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We’ve all heard the term
in the media, or tossed around by savvy financial planners or accountants. But
what are corporate tax havens? Are they legal? And can they help you reduce
your tax liability?
Read on to learn more…
What is a Corporate Tax Haven?
In lay terms, a “tax
haven” refers to any jurisdiction or country that offers minimal or
substantially reduced tax liability to foreign businesses and individuals.
These so-called havens
typically place an emphasis on privacy, sharing little to no financial
information with other foreign tax authorities, and often do not require
residency or a physical business presence within their borders for a business
or individual to benefit.
Criteria to Qualify as a
Interestingly, there are
a number of qualifying factors that a jurisdiction must meet in order to
qualify as a tax haven. The OECD (Organization for Economic Cooperation and
Development), in 1998, offered a number of criteria that could be used to
identify such financial centers worldwide.
Tax Haven Characteristics:
or minimal imposed tax on income
standards and no exchange of information with other parties
- A lack
of transparency (to improve privacy/anonymity)
What do Governments Have
havens are certainly attractive to investors, business professionals, and
wealthy individuals. But what do governments stand to gain by establishing
their jurisdiction as a tax haven?
out tax havens have a lot to gain as well.
Benefits of Tax Havens for Countries and Governments:
the name, tax havens aren’t typically “free” of cost or fees. Although
favorable from a tax liability perspective, they often charge a nominal tax
rate while making up for fees in other areas such as high import duties.
fees and annual renewals. Some tax havens charge fees for registration, annual
licensing and other fees.
- The attraction
of foreign investors and money brings with it a vital infusion of capital into
the local economy. Further, the country may benefit from ongoing business
operations within its borders, such as investments in local infrastructure,
offices, job opportunities and more.
you can see, there are a number of built-in incentives for a government to
operate a tax haven, including capital injection into the country’s economy
where investments may flow into local businesses, financial institutions, and
Key Tax Haven Benefits
tax havens have long been the preferred domicile for Fortune 100 companies,
astute investors and privacy-minded individuals. But why?
1. No (or minimal) Tax Liability
the name clearly suggests, these domiciles are havens for corporations,
individuals and investors seeking to reduce their tax liability. Many developed
countries have implemented a “progressive” tax system that places an increasing
burden on those with higher income.
tax havens offer a clear path to minimizing taxes safely and effectively, with
many locales having zero corporate taxes, capital gains tax, personal income
tax and more.
2. Privacy and Discretion
tax havens offer more than just tax savings. These locations boast unmatched
privacy for individuals and corporations alike. Many tax havens accomplish this
by not keeping any publicly accessible bank account or company information, and
policies preventing them from sharing any recorded information with outside
third parties (such as international tax agencies). For example, in Antigua and
Barbuda, it is actually illegal for a bank to disclose account holder
information to any third party. Interestingly, not even Antigua and Barbuda’s own
government can access this information.
3. Security and Peace of Mind
tax havens often play by their own rules, outside of the jurisdiction of
(sometimes) overbearing nations such as the United States or the governing
bodies of the EU. This level of independence can be a major benefit for individuals
who have concerns about their privacy and outside governmental agencies such as
the IRS, FAFT, OECD, and others overstepping their bounds.
most corporate tax havens do not participate in what are known as TIEAs or “Tax
Information Exchange Agreements” with the EU or USA.
means that even if outside organizations try to investigate or uncover
information, there is no legal framework in place to allow them to do so.
those seeking alternative locales to do financial business, corporate tax
havens are attractive options due to their simplicity and well-defined processes
for setting up new accounts. In fact, due to their business-friendly
legislation, getting set up with many tax havens can take as little as 2-4
days. Not to mention business registration is typically low, with many
jurisdictions charging $500 or less and can be done all without even visiting
that’s not where the convenience factor ends. In an effort to attract more
business, many corporate tax havens work to make the process of running and
managing a business within their domicile as easy as possible. This typically
manifests as less paperwork and administration.
Highlighted Tax Havens
The number of popular tax havens is
extensive. Below we’ll highlight two popular corporate tax haven destinations.
The nation island of Malta is a member
state of the EU (European Union), a key reason why Malta passports are highly
sought after around the world. Malta is a safe country, rich in culture and
strategically located between Africa and Europe. Their program, simply named Malta’s
Individual Investor Program (MIIP) is a popular option for many investors worldwide.
Malta’s Individual Investor Program (MIIP)
- Contribution of €650,000 to the National Development and Social Fund
- Contribution of €25,000
for minor children and a spouse of the primary applicant
- Contribution of €50,000 for each
dependent child age 18-26 or dependent parents age 55 or older
- Due diligence fees
- Residence in Malta for 5 years
- Purchase of property valued at
€350,000 or lease a property at €16,000 or more per month
- €150,000 deposit in a government-approved
of the Program:
- Advantageous tax system
- Tax concessions
- Centralized business hub
- Tax treaties with over 50
- English as the primary language
- Access to free EU healthcare
and education systems
- Malta passport opens up visa
travel to over 160 countries
- Stable and safe country
- Lifetime citizenship can be passed
to future generations
2. Saint Kitts and Nevis
The duel island nation, also sometimes
referred to as the Federation of Saint Christopher and Nevis, represents one of
the most popular corporate tax havens. Known for its charming islands and