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Understanding Tax Havens

Living, working, or running a business internationally is not only exciting, but can provide lots of opportunities to reduce your tax commitments by levying international law.  While all legal transactions should be handled by a qualified attorney, it’s wise to understand where your options lie when looking for tax havens.

A tax haven is an international territory or country where specific incomes receive little or no taxation at all.  Because of this, individuals and corporations can form offshore trusts and other binding financial agreements that keep the assets in a lower or nonexistent tax bracket than if they remained in their country of origin.

There are three criteria that make a country a tax haven:

  1. Personal financial information protection.  The country will have administrative or legal practices that block other jurisdictions from accessing and declaring the funds.
  2. Lack of transparency.  From country to country, the different reporting practices allow for loopholes that make it difficult to litigate between them, which benefits the account holder.
  3. Minimal taxation.  To fully qualify as a tax haven, the territory must have low to no taxes for outside investors who shelter their money in the country.

It’s important to keep in mind that individual country regulations and laws are constantly changing, so a location that was originally a tax haven can eventually lose this status, like Andorra and Cyprus.

That being said here is a list of common and well-known tax havens:

  • Bahamas: No tax on personal income, capital gains, inheritance, or gifts.
  • Cayman Islands: Good for investors and hedge funds.
  • Belize: It only takes 3-4 days to set up an offshore subsidiary here.
  • Netherlands Antilles: Lots of tax treaties make this a very popular location for large companies.
  • Seychelles:  No taxes for companies ran by non-residents.
  • Mauritius:  Popular with Indian investors.
  • Bahrain: Declared to have the freest Middle Eastern economy.
  • Ireland:  Has a funds funneling technique known as the “Double Irish and Dutch Sandwich”.
  • Channel Islands: Good for real estate trusts.
  • Isle of Man: No capital gains tax, stamp duty, or inheritance tax.
  • Luxembourg: No tax on bank interest, capital gains for non-residents, or investment dividends.
  • Singapore: Dubbed the “New Switzerland”.
  • Monaco: Popular with Britons.
  • Liechtenstein: One of the first tax havens.
  • Macau: The gambling capital of the world.
  • Nauru: The most secretive haven in the world.
  • Samoa: Prohibits the disclosure of any financial information.
  • Niue: Very easy to incorporate here.
  • Marshall Islands: Popular with shipping companies.

Other locations to watch as emerging tax havens include the Northern Territory of the Australia, Gambia, Nairobi, and Latvia.

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