Article image: History of Offshore Zones

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Offshore zones are states or their designated territories where it is possible to legally open companies with minimal or zero tax rate.

Today offshores are thought to be a way to reduce level of taxation and provide confidentiality. The perfect example is offshore zones in the UAE. Opening an offshore company in the Arabic Emirates, you get a complete tax freedom, absence of financial reporting and foreign exchanges control and also high level of confidentiality.

How did offshore zones appear?

The wish not to pay taxes appeared almost simultaneously with the trade development. Even in antique time, Phoenician traders found a way to avoid sales duties by selling goods outside the walls of cities with high taxes. The name of term “offshore” is also derived from that and means “outside the boarder”.

In the Middle Ages traders sold wool not in England, where the taxes were too high, but in neighbouring Flanders. In the 18th century, traders from the Northern America bought and sold goods in countries of Latin America to avoid high duties in England.

The notion of privacy of offshore companies appeared in Switzerland at the beginning of 18th century. Royal persons, who were Catholics, wanted to conceal from publicity the fact that they borrowed money from Protestants. That was the reason why the law about the protection of bank deposits and loans confidentiality was created in 1713. Since then and until now Swiss bankers has been keeping confidentiality of information about clients.

Switzerland has become the first offshore zone letting down the bars for purchase of currencies and giving banks possibility to make operations in other countries. Because of that, international companies could develop their activity and be sure in their personal data confidentiality.

In the middle of 20th century, offshores became not only the way of tax minimization, but also opened new possibilities for development of countries with weak economies. Liberia is an example. After it became independent from the USA, its economy underwent difficult times. However the government found the solution by opening an offshore zone. Foreign ships got the possibility to be registered in Liberia and sail under its flag, so the country could boost its economy by such means of income.

At the same time, it is necessary to notice that today there are several dozens of offshore zones all around the world. They are divided into different categories in accordance with their rank, recognition and the most frequent usage for different purposes. For example, the above Liberia mentioned is mostly used for ships registration, and Guernsey is more common used for registration of financial management companies.

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