Here are several choices available for the host jurisdiction for the IBC. The first issue for most companies is whether or not a treaty jurisdiction is required or is preferable. In most situations, this is in fact the case. Without a treaty jurisdiction, no repatriation of funds as "exempt surplus" is possible.
The major choices of tax treaty jurisdictions for Canadian companies are Barbados, Ireland, Hungary and Cypress. A number of key factors must be taken into account:
- Banking: Banking that is amenable to Canadian companies must be available. The ability to move funds, pay bills and operate in different currencies is usually key to international business success.
- Convenience: For many companies, the issues of convenience re travel and time zones are a factor in the choice of jurisdiction.
- Legal System: The ability to work with familiar legal concepts and a familiar legal system give great comfort to most Canadian companies. Both Barbados and Ireland have such systems (in fact, Barbados has largely adopted the format of the Canada Business Corporations Act).
- Reputation: In these days of increased scrutiny, it is more important than ever that the chosen jurisdiction have a solid reputation.
- Tax Rates: The various jurisdictions have differing rates of taxation for an IBC structure. While not the overriding factor, this does come into consideration as to the overall cost-efficiency of the structure.
- Other Factors: Market access via treaties, proximity to markets, costs of overall operations and business chemistry are all factors to be taken into account.
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