Tax havens

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Tax havens

Los paraΓ­sos fiscales are jurisdictions that offer a favorable taxation, as well as other advantageous conditions to its taxpayers. There is no generally accepted definition of what makes a country a tax haven, but the activities associated with such places go beyond low taxes.

Traditionally it is associated with those countries or jurisdictions that offer important tax incentives and where hardly have to pay taxes. The following definition can account for this characteristic: "These are jurisdictions where certain taxes such as inheritance or income tax have rates extremely below the average"

Others refer to a state, country or territory that maintains a financial secrecy regime that allows people hide assets or income to avoid or reduce taxes in the country of origin. Some refer to them as "secret or offshore jurisdictions" instead of "paraΓ­sos fiscales". There is also a Financial Secrecy Index It orders each country in a ranking step according to its size and the degree of secrecy it offers.

Earnings by real estate (such as rents) can also be hidden in tax havens. If the companies (offshore companies) located in the tax haven (and owners of the real estate located in a country with high taxes) pay these assets at a rate of 0% in the offshore jurisdiction, they no longer have to pay in the country where the property is located. There are other property related taxes like Inheritance Tax, el Patrimonial Transfer Tax or the annual real estate tax that cannot be avoided simply because are taxed in the country where the property is located.

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EGoing to an offshore jurisdiction is a process as complex as choosing a suit. It has to be tailored to the request. Among other factors, the amount of financial assets, furniture, etc ..., the nationality of the owner, as well as other characteristics that our team of professionals will study to adapt to your specific case, influence.

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Both natural and legal persons can establish fictitious subsidiaries in said territories, or transfer their tax residence to low tax jurisdictions. Each jurisdiction can be the ideal refuge for different types of taxes as well as for each type of natural or legal person.





    Discover all the keys

    What is a tax haven?

    Definition
    Key factors
    New definition

    DAccording to some definitions, the central feature of a tax haven is that its legislation can be used to evade or evade the laws or regulations of other tax jurisdictions. The Government Accountability Office (GAO) of the US Government In his December 2008 report on the use of tax havens by US companies, he was unable to find a satisfactory definition of a tax haven, but considers the following characteristics as indicative:

    • Nominal taxes.
    • Lack of cash exchange of tax information with foreign tax authorities.
    • Lack of transparency in the application of legislative, legal or administrative provisions;
    • There are no requirements for an effective local presence 
    • Self-promotion as an offshore financial center.

    AStarting in February 2008, the Organization for Cooperation and Development (OECD) identified three key factors to consider whether a jurisdiction is a tax haven:

    • Nominal taxes or without taxes: Tax havens impose only nominal taxes or sometimes none and present themselves as a place to be used by non-residents to escape the high taxes in their country of residence.

    • Protection of personal financial information: Tax havens typically have laws or administrative practices so that companies and individuals can take advantage of strict rules and other protections against the scrutiny of foreign tax authorities. This prevents the transmission of information about taxpayers who benefit from opacity in the low tax jurisdiction.

    • Lack of transparency: The lack of transparency in the operation of legislative, legal or administrative provisions is another factor that is used to identify tax havens. The OECD is concerned that the information needed by foreign tax authorities to determine the status of a taxpayer is available. Lack of transparency in one country can make it difficult, if not impossible, for other tax authorities to be able to apply their laws effectively.

    SHowever, the OECD found that its definition also alluded to certain aspects of the tax systems of some of its members, such as United States o United Kingdom (Some countries have low or no taxes and are delimited for certain groups). For this reason, his later work has focused on the aspect of information exchange.

    In deciding whether or not a country is a tax haven, the first factor to consider is whether or not taxes exist and whether they are nominal. You also have to determine if there is a information exchange and transparency. The OECD recognizes that each jurisdiction has the right to determine whether to impose direct taxes and, if so, to determine what the corresponding tax rate is.

    Types of tax havens

    Cn order to avoid or reduce taxes, many multinationals can use various types of tax havens. There are three categories of tax havens:

    • Primary tax havens: The location of financial capital evaporates. These places are often the location of many offshore companies that have obtained the rights to acquire the benefits of corporate intellectual property through transfers from the parent company.
    • Tax semi-paradises: Jurisdictions that produce goods intended to be sold and marketed mainly outside its territorial limits. In addition, they have flexible regulations to stimulate job growth, through free trade zones.
    • Tax havens conduit: They are places where sales revenue is collected, made mainly outside its borders, and then distributed. The semi-tax havens reimburse them for the actual costs of the product, perhaps with a marked asset.

