Depending upon their use, corporate tax havens are a sensation or a scourge. Tax havens offer a low- or no-tax option for corporations and wealthy individuals looking to shelter assets from an unstable economy or as a tax buffer for substantial wealth. Tax havens can also be used to hide unreported wealth, facilitate money laundering, and perpetrate tax fraud.
The term “offshore tax haven” conjures visions of beachfront property and sunny idyl, and indeed, Bermuda, the Bahamas, Mauritius, and the Cayman Islands offer that sort of view along with favorable corporate tax rates and preferential tax laws.
But the most popular—and profitable—tax havens are those with the greatest opacity. Every two years, the non-profit advocacy group, the Tax Justice Network (TJN) publishes its Financial Secrecy Index. The Index compiles a list of jurisdictions with financially favorable regulations that attract foreign and domestic investors. TJN factors together secrecy, global use of the jurisdiction, and preferential tax treatment to identify the top secrecy jurisdictions for helping companies, groups, and high-asset individuals nurture wealth—and also illegally hide foreign bank accounts and circumvent legitimate tax liability owed elsewhere.
According to the TJN, the top ten performers as tax havens and secrecy jurisdictions on a global scale include:
- The United States: The secrecy jurisdiction that ranks highest on TJNs list of enablers of global money laundering, tax crime, and preferential tax regulations is the United States of America. This is the first time the U.S. has taken the number one position on this index.
- Switzerland: Forever associated with secret Swiss bank accounts, it is not too surprising to find the small country in the number two spot.
- Singapore: Rising in popularity and profitability for years, Singapore does not assess taxes on capital gains and offers substantial tax breaks along with low corporate taxes.
- Hong Kong: A zero tax rate on foreign income makes the region a highly desirable tax destination for wealthy individuals and corporations.
- Luxembourg: Luxembourg offers preferential tax treatment to foreign investors and multinational companies.
- Japan: Japan is another longtime tax haven eyeing legislation to close favorable tax loopholes.
- Germany: Even as it investigates anti-tax haven legislation, Germany is a favorable jurisdiction for secrecy, with income and corporate-friendly tax laws.
- United Arab Emirates: With a reputation for secrecy, UAE offers free-trade zones, low tax rates, and no taxes assessed on corporate income.
- British Virgin Islands: With no taxes on offshore tax accounts and no tax treaties, the British Virgin Islands is a perfect getaway for hidden wealth.
- Guernsey: Guernsey has long earned marks for its regionally controlled, and preferential tax laws as well as low to no taxes for corporations.
There are numerous global opportunities for high-asset individuals and corporations to shift cash offshore to nurture wealth and take advantage of favorable tax environments. Work with a tax attorney experienced with these jurisdictions to craft a profitable—and legal—strategy for your investment portfolio.
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From offices in Chicago and Cleveland, Robert J. Fedor, Esq., LLC offers strategic legal guidance to clients throughout the U.S. and abroad on IRS audits, criminal tax investigations, payroll tax issues, and more. When you have questions about individual or business tax compliance, call us at 800-579-0997 or contact us.