The use of offshore shipping companies can eliminate direct or indirect taxation on shipping. Shipping companies may own or charter ships, the profits from which activities can be accumulated tax free. Tax and legal requirements generally dictate that the offshore company owning a shipping vessel should be incorporated in the jurisdiction whose flag the ship flies. The historic havens for these purposes have been Panama and Liberia. Latterly, the registries of other nations have expanded and consideration might be given to registrations at British Ports of Registry such as those in the Isle of Man and Gibraltar. A certain prestige attaches to the registration of a ship or indeed a yacht at a British port of registry and the vessel can be surveyed at most ports throughout the world by a surveyor recognized by the UK Department of Trade and Industry. The British flag has always been regarded as one of the world’s most dependable.
Tax Planning Consequences
It is important to note that you cannot simply open up an offshore trading company and “pretend” to make money offshore. Any income through investment would have to be actually “sourced” outside of the United States (either through the IRS tax sourcing rules, or various tax treaties) to receive tax beneficial treatment. In addition you must make sure that your structure does not run afoul of the IRS Controlled Foreign Corporation Laws and that your structure is not deemed to be a Foreign Personal Holding Company.