    Lower tier countries were initially classified as β€œnon-cooperative tax havens". Uruguay was initially classified as non-cooperative. However, on appeal, the OECD declared that it met the standards of fiscal transparency and consequently promoted it. The Philippines took steps to withdraw from the blacklist and Malaysian Prime Minister Najib Razak had previously suggested that Malaysia should not be at the bottom level.

    In April 2009, the OECD announced that Costa Rica, Malaysia, the Philippines and Uruguay they had been blacklisted after making a full commitment to exchange information with OECD standards. Former President of France Nicolas Sarkozy requested that Hong Kong and Macao would be re-listed separately from China, which are not yet listed independently, although it is expected that they will be added at a later date.

    Luxembourg Prime Minister Jean-Claude Juncker has criticized the list, stating that it does not have "credibility", for not including several states of the United States that provide infrastructure for the constitution of offshore companies that are inseparable from the aspects that they offer tax havens cigars that the G20 opposes. Starting in 2012, 89 countries have implemented reforms enough to be included in the OECD white list. Interestingly, according to the NGO International Transparency, half of the least corrupt countries were tax havens

    What can you find in a tax haven?

    Products offered by tax havens

    Tax residence

    DInce the early XNUMXth century, many individuals from high tax jurisdictions have attempted to relocate to low tax jurisdictions. In most countries of the world, residence is the main key that determines which taxes will be applied in each case. Low tax jurisdictions may impose very low taxes, they will not be able to tax capital gains, nor will they have inheritance tax. Generally, natural persons will not be able to return to their previous country for a few days a year. They are also often called tax exiles.

    Company location

    LLegal persons, on the other hand, do not have this mobility of natural persons. However, new companies may be incorporated in a country of your choice. Each company may establish subsidiary offshore companies in many jurisdictions, some for the purposes of negotiation and tax planning with some justification. This allows them to benefit from the variety of laws, regulations, treaties and Double Taxation Agreements in different countries within the legal framework. Only in extreme cases will they move their formal corporate headquarters.

    Bearer Shares

    Lbearer shares offer confidentiality to their holders. For this reason, it has been criticized for being a tool that can also facilitate money laundering and tax evasion. In addition, these actions are also available in some OECD countries, as well as in the state of Wyoming (USA).

    Asset ownership

    LAsset holding involves using a offshore trust o offshore company, or a trust (also called trust) can be a business owner. The company or the trust will be formed in a tax haven, and they are generally administered and reside in a different country. The function is to maintain assets, for example, through a investment portfolio under management, or commercial companies, physical assets, such as movable or valuable real estate. The essence of such provisions is that by shifting ownership of the assets to the offshore company that is not a tax resident in the high tax jurisdiction they will cease to be taxable assets in that jurisdiction. This is to avoid paying some taxes. To do this, some individuals transfer their home to a offshore company. The shares of this company can be established in a trust. In addition, when the owner dies, the assets will pass to his heirs without having to pay any Inheritance tax. This type of transfer of wealth works more with intangible assets compared to real estate.

    Commercial activities

    MMany businesses do not require a specific geographic location, nor do they require tedious establishment work in one jurisdiction. The main objective is to minimize the fiscal pressure. We are referring to insurance and reinsurance companies as well as many other companies that offer their services through the Internet (E-commerce)

    In the 1970s and 1980s the first groups of societies that constitute offshore companies with the objective of β€œrebilling”. It is their only reason for existence without performing any type of economic function. In this way, the profit appears in the subsidiary company in the tax haven so it is not subject to tax pressure. With this, the benefits are disconnected from the company that invoices in the high tax jurisdiction.

    The key is in the transfer prices that companies that invoice in offshore jurisdictions must pay subsidiaries of tax havens for intellectual and technological property. Attempts are currently being made to combat this practice in the tax codes of many countries.

    Financial intermediaries

    GMuch of the economic activity in tax havens belongs to the financial setor. All kinds of products are offered in these jurisdictions, such as Investment funds, Bank, life insurances and pensions. The funds are usually deposited in the offshore jurisdiction where the broker will either lend or invest the money (often in a high tax jurisdiction).

    In the offshore sector, it has been estimated that more than 75% of hedge funds in the world, probably the riskiest form of collective investment vehicles, are domiciled in the Cayman Islands, with nearly $ 1,1 trillion of US assets under management.

