Offshore tax havens are those countries which double as offshore financial centers and tax havens. An offshore financial center can be best described as a country or jurisdiction which offers financial services to foreign individuals and corporations. A tax haven is a country which has very little or low taxes imposed on offshore companies. Offshore tax havens are spread out around the world and the majority are located in the Caribbean with a few in Europe and the Pacific Ocean. Some of the world’s more popular offshore havens are Anguilla, Nevis, Dominica, Belize, Republic of Panama, Seychelles, Mauritius, Singapore, Cyprus, Gibraltar, British Virgin Islands, Bahamas, Cayman Islands and Vanuatu among others.
Off shore tax havens can be used for various purposes. When they first came about offshore tax havens were mostly frequented by some of the wealthiest individuals and families seeking asset protection but today things have changed considerably, and offshore tax havens are sought by everyone with capital or assets to protect. The tax havens of today are heavily used for business, investment and trading purposes.
An off shore tax haven provides the following services to its clients who are mainly non-nationals; the incorporation of International Business Companies (IBC) or offshore companies, the formation of offshore foundations and trusts, captive and offshore insurance, electronic gaming, offshore banking, the registration of boats and vessels and investment fund management among others.
Offshore tax havens are frequently used as a means of reducing tax liabilities. Income gained abroad is not taxed in an offshore haven. Income include profits earned, interest, dividends etc. therefore a company incorporated as an offshore company, for example in the offshore tax haven of Dominica, will pay no taxes if all its business and all its incomes are derived abroad. Tax exemptions for international business companies are guaranteed by offshore business companies legislation. In the Bahamas and Dominica a twenty year period of exemption from taxes is guaranteed by legislation and begins from the day of incorporation. Offshore trusts and offshore foundations are also exempted from taxation in offshore tax havens. The only form of taxes paid by these offshore entities is an annual license fee which is customarily paid on the anniversary of incorporation. License fee vary from one offshore tax haven to the next. In some tax havens the fee is fixed while in others it is determined by the amount of authorized share capital of the corporation.
Offshore havens go to great lengths to protect the privacy of individuals and corporation who do business there. In many offshore tax havens the names of the owners of offshore corporations are not filed with the registrar of companies therefore this does not appear as public records. The offshore tax havens allow offshore companies to be registered using nominee shareholders and directors which means that the names of the beneficial owners are not disclosed. Offshore companies can take advantage of the fact that in most jurisdictions there are no legal obligations to file annual financial statements with tax authorities. The annual financial statements for offshore companies in most tax havens in private information which is only known to the company’s shareholders and directors.
Current offshore tax havens facilitate trade for offshore companies. Most offshore tax havens have no exchange controls in place. This makes trading easier for offshore companies since capital can be moved around without having to disclose the amount to the authorities or having to complete forms and go through any formality.
Offshore tax havens with no taxes in places are often called pure tax havens and those with low taxes are called low tax havens. In the pure tax havens there is no form of Capital gains tax, corporate tax, income tax, inheritance tax, withholding tax or gift tax for offshore corporation, trusts, foundations or individual. Offshore foundations, trusts and offshore corporations are exempted from Stamp Duty in most offshore jurisdictions.
Offshore tax havens have established themselves as some of the best offshore banking centers in the world. Most offshore havens have built solid reputations from offshore banking. Offshore banking gives clients another avenue to reduce tax liabilities while increasing capital. There is no tax levied on the interest gained by offshore bank accounts in offshore tax havens. Offshore bank accounts in the numerous tax havens which offer the services of offshore banking are very professional. Services offered at offshore banks are credit and debit cards, bank accounts in multiple currencies, online banking and banking via fax and telephone. Offshore bank accounts are available for individuals and corporations.
Most clients prefer doing offshore banking in the tax havens because this is protected by banking secrecy which forms part of offshore banking legislation in many tax havens. Banking Secrecy laws protect the information in offshore bank account from outside parties. According to banking secrecy laws in many offshore jurisdictions, the information in an offshore bank account can only be revealed if the bank account holder gives his or her written consent. Information can also be given out if a court order has been handed out for circumstances such as criminal investigations. Disclosure of offshore bank account information by an unauthorized party is punishable by law which cans consist of fines and prison sentences. In some jurisdictions bank employees are made to take an oath to uphold banking secrecy. Banking secrecy was first established by the Swiss in 1934 and since then has been used by many offshore banking jurisdictions. Banking Secrecy is maintained in the offshore jurisdictions of Dominica, Anguilla and Nevis among others.
Offshore tax havens around the world have built reputations as well developed offshore financial centers and pride themselves in providing quality and professional services. Tax havens present clients with the legal means to protect assets and save on taxes. With stable political and economical environments the offshore tax havens are very investor friendly. It has become very easy to set up an offshore corporation or offshore bank account.