permanent home. Non-domiciliaries can avoid tax on foreign income and gains by not remitting the income/ proceeds to the UK. once UK resident in 7 out of the 9 years prior to the year in question, this generally comes at an annual cost of pound 30,000. non-domiciliaries are also not liable to inheritance tax on their non-UK sites assets and for this purpose an individual is deemed UK domiciled once resident in the UK during 17 out of 20 years.


Sundry : Stamp Duty Land Tax (SDLT) is levied on the purchase of UK property with the rate varying between 0% and 4% with the latter applying where the purchase price exceeds pound 500,000. From April 2011 a 5% rate will apply to residential transactions over pound 1m. UK property is often held by an offshore company, and rather than sell the property, the shares in the offshore company are sold to avoid SDLT. It has been proposed that from April 2013 UK companies will pay corporation tax rate at 10% on income from new patents.

10. Double Taxation Agreement

UK has double taxation treaty with the following countries:

• Argentina
• Austria
• Bulgaria
• China
• Cyprus
• Czech Rep.
• France
• Germany
• Hungry
• India
• Indonesia
• Israel
• Italy
• Japan
• Jersey
• Kuwait
• Malaysia
• Malta
• Mauritius
• Mexico
• Morocco
• Netherlands
• Poland
• Portugal
• Romania
• Russia
• Singapore
• Slovenia
• Spain
• Switzerland
• Tunisia
• Turkey
• USA
• Venezuela

Offshore Company in Japan

1. Why Japan?

• Thanks to the recovery programs implemented after World War II, the Japanese economy expanded rapidly. As a result, Japan became the world's most successful economy, dominating such fields as electronics, robotics, ITs, Car production, Banking and J-pop-cultures.
• Japan is safe and clean country and a strong work ethic with mastery of high technology. 
• There is big smart consumer market and high quality products/services are required.
• Japanese tax rate currently is relatively high need reliable professional firms.

2. Legal Framework

• Japanese law was based on the European legal system especially Germany and France. However, after the world War II, the Japanese legal system underwent major legal form and was revised by modeling American law. Therefore, it is possible to say the Japanese legal term is a hybrid of continental and Anglo American law.
• Important laws for foreign investors are,normally, business laws, labor laws and tax regulations.

3. Banking

• Japan's banking system is consisted of city banks, regional banks and foreign banking institutions.
• Bank transfer is probably the most common way to pay various expenses, through internet banking system. Also, payroll and related taxes can be paid though banks.

4. Financial Regulatory Authority

The Financial Services Agency is a Japanese government organisation responsible for overseeing banking, securities for exchange, and insurance. The agency operates with a commissioner and reports to the minister of financial Services. It oversees the securities and Exchange Surveillance Commission and the Certified Public Accountants and Auditing Oversight Board.

5. Taxation

5. a. Corporate Tax

• Companies engaged in economic activities in Japan (i.e. Branch) are subject yo Japanese taxes on the income generated in Japan only.
• Companies established in japan is subject to Japanese tax for all income all over the world, but foreign taxation deductions are available.
• Corporate taxes are consisted of income tax, inhabitant tax, enterprise tax and the effective tax rate is approximately 40%.
• Tax losses in each business year are carried forward for the next seven years of withholding tax is assessed on the dividend.

5. b. Personal Tax Rates

• Resident individuals are taxed on their worldwide income whereas non-residents are taxed only on japan-source income. There is no strict definition  of residence, but residence will be based on where a person effectively lives and has a home. Staying in japan for six months in a year would imply residence. Tax is charged at progressive rates up to a maximum rate of 40%.
• Employers and employees of the Company established in japan is are normally subject to withholding tax and personal tax, as well as inhabitant tax and social insurance is withheld by the Company from the Salaries.

5. c. Social Security

• Health Insurance and Employees pension Insurance apply to all companies and individual offices which regularly employ 5 or more persons. Those who are required to join this insurance, are employees employees who work regularly for an applicable company, and an employees' ordinary working days or hours are three quarters or more of those of full-time employees. The monthly premiums are determined in accordance with the employees wages, and are shared  equally between the employer and the insured person. As the employer must pay both the shared premiums together each month, the employer's premium shall be deducted from his/her monthly wages and bonus.

5. d. Customs & Excise Duties

• Goods imported into Japan are subject to customs duty and VAT (consumption tax). In addition to consumption tax, certain other internal taxes ( liquor tax, tobacco tax, etc.) are also applicable to dutiable imported goods.

5. e. V.A.T.

• VAT (Consumption tax in japan) imposed on most sales and services provided in japan and on imports. A taxpayer may offset the consumption tax paid on expenses against the tax he has to pay on his income. Consumption tax rate is flat 5%. Companies whose sales per year are less than 10 million yen are tax exempt.

5. f. Tax Incentives

• Tax Incentives are provided to encourage manufacturing companies to locate operations in specified industrial development regions outside of Tokyo and Osaka.

Notes: Japan contracted Double Taxation treaty with many countries all over the world (56 countries as of October 2009). For double taxation agreement see the list of the end.

6. Main Types of Corporate Forms

There are three different types of operation for a foreign company:

• Representative office
• Branch office
• Subsidiary (company established under the Japanese law)

Company in Japan can be currently 4 types, however, normally company limited (Kabushiki Kaisha, K.K.) is selected.

7. Company Incorporation

• The new Japanese Corporate law effective from 1st may 2006 has made it a lot easier to set up a company in japan.
• Numbers of restrictions such as minimum capital of 10 million yen, minimum number of 3 directors have been abolished, and it is possible from now on to establish a company limited (Kabushiki Kaisha, K.K.) with a capital starting from one yen and with only one director.
• A representative director can be foreign people; however, he must be a residence in japan.

8. Reporting & Auditing

• Financial reporting is required at least once a year for all companies. These financial statements are submitted to the tax authority with annual corporate income tax returns.
• External audits are required for list companies and large companies only in Japan.
• Large companies is defined as capital stock of yen 500 million or more, or liability of yen 20 billion or more, as of the latest fiscal year-end.

Double Taxation Agreement

Japan has double taxation treaty with different countries:

• Austria
• Brazil
• Bulgaria
• China
• Czech Rep.
• France
• Germany
• Hungry
• India
• Indonesia
• Israel
• Italy
• Malaysia
• Mexico
• Netherlands
• Poland
• Romania
• Russia
• Singapore
• Spain
• Switzerland
• Turkey
• UK
• USA