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A tax haven is a place where certain taxes are levied at a low rate or not at all. Among tax havens, different jurisdictions tend to be havens for different types of taxes, and for different categories of people and/or companies. A tax is an involuntary fee paid by individuals or businesses to a state, or to functional equivalents of a state, including tribes, secessionist movements or revolutionary movements. ...
One way a person or company takes advantage of a tax haven is by moving to, and becoming resident for tax purposes in, the tax haven (USA citizens see below). Another way for an individual or a company to take advantage of a tax haven is to establish a separate or subsidiary legal entity (a company or a common law trust) in the tax haven. Assets are transferred to the new company or trust so that gains may be realised, or income earned, which otherwise would be realised or earned by the beneficial owner. A company in the broadest sense is an aggregation of people who stay together for a common purpose. ...
The term trust has several meanings: In general, trust refers to an aspect of a relationship between two parties, by which a given situation is mutually understood, and commitments are made toward actions in favor of a desired outcome. ...
Whether all this is tax avoidance or tax evasion is not always entirely clear and depends upon the legislation of the countries involved and the particular circumstances of the companies or individuals. This article contrasts tax evasion, tax avoidance and tax mitigation. ...
This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ...
Many countries (particularly OECD countries) have laws that make it difficult for their residents to own a company (or have an investment) in a tax haven without paying tax either in the tax haven or where they are resident. For example, income or gains arising to the offshore company or investment may attributed for tax purposes to the owner or investor under CFC or other laws. Although many countries also have bilateral double taxation treaties to prevent their residents from paying tax twice (although, typically, the higher rate of tax charged in the two countries is due), few countries have tax treaties with tax havens. The Organization for Economic Co-operation and Development (OECD) is an international organization of those developed countries that accept the principles of representative democracy and a free market economy. ...
Controlled Foreign Corporations or Companies, also known as CFCs, are a legal construction of the various tax authorities around the world. ...
Tax treaties exist between many countries on a bilateral basis to prevent double taxation (taxes levied twice on the same income, profit, capital gain, inheritance or other item). ...
Double taxation is a situation in which two or more taxes must be paid for the same asset or financial transaction. ...
USA Citizens
Most countries impose tax based on source of income (if the money is earned there it's subject to tax), or they tax based on residency (if you live there then your worldwide income is subject to tax). But most countries do not impose tax based on citizenship alone. The United States is unlike other countries in that its citizens are subject to US tax on their worldwide income no matter where in the world they reside. US citizens therefore find it difficult to take advantage of personal tax havens. Although there are some offshore bank accounts that have been advertised as tax havens, U.S. law requires reporting of income from those accounts and failure to do so constitutes tax evasion. Taxation in the United States is a complex system which may involve payments to at least four different levels of government: Local government, possibly including one or more of municipal, township, district and county governments Regional entities such as school, utility and transit districts State government Federal government The federal...
This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ...
However: US citizens who reside (or spend long periods of time) outside the US, may be able to exclude up to US$80,000 (or foreign equivalent) of salaried income earned overseas (but not other types of income), as well as foreign housing expenses. Additionally, the US will normally allow a US citizen to subtract any foreign income taxes paid on foreign sourced income, from the US income tax due on that income.
Examples of Tax Havens - The UK is a tax haven for people of foreign domicile, even if they are UK resident (residence and domicile being separate legal concepts in the UK), in that they pay no tax on foreign income not remitted to the UK. Similar arrangements are to be found in a few other countries including Ireland.
- Switzerland is a tax haven for foreigners who become resident after negotiating the amount of their income subject to taxation with the canton in which they intend to live. Typically taxable income is assumed to be five times the accommodation rental paid.
- Monaco does not levy a personal income tax and neither does Andorra. The Bahamas levies neither personal income nor capital gains tax, nor are there inheritance taxes.
- In the various Channel Islands, and in the Isle of Man, no tax is paid by corporations or individuals on foreign income and gains. Non-residents are not taxed on local income. Local taxation is at a fixed rate of 20.0%.
- In Gibraltar, tax exempt companies, which must not trade or conduct any business locally, are taxed at a flat rate of £100 a year.
- Vanuatu, an island archipelago state in the Micronesian Pacific, is a tax haven that does not release account information to other governments and law enforcement agencies. In Vanuatu, there is no income tax, no withholding tax, no capital gains tax, no inheritance taxes, and no exchange controls.
- Campione d'Italia
- Hong Kong's tax rates are so low that it can be considered a tax haven.
- Luxembourg
- San Marino
- Belize
- Cayman Islands
- Bermuda
- Saudi Arabia
- United Arab Emirates
- Liechtenstein
The twenty-six cantons of Switzerland are the states of the federal state of Switzerland. ...
Income tax is a direct tax which is levied on the income of private individuals. ...
In finance, a capital gain is profit that is realized from the sale of an asset that was previously purchased at a lower price. ...
Inheritance tax, also known in some countries outside the United States as a death duty and referred to as an estate tax within the U.S, is a form of tax levied upon the bequest that a person may make in their will to a living person or organisation. ...
The Channel Islands are a group of islands off the coast of Normandy, France, in the English Channel. ...
Campione (also known as Campione dItalia) is an Italian enclave within the Swiss canton of Ticino, separated from the rest of Italy by Lake Lugano and mountains. ...
Amounts While incomplete, and with the limitations discussed below, the available statistics nonetheless indicate that offshore banking is a very sizeable activity. IMF calculations based on BIS data suggest that for selected OFCs (Offshore Financial Centers), on balance sheet OFC cross-border assets reached a level of US$4.6 trillion at end-June 1999 (about 50 percent of total cross-border assets), of which US$0.9 trillion in the Caribbean, US$1 trillion in Asia, and most of the remaining US$2.7 trillion accounted for by the IFCs (International Financial Centers), namely London, the U.S. IBFs, and the JOM (Japanese Offshore Market).([1]) The Bank for International Settlements (BIS) is a financial international organization established under the Hague agreements of 1930. ...
See also A corporate haven is a jurisdiction with laws friendly to corporations thereby encouraging them to choose that jurisdiction as a legal domicile. ...
A free port (porto franco) or free zone (US: Foreign-Trade Zone) is a port or area with relaxed jurisdiction with respect to the country of location. ...
Many countries have, or have had at some time, designated areas where companies are taxed very lightly or not at all to encourage development or for some other reason. ...
An offshore company is one which does not conduct substantial business in its country of incorporation. ...
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. ...
External links - OffshoreNet - Sovereign Lifestyle Guide
- Offshore News - Tax haven and offshore banking news
- Offshore Banking and Financial Centers
- Offshore Financial Centers -- IMF Background Paper
- Escape Artist
- http://www.lowtax.net/
- Tax Havens
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