Offshore Tax Havens

Offshore Tax Haven Countries

Offshore tax havens are basically countries which impose low or no taxes. Very often there are laws put in place for ensuring the privacy of non-resident corporations and nationals who either hold, say, an offshore bank account or has a registered offshore entity in the jurisdiction.

Offshore tax havens are typically identified as small developing countries that are either former colonies of Britain or are still part of the Crown’s dependencies or overseas territories. Countries that are very fitting to this classification include the British Virgin Islands, Turks and Caicos, Isle of Man, Guernsey, Jersey, Gibraltar, the Cayman Islands and Anguilla. Offshore tax havens that are former British colonies include countries such as Belize, Barbados, St. Vincent and the Grenadines, Dominica and Antigua and Barbuda.

Other Offshore Tax Havens

Due to this, the classic logo of an offshore tax haven is a coconut tree, white sand beach and blue sea, owing to the fact that most of these countries are either islands or are situated in the tropics. Hence, whether or not a tax haven is situated in Europe, the fact that it is an island automatically makes it identified with vacation, leisure and white sand beaches. This stereotype of offshore tax havens has altered the true picture of tax havens which also includes some developed nations and territories or states within countries; many of which are leading and prime offshore tax havens.

Some of these are the United Kingdom, New Zealand, Luxembourg and the United States, which are all offshore tax havens in their own rights. In the United States, for example, first class offshore services are provided in states such as Nevada, New York, Delaware, Oregon, Wyoming, California, Washington, Colorado, Arkansas, Florida and Oklahoma, where juridical entities such as Limited Liability Companies (LLC) and Limited Liability Partnerships (LLP) can be specially structured as offshore companies for tax mitigation and asset protection purposes. These states are very popular offshore jurisdictions largely as a result of the level of credibility that is obtained from owning a US offshore company.

New Zealand offers several tax planning possibilities, which can be attained by setting up a New Zealand Special Purpose Company, which has the structure of the Trustee of a non-resident New Zealand Trust. Just as in premier offshore tax havens, New Zealand offshore companies and trusts are exempt from all local taxes as long as the company is not permanently established in New Zealand and all business activities are carried out abroad.

Luxembourg is one of the most respected and prosperous offshore tax havens in the world. Several thousands of offshore and holding companies are established in Luxembourg and the country counts about 220 banks, giving it the second largest banking sector followed by the UK. Despite being a signatory to the EU Savings Tax Directive, Luxembourg offers access to premier banking services and allow for offshore account growth for corporations and people who are not residents of the EU and are unaffected by the Directive. In addition to company formation, Luxembourg offers customer discretion and confidentiality.

Offshore Tax Havens - Corporate Structures

A driving force of offshore tax havens is the International Business Company or IBC, which is a significant feature of all offshore tax havens. International business companies are formed in offshore tax havens as a vehicle for conducting profitable international trade. Offshore tax havens establish special IBC Acts which govern international business companies. Offshore laws enable ibc’s to carry out almost any form of legitimate business in any part of the world except in the offshore tax haven where they are incorporated. IBCs are flexible in that they are able to adapt to changes made in the direction or structure of the company. Offshore tax havens generally prohibit IBCs from conducting banking, insurance and licensing business which require a separate entity for carrying out these activities.

An IBC formed in an offshore tax haven can be used for real property and land ownership. Making an IBC the legal owner of property is an effective way of avoiding inheritance, transfer and capital gains tax on property. Through an offshore tax haven this can be done by transferring the IBCs shares to the person inheriting the property. This is one of the ways in which an offshore tax haven can be used for the sale, purchase or transfer of real estate, especially in the Caribbean region where wonderful real estate possibilities exist. Tax havens such as the British Virgin Islands, Dominica, Cayman Islands, Panama, Belize and Seychelles charge exempt share transfers from stamp duties, and this greatly facilitates property transfer, sale or purchase. The property ownership benefits of an offshore tax haven also extend to areas such as the ownership of copyrighted material, patents and collecting royalties.

At the end of March 2007, the financial services sector in the City of London contributed about £67.8bn to UK government taxes. Offshore tax havens offer a wide array of financial services and enhance business expansion, tax mitigation and asset protection; three of the basic reasons why corporation turn to tax havens as the solution for improving their financial status.

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