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
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
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.