Ways to minimise taxes for a business
Registering a company in the country of second citizenship or residency might help to optimise taxes. Learn more about taxes for legal entities in the Caribbean, Vanuatu, Europe, and the Middle East.
Corporate and other taxes for businesses in the Caribbean
International Business Company (IBC) is a form of a company in the Caribbean. It is suitable if the investor’s business is focused on working with counterparties outside the country of registration. IBC is often chosen by investors who obtain Caribbean citizenship by investment.
A company becomes a tax resident of a Caribbean country if registered, managed or controlled there. In this case, it is subject to tax rates for local companies.
Taxes for companies. Legal entities that are non-residents pay taxes only if they generate income on the Caribbean country’s territory. Tax rules for resident companies vary by country.
Taxes for resident companies of Caribbean countries
Country
Taxes and fees
25% of the profit — a tax on global income
15% — the standard VAT rate
0% — a withholding tax on dividends, interest and royalties
6% of salary — social contributions
25% of the profit — a tax on global income
15% — the standard VAT rate
0% — a withholding tax on dividends, interest and royalties
7% of salary — social contributions
28% of the profit — a tax on global income
15% — the standard VAT rate
0% — a withholding tax on dividends, interest and royalties
4% of salary — social contributions
33% of the profit — a tax on global income
17% — the standard VAT rate
0% — a withholding tax on dividends, interest and royalties
6% of salary — social contributions
30% — a tax on income earned in St Lucia from commerce, rent, interest, or royalty
12,5% — the standard VAT rate
0% — a withholding tax on dividends
10% — a withholding tax on interest and royalties
5% of salary — social contributions
A preferential tax regime for IBCs operates in Antigua and Barbuda. They are exempt from taxes on income, dividends and interest from foreign sources for 50 years.
IBCs are usually not allowed to buy real estate, so they do not pay taxes associated with purchasing, selling and owning property.
Tax agreements. Caribbean countries have fewer double tax treaties than European countries, most of which are usually concluded within the Caribbean Community (CARICOM). Therefore, it may be beneficial for a business owner to change their country of tax residence to minimise the tax burden.
Practical Guide
Compare the Caribbean and Vanuatu citizenship by investment programs
Vanuatu corporate tax rate and other taxes for businesses
International Business Company (IBC) is the most popular legal form of business among foreign investors in Vanuatu. Such a company can only operate abroad.
IBCs aren’t allowed to buy real estate in the country, offer the country’s residents to buy shares or make a contribution. Also, IBCs cannot obtain a licence to engage in insurance, banking or trust business.
An IBC must have a registered office or official representative in Vanuatu. It must also have a director and at least one shareholder; their names aren’t disclosed. There are no capital or currency requirements.
Taxes and fees for IBCs. The registration fee is $150; the annual fee is $300. No filing or reporting is required. These benefits are available to foreigners who acquire Vanuatu citizenship by investment.
There are no taxes on profits, personal income and capital gains for companies and their shareholders that don’t receive income from sources in Vanuatu. There is neither inheritance, gift taxes, or stamp duty on any transactions except for purchasing property in Vanuatu.
IBCs benefit from tax incentives for 20 years.
Vanuatu doesn’t have double tax treaties with other countries. If an investor registers a company in Vanuatu but remains a tax resident of another state, they will pay an income tax at the country of tax residence rates.
Malta corporate tax and other duties
Registering a company in Malta allows the owner to minimise taxes, open business accounts in European banks and expand the range of partners abroad.
Criteria for tax residence. A company can pay taxes at the rates for Maltese legal entities if it’s a tax resident of Malta. To make it more convenient to manage a company, foreigners obtain Malta permanent residence by investment.
There are two options for tax residence:
a company is registered in Malta;
a company isn’t registered in Malta, but it is managed from the country, or its head office is located there.
The company’s profits are taxed at 35%. Resident companies pay corporate tax on income from sources in Malta and other countries.
Shareholders can get back a part of the tax paid by the company. The refund amount depends on the company’s activity and income type:
2/3 if the income is subject to a double taxation treaty (DTT);
5/7 if the company makes a profit from passive interest and royalties;
6/7 if the profit is from trading activities;
100% if dividends are received from the shares of a foreign company owned by a Maltese company, subject to qualified participation (Participation Holding).
Reimbursement of taxes to the shareholders of Maltese trading companies
Other taxes for companies. The standard VAT rate is 18% in Malta. It is lower than in most EU countries.
Social contributions from an employee’s salary are 10%.
