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Tax Havens

 

What is a Tax Haven?

A tax haven is any country whose laws and regulations allow foreign investors (both individuals and corporations) to reduce their tax liability through the utilization of offshore vehicles such as trusts, International Business Corporations, bank accounts, and credit cards.

Types of Tax Havens

Over the years, more and more countries have been presenting themselves  as tax havens in order to promote tourism and attract foreign investment. As a result, there are countries that have no taxes or low taxes, and others that offer special exemptions or arrangements for foreign investors.

A "no-tax haven" country is one that has no taxes of any sort on any sort of income. Although there are no taxes, these countries do charge fees, as do most, for incorporations, filing and other regulatory services. Some examples of no-tax havens are Turks and Caicos, Bahamas, Cayman Islands, and Bermuda.

A "low-tax haven" country usually incompasses some tax on income of an individual or corporation regardless of where the income is earned. Examples include Barbados, British Virgin Islands and Cyprus.

A "special tax haven" country is one that has most of the usual taxes imposed by other countries, however, they have legislation that allows for special treatment for certain vehicles such as International Business Corporations and exempt companies. Austria is a prime example as are the Netherlands and Liechtenstein.

There are also countries that impose taxes only on locally produced income. Exempt companies, as they are referred to, do not pay any tax so long as the income they produce relates to operations and activities outside the country. Isle of Man, Liberia, Gibraltar and Jersey are examples of this type of haven.

 

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Revised: February 19, 2002