As long as there have been taxes, there have been tax avoiders. And as long as there have been tax avoiders, there have been tax havens. Broadly speaking, any country that is known for helping individuals or businesses avoid taxes can be described as a tax haven. Some are very forthcoming and proudly advertise the tax advantages of living there, while others are more discreet. In either case, tax havens have a long and enduring legacy in civil society (with an estimated $11.5 trillion currently stashed in offshore accounts) and each one offers something different to aspiring tax dodgers.
Luxembourg is an attractive place for foreigners to stash excess wealth, as the entire country (said to be among the richest in the world – in per capita terms) seems to have a rather lax attitude toward tax collection. According to one website that profiles tax havens: “although they have taxes, nobody seems to work too hard on collecting them.”
Amenities: No tax on bank interest, investment dividends, or capital gains for non-residents.
The Cook Islands have much to offer prospective tax dodgers, including the sheer natural beauty of its beach climate. Combined with the tax advantages discussed below, it’s no wonder shamed Australian entrepreneur Alan Bond stashed his money here before it all came crumbling down on top of him. Not everyone has such a rosy view of the Cook Islands, however. AssetProtectionBook.com describes several instances where Cook Islands-based trusts were successfully invalidated by foreign judges and attorneys, some of whom actually specialize in going after trusts that are based there.
Amenities: No capital gains taxes, income taxes, or death taxes levied on investors.
Hedge fund managers and investors have grown particularly fond of the Cayman Islands, which relies solely on indirect methods of taxation like import duties, tourist fees, and licensing fees to sustain its government and operations. The Caymans got major press during the 2008 Presidential debates when Barack Obama slammed their tax haven status, declaring “there’s a building in the Cayman Islands that houses supposedly 12,000 US-based corporations. That’s either the biggest building in the world or the biggest tax scam in the world, and we know which one it is.”
Amenities: No income, capital gains, gift, or estate taxes on individuals or offshore corporations.
Investors with real estate-based investment trusts (or REITs) in their portfolio will find the Channel Islands much to their liking. A 2007 Telegraph article notes that UK-based REIT investors are flocking to the Channel Islands (located between the shores of France and England) where their investment income is taxed at far lighter rates than the mainland UK. In addition to REIT investors, the Channel Islands are also apparently attracting their fair share of of e-commerce firms and web companies (including UK retailer Play.com.)
Amenities: Low taxes on property investment income, low incorporation costs.
What could be better than floating in these crystal-clear waters and sipping an exotic drink with the knowledge that your business profits are completely shielded from taxation? These and other benefits help explain why entire companies (such as Tyco) have moved their operations to Bermuda. And while other tax havens are coming under intense legal scrutiny, a 2002 Seattle PI article notes that “what these American companies are doing in Bermuda appears to be perfectly legal under the tax code.”
Amenities: While Bermuda does not currently offer much in the way of tax benefits for individuals, businesses enjoy a total exemption from income and capital gains taxes.
Dubai is the tax haven of choice for those seeking to do business with Russian companies and investors. It is also home to a sizable pool of job talent and business contacts of all kinds. According to one website, Dubai is blossoming into “leading UAE commercial gateway to more than 1.5 billion consumers in Asia, Africa, Europe, India and the Middle East.”
Amenities: No taxes of any kind, no tax audits, no information shared with prying government agencies.
Lichtenstein is rumored to be one of history’s earliest tax havens, and it has a well-deserved reputation among tax dodgers. Unfortunately, the success of evading taxes in Lichtenstein may be leading to its own undoing! Forbes recently reported that German spies have been dispatched to the country to hunt down suspicious activity from its own citizens.
Amenities: Very easy for foreigners to set up trusts (just use a locally-hired attorney or nominee.)
British Virgin Islands
According to a Yahoo! News article, ‘More than 400,000 companies share a few local addresses” on the British Virgin Islands, despite having no employees there and often evading taxes in their native countries as well. Indeed, offshoring is so integral to the local economy that it provides over half of all government revenue.
Amenities: Business owners are attracted to the British Virgin Islands for, among other things, the extremely low incorporation and trust maintenance fees that the Islands have to offer.
Those who are looking for a “basic” tax shelter to avoid taxes on personal income (versus sophisticated tax avoidance schemes for hedge funds, corporations, or investment vehicles) will find what they have been looking for in Andorra, a small, landlocked country in Western Europe that is one of only three countries remaining on OCED’s blacklist of “uncooperative” tax havens. While Andorra recently instituted a small capital gains tax, the overall tax savings still far outweighs it’s liability.
Amenities: No personal income tax.
No list of tax havens would be complete without the one that paved the way for them all: Switzerland. Famously utilized by celebrities and rich people around the world, Switzerland is best known for its “Swiss bank accounts”, which offer anonymity and protection from prying eyes of all kinds. An eye-opening article at Tax Justice USA describes how celebrities hide their money in Switzerland. It’s well worth a look!
Amenities: High level of secrecy and confidentiality, no taxes on money saved.
The UK colony of Gibraltar has a proud and distinguished history as a tax shelter and today, an online gambling epicenter. But as with many successful tax havens, Gibraltar’s reputation is landing it in hot water with countries who frown upon tax evasion. Most recently, Spain pleaded with OCED to blacklist Gibraltar as “uncooperative”, as a result of Spanish efforts to investigate financial corruption and, allegations that Gibraltar “shelters corrupt businesses.” The EU has also recently pressured the UK to stop offering tax breaks to offshore companies based in Gibraltar, but this yet too have resulted in any significant changes.
Amenities: Low gambling tax (1% on all winnings), low taxes on offshore corporations
Not all countries are eager to advertise their coziness with tax dodgers, but Belize has nothing to hide. According to Shelter Offshore, Belize openly writes its laws with an eye toward tax avoidance, further noting that Belize “learned from the successes and mistakes of other tax havens around the world and designed its legislation carefully so that it would become THE most attractive tax haven globally.”
Amenities: Names of directors & shareholders of offshore companies are concealed, very fast incorporation time (1-3 days)
An important consideration in choosing a tax haven is whether the country in question will share information with governments or investigators. This is where the Micronesian Pacific island of Vanuatu shines, as it shares no account information whatsoever with law enforcement.
Amenities: Highest level of secrecy, no income, capital gains, or inheritance taxes.
Another tax haven with exceptional climate and cultural appeal beyond its tax advantages is Greneda, a favorite of banking trust investors around the world. But be careful! As recently as 2001, Grenada was entangled in a scandal that saw roughly $150 million stolen from some six thousand offshore American depositors. It was also reported that while many tax havens were beginning to clean up their act, Grenada “has proved a particularly poor regulator.”
Amenities: Strict confidentiality of offshore corporations and accounts, bank trust laws among the best in existence.
Named in a recent survey as “one of the most attractive tax havens in Europe”, Cyprus has almost unprecedented support from the local civilian and business community regarding its taxation practices. In all of Europe, no other country’s citizens are as happy with the level of taxation currently in effect than those living in Cyprus. It is also described as an ideal country in which to form an offshore corporation.
Amenities: Low corporate tax rate (10%), no capital gains tax, no withholding tax on offshore companies