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What is Tax Haven ?
A Tax Haven is a safe place where
some taxes are levied either at a lesser rate than in
surrounding areas or there may not be any tax at all. There are
different jurisdictions for different types of taxes, and
different categories of people and/or companies. Tax havens are
generally characterized by strong privacy protections, low tax
rates, and highly reputable banks. They are usually amongst the
most politically stable regions in the world. An individual, who
wants to enjoy all the benefits of tax haven in a country,
should stay in that particular country. The best way for a
person to enjoy the advantages of Tax Haven is that he should
become a resident of the country. Another way is to establish a
company or a subsidiary of the company under legal conditions
while all this tax depends upon the country’s legislation. For
example, The French principality of Monaco provides tax benefits
for the individuals who are the legal residents of Monaco.
Another example is Switzerland where the resident foreigners
have an option of negotiating their tax level. In Channel
Islands, there is no taxation for foreign income. The United
States is considered a Tax Haven by some countries. But in
United States, the citizens pay tax for their Income no matter
in which country they are resident.
Many 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. There are several reasons for a country to become
a Tax Haven. Some countries allege more tax on personal income
and some countries allege tax over large corporations.
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There are several Tax Havens under
the List of Organization for Economic Co-operation and
Development (OECD) and are considered as Co-operative Tax havens
and there are some Unco-operative Tax Havens also.
The OECD identifies three key
factors for considering whether the jurisdiction is a Tax haven
1. No or only nominal taxes:
Tax havens should not impose taxes or should levy only
nominal taxes and alleged to offer themselves as a place to be
used by the non-residents to avoid tax in their country of
residence.
2. Lack of effective exchange of
Information: Tax havens should have legal practices
and laws for all the taxations levied over corporations and
Individuals. This will prevent the exchange of Information about
taxpayers who are benefiting from low tax jurisdiction.
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3. Lack of
transparency: The tax havens should have open and
consistent laws and should provide all the necessary information
needed by tax authorities to verify the tax payer’s details. A
lack of transparency in legislative, legal or administrative is
an important factor to consider the jurisdiction as a Tax Haven.
About 33 Jurisdictions are considered co-operative jurisdictions
by the OECD's Committee. Some other jurisdictions identified as
tax havens in June 2000 have not yet made commitments to OECD.
Examples of Tax havens and Tax havens of the world
The Tax havens worldwide are listed under the rules and
regulations of Organization for Economic Co-operation and
Development (OECD) the list is as follows:
Some of the examples of Tax Havens
are
Albania: The taxation is
around 7% to 10% and the taxation is negotiable because of the
good banking arrangements.
Andorra: The principality of
Andorra is not imposing personal Income tax to the Residents. It
has a high standard of living and immigration permits are very
difficult to get.
Austria: This is one of the
most economical and stable tax haven which does not claim any
tax for foreign income. Residence permits are easy to obtain.
Bahamas: The commonwealth of
Bahamas does not levy tax on capital gains, corporate earnings,
personal income, sales, inheritance, or dividends. Bahamas
claims about 1.5% - 2% tax/year over property rights and Import
taxes
Barbados: This is the
country with low tax, which claims 2%. Presently Barbadosis not
considered as a tax haven and its tax is most similar to UK.
Belize:
The Taxation rate in Belize is 25% as per the 2000 budget.
Bermuda: Bermuda does not
claim income tax on foreign earnings, and allows foreign
companies to incorporate under the condition that the company
should be owned by 60% Bermudians.
British Virgin Islands:
British Virgin Islands was the home for about 41% of the world's
offshore companies, It is considered to be the largest offshore
jurisdiction in the world by the volume of incorporations
located in the country.
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Campione D'
Italia: Campione is one of the least known tax haven
and is an attractive base for the companies. Residence permits
can be obtained easily.
Canary Islands: It is
located in spain and currently it is not a Tax haven.
Cayman Islands: It is
located in Caribbean sea. This beautiful Island does not levy
Income tax, Inheritance tax except few Value added tax and Hotel
tax.
Channel Islands: In Channel
Islands, there is no tax for foreign Income, individuals,
capital gains, no tax for Incorporations. The local tax rate is
20 %.
Cyprus:
Cyprus is located in Mediterranean sea. The tax rates are low
among all the European Union Countries.
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Dominica:
The common wealth of Dominica does not impose capital gains tax.
Dominician Republic: Presently
Dominician Republic is not a tax haven but the tax rate was 35%.
Gibraltar: In Gibraltar,
Taxation is fixed at a rate of £100 per year.
Guernsey: The tax rate in
Guernsey is 20 %.
Hong Kong: The Taxation rates
are very low in Hong Kong, but it is considered as a Tax haven.
Ireland: There is no tax for
foreign income.
Isle of Man: The Isle of Man
does not have corporation tax, Local Income tax is 10% to 18%.
Malta: The tax rate is 15 % but
Malta offers some special discount for electronic manufacturing
companies.
Madeira: Madeira has a
legislation that is very economical and does not claim any tax on
corporate vehicles.
Monaco: There is no personal
Income tax.
Switzerland: Switzerland is
considered as the tax haven for foreigners who become resident after
negotiating the amount of their income subject to taxation in which
they intend to live.
UK: UK is the Tax haven for the
people from foreign countries. There is no tax on foreign income.
The same kind of Taxation arrangements are found in few other
countries including Ireland.
Vanuatu: The Republic of Vanuatu
is an Island located in Micronesian Pacific, is a tax haven that
does not release any 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.
The other tax havens of the world are:
Anguilla, Anguilla and Barbuda, Cook Islands, Grenada, Liberia,
Latvia, Liechtenstein, Luxembourg, Maldives, Marshall Islands,
Mauritius, Montserrat, Nauru, Netherland Antilles, Niue, Panama,
Samoa or Western Samoa, San Marino, Seychelles, St Lucia, St Kitts
and Nevis or "The Principality of St. Christopher and Nevis", St
Vincent and the Grenadines or "The Republic of St. Vincent", Tonga
or The Friendly Islands, Turks and Caicos and US Virgin Islands.
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