Tax agreements. Malta has concluded DTTs with more than 70 countries. The tax paid in one country is credited in the second. Thus, you only need to pay the full amount once.
Portugal’s taxes for legal entities
Portuguese legal entities pay quite high taxes. But they can minimise the tax burden if they register a company in Madeira or the Azores.
The corporate tax rate is 21% on the mainland and 14,7% in Madeira and the Azores.
In some cases, the tax can be significantly reduced: for example, companies with licences from the International Business Centre of Madeira (IBCM) pay income tax at 5%.
The standard VAT rate is 23% in Portugal. But it can be significantly reduced depending on the type of goods and the region: for example, the VAT rate on food and medicine in the Azores is 4%.
Other taxes. Capital gains are taxed at 28%. The tax on dividends for Portuguese resident companies is 28% and 25% for non-residents.
Social contributions for employees of commercial companies amount to 23,75% of the employee’s salary.
The stamp duty rate ranges between 5% to 10%, depending on the transaction type.
Portugal has double tax treaties with more than 80 countries. DTTs allow business owners to minimise the tax burden on income received from abroad or transferred to another country.
An entrepreneur can get a Portugal residence permit, for example, by investing and creating jobs or opening a start-up in a business incubator.
UAE taxes for businesses
Entrepreneurs from other countries register companies in the United Arab Emirates to optimise business taxes.
The corporate tax will be levied at 9% from June 1st, 2023. Companies with an annual profit of at least AED 375,000 ($102,100) will pay the tax. Until the rule enters into force, the corporate tax rate for most companies is 0%.
Dividends and capital gains are not subject to tax.
High tax rates apply only to specific legal entities. For example, foreign companies engaged in oil and gas exploration and production pay a corporate tax of 55%.
The standard VAT rate is 5%. Only companies with an annual profit of at least AED 375,000 ($102,100) must register as VAT payers.
Registration of a company in a Free Zone allows the owner to minimise taxes and not pay the corporate tax, VAT and customs duties for up to 50 years after the company’s registration.
There are 45 Free Zones in the UAE, most of which are in Dubai. Registration of a company in one of them allows the owner to do business with international partners and operate on the territory of the selected zone.
You cannot get a Golden Visa in the UAE by investing in a company. The program only offers real estate investment options.
Turkey’s corporate and other taxes
A legal entity is considered a Turkish tax resident in two cases:
The company or branch has a legal entity’s registration address in Turkey.
The company’s activities are concentrated and managed in Turkey, even if the legal entity doesn’t have a registered address in the country.
Resident companies must pay tax on global income in Turkey.
Corporate tax. The standard rate is 20%, but, in practice, it can be changed by presidential decree depending on the economic situation. In 2022, the corporate tax rate was 23%.
Other taxes. The standard VAT rate is 18% in Turkey. Profit from the sale of assets is included in the tax base for corporate tax; in some cases, profits from the sale of shares in foreign companies are exempt from tax.
Dividends from Turkish companies aren’t taxed.
Social contributions are 20,5% of the salary for the employer and 10% for the employee.
Companies in free economic zones (FEZs) enjoy tax benefits. They don’t pay the following taxes:
corporate tax on exported goods;
stamp duty and property taxes on real estate in their FEZ;
VAT on goods that entered their FEZ from the rest of Turkey or exported from the FEZ.
In addition, the company’s employees do not pay income tax if the company exports more than 85% of its products.
There are 18 FEZs in Turkey, most of which are close to the main ports.
Turkey citizenship can be obtained by investment, including business investments of at least $500,000.
Highlights: how to optimise taxes for a business
A second citizenship or residence permit helps to register a company abroad to minimise taxes.
As a rule, a company can become a tax resident of a country if registered there or managed from the state’s territory.
Corporate taxes start at 25% in Caribbean countries. But there are special conditions in some countries. For example, in St Lucia, legal entities pay corporate tax only on profits from activities performed in the country. In Antigua and Barbuda, International Business Companies may not pay taxes on income, dividends and interest from foreign sources.
Vanuatu has incentives for International Business Companies: they are exempt from most taxes for 20 years and only have to pay an annual fee of $300.
In Malta, shareholders can recover up to 100% of the corporate tax paid by the company.
UAE companies with an annual profit of at least AED 375,000 ($102,100) will pay a corporate tax of 9% from June 1st, 2023. Until then, most companies are tax-free.
Registration of companies in free economic zones helps to minimise taxes for businesses in Portugal, Turkey and the UAE.
Material prepared by Albert Ioffe, Legal and Compliance Officer, certified CAMS specialist
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