Haven meaning shelter or refuge, tax refuge is actually kind of shelter for clients trying to evade taxes. There’s lots you need to know about tax havens- what it is about, which are the tax haven areas etc. Here you will find an insight to all the information you need about tax havens.
What exactly is a tax haven?
A tax haven is a jurisdiction, other than one’s own home town or area, where particular taxes, such as an inheritance tax or income tax are levied at a low rate or not at all. People can easily evade their taxes with the support of offshore accounts. When taxes are paid in a tax haven jurisdiction based on the earnings from accounts kept there, one need not paid taxes in their own jurisdiction.
To take advantage of this, people establish shell subsidiaries in tax haven countries or move to a tax haven country. As a result there is so much of tax competition among jurisdictions. Different jurisdictions offer different havens for different types of taxes and also according to the category of people or company. A report called the Financial Secrecy Index by the Tax Justice Network screened 73 jurisdictions around the world that allowed foreign currencies to be stored in offshore accounts.
How the system works.
- The first step is to choose from the numerous jurisdictions available to hide your assets or money.
- Next, a company is set up with the help of the offshore investment advisers. Another option is to invest the money in a private non-profit foundation which can own a corporation. This helps in adding a layer of secrecy to the invested money.
- One or more nominees are chosen to manage the resources acting as owners on their behalf. It is the name of these nominees that appear on the documents.
- A blank account is set up in an offshore location to give the money a safe place to rest.
- The next step is probably the moving of the money. Flexing money in lump sum will actually give the authorities an idea about the offshore accounts. So one may smuggle cash or flex it in amounts under the reportable $ 10,000 requirement.
- Now spending the money is where it gets tricky. To avoid this risky business some may relocate to the place of tax haven while others chose to spend these on credit cards issued in the offshore company names. There are other options too to get the money out which includes gifts, issuing insurance from the offshore company, or taking loans from the onshore branch of the offshore company or even gambling which has no tax in some places.
Here’s a list of 10 tax havens.
Its termed to be the no.1 among all tax havens due to the extreme level of secrecy it provides for its clients. Also the accounts are operated on a large scale.
- The Cayman Islands
It is a British overseas territory comprising of three different islands. The best part about Cayman Islands is that , in here they do not collect any kind of taxes from their foreign clients. You get a full package to help you evade taxes.
Luxembourg scored 68 in its level of secrecy and hence is said to be the third best in the group. It is a member of the European Union.
- Hong Kong
Apart from being a popular hotspot for tourists, Hong Kong is also safe for people trying to evade their taxes. Neither does it acquire any sales taxes, capital gain and payroll taxes nor does it imply personal taxes on your earnings.
In the U.S , Nevada and Wyoming are the 2 major tax havens ignoring certain types of taxes each.
Singapore is considered to be a best choice for offshore accounts. With a secrecy score of 71, Singapore allows anyone to open an account without any hassle.
Jersey is also another tax haven jurisdiction that allows you to open those tax free offshore account.
Japan has its main banking centre at Tokyo and these do not subject the deposits made by their clients to interest rate standards and regulations.
Germany is also a tax haven but the government is now trying to control this.
This middle eastern allows foreigners to establish offshore accounts but not with a high secrecy level.
Even though a benefit for clients, tax havens are not much good for the country as they lose billions of foreign currency that otherwise would be paid as tax to them.