As a result of widespread use of offshore schemes in business, many countries of the world have faced a serious problem: huge capital began to pass around the state budget. In order to protect the economic system, the states make up the lists of offshore jurisdictions – the so-called “black lists” of offshores. The countries and territories included in this list are subject to close monitoring and a special system of taxation. As a rule, they are characterized by the availability of fixed tax benefits for non-resident companies up to the complete exemption from taxation of all profits, a high level of confidentiality of information with respect to business owners, the lack of requirements for the submission of accounting and financial reporting, as well as insufficient cooperation with other countries in relation to exchange of information.
The lists of offshores of different countries are different, but they often include a “traditional” block of countries, generally accepted for all state lists. Among such countries are: Dominica, Panama, Seychelles, Belize and others.
The Ukrainian current legislation has two lists of unreliable states:
- The list of offshore zones approved by the Order of the Cabinet of Ministers of February 23, 2011 N 143-p. It includes 36 offshores, including Guernsey, Jersey, Man and Alderney, Bahrain, Belize, Andorra, Gibraltar, Monaco, the Bahamas, the British Virgin Islands, the Marshall Islands, etc.
- The list of states (territories) that meet the criteria established by subparagraph 39.2.1.2 of subparagraph 39.2.1 of paragraph 39.2 of Article 39 of the Tax Code of Ukraine. We remind that this paragraph has established that the economic operations are controlled for the purpose of calculating corporate profit tax, that affect the object of taxation of the taxpayer, one of the parties is a non-resident registered in the state (on the territory) that is included in this list. It includes 86 states (territories) and approved by the Decree of the Cabinet of Ministers of December 27, 2017 No. 1045.
On what grounds are the countries included in the “black” list?
Offshore zones are monitored by central banks of the states. In addition, there are authorized international organizations that monitor the countries that conduct an unacceptable tax policy. One of such organization is the Financial Action Task Force on Money Laundering (FATF), aimed at combating money laundering by criminal structures and financing of terrorism. FATF is designed to protect the international financial system from the risks and ensure compliance with clear rules from all jurisdictions. The “FATF” personal list includes Nigeria, Nauru and Myanmar.
The Organization for Economic Cooperation and Development (OECD), in turn, has published its own list of offshores, including such states as Liechtenstein, Marshall Islands and Monaco. At the same time, every state or international organization is guided by its own tasks when making a list of offshore companies, such as regulating tax control, counteracting the financing of terrorism, organizing settlements with non-residents, etc. For example, the countries that refused to cooperate on tax issues with at least 10 EU Member States are included in the “black” list of the EU. The FATF list is formed in a completely different way: only those jurisdictions that are considered high-risk for business get into it, as well as those ones that absolutely do not contact the tax authorities of any country, even on the issues of double taxation.
Despite the different approaches, one can still highlight the main reasons for enrolling the territory in the “black” list:
- Exchange control system.
- Level of confidentiality with respect to the owners of the company.
- Taxation system and loyalty program.
- Prevalence of financial services.
- Terms and conditions for company registration, reporting requirements.
It follows from the foregoing that the availability of jurisdiction in the Ukrainian “black” or “controlled” list is a kind of guarantee that it lacks taxes and reporting requirements (or they are lower than in Ukraine) or other favorable conditions are legally fixed for doing business. When deciding on cooperation, each offshore zone should be considered individually, taking into account the specific situation. But in any case, you need to be prepared that the bank that serves you will require information about your foreign counterparties and their beneficiaries, and ask them for the relevant documents.