    Here is the list of jurisdictions considered tax havens

    The definitive list

    Classification
    Fiscal transparency

    En the London G20 summit From April 2, 2009, the G20 countries agreed to define a black list for paraΓ­sos fiscales, which would be segmented according to a four-level system, based on compliance with the international standard of automatic exchange of tax information to combat opacity. The four levels are:

    1. Those who have substantially implemented the standard (includes most countries, but China still excludes Hong Kong and Macao).
    2. The tax havens that are committed to establish the norm (includes Montserrat, Nauru, Niue, Panama and Vanuatu)
    3. Financial centers that have committed to apply the standard (includes Guatemala, Costa Rica, and Uruguay), but not yet fully implemented.
    4. Those who they have not committed to meet the standard.

    LThe lower tier countries were initially classified as β€œnon-cooperative tax havens". Uruguay was initially classified as non-cooperative. However, on appeal, the OECD declared that it met the standards of fiscal transparency and consequently promoted it. The Philippines took steps to withdraw from the blacklist and Malaysian Prime Minister Najib Razak had previously suggested that Malaysia should not be at the bottom level.

    In April 2009, the OECD announced that Costa Rica, Malaysia, the Philippines and Uruguay they had been blacklisted after making a full commitment to exchange information with OECD standards. Former President of France Nicolas Sarkozy requested that Hong Kong and Macao would be re-listed separately from China, which are not yet listed independently, although it is expected that they will be added at a later date.

    Luxembourg Prime Minister Jean-Claude Juncker has criticized the list, stating that it does not have "credibility", for not including several states of the United States that provide infrastructure for the constitution of offshore companies that are inseparable from the aspects that they offer tax havens cigars that the G20 opposes. Starting in 2012, 89 countries have implemented reforms enough to be included in the OECD white list. Interestingly, according to the NGO International Transparency, half of the least corrupt countries were tax havens

    Information is power

    SIf you want to know more about the main tax havens in the world, feel free to visit The daily offshore news, our news portal related to the latest news on tax havens.

    tax havens FosterSwiss
    A tax haven is that territory that is characterized by little or no taxation to which they subject the persons or entities that take refuge in their shelter or shelter.
    The main characteristics of tax havens are the following:
    - Existence of a dual system, by which a fiscal, exchange control, banking, etc. regime is used. different depending on whether it applies to the nationals of that paradise or to the holders of third States that take refuge in it.
    - Confidentiality, secrecy and anonymity are guaranteed: there is a restrictive law that prevents the lifting of bank secrecy and greatly limits the information that can be obtained from public records.
    - These jurisdictions prevent the negotiation of any agreement that includes a clause that regulates the exchange of information.
    - There is an absence of any rule that limits or controls the movements of capital whose origin or destination is a tax haven.
    - In these jurisdictions there is a communications network of all kinds, which favors the movement of goods, people and services as well as the existence of a legal, accounting and fiscal infrastructure created to take advantage of the advantages offered by the tax haven.
    - Another important purpose is the planning of inheritances and bequests, avoiding double or multiple taxation by inheritance.
     
    A Trust or Foundation is a method widely used by individuals to ensure testamentary disposition and to protect assets against civil liability claims in the event of insolvency.
    Legal entities (companies) use the advantages of these areas, which consist mainly of: not being subject to the profit tax obtained by companies incorporated in those countries, as well as the dividends received from the subsidiaries, the absolute freedom of movements for capital and the absence of exchange controls.
    The most usual formula for these companies is investment through Holdings. Although in these cases you have to be very attentive to the double taxation treaties that your country of residence may have signed with tax havens.
    Through the affiliation of several companies to a Holding company, tax credits can be combined so that an average foreign tax lower than that owed in the group's country of origin is obtained.
    Of course, we must point out that taking advantage of the different existing structures in tax havens does not have to be indicative of tax fraud. The use of adequate international taxation allows you to save or eliminate taxes, as long as that income comes from a legal source, coming from fully recognized and legalized activities.
    Although there is no unified list of tax havens, since each country or organization applies its own valuation criteria, we offer you the following guiding list:
     

    EUROPE

    BRITISH ISLANDS

    CARIBBEAN

    PEACEFUL

    ANDORRA ALDERNEY EEL HONG KONG
    AUSTRIA GUERNSEY OLD AND BEARDED COOK ISLANDS
    GIBRALTAR ISLE OF MAN NETHERLANDS ANTILLES MARSHALL ISLANDS
    HOLLAND JERSEY ARUBA SAMOA ISLANDS
    LIECHTENSTEIN SARK BAHAMAS LABUAN
    LUXEMBOURG IRELAND BARBADOS NAURÚ
    WOOD   BERMUDA SINGAPORE
    MONACO   ALLIGATOR VANUATU
    SWITZERLAND   GRANADA  
        V. BRITISH ISLANDS  
        V. NORTH AMERICAN ISLANDS  
        NEVIS  
        TURK AND CAICOS  
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