Ever wondered why politicians and corporates own offshore accounts in Bermuda or the Bahamas? Top US companies like Apple, IBM, and Walmart conceal trillions of dollars in best tax havens in the world. Apple has more than $181 billion in offshore accounts.
American corporations and individuals seek tax havens to protect their wealth. Corporations believe that lower tax rates offer an incentive for growth.
US government allows Americans to move money in offshore accounts in tax havens. If you consider this move, you need to learn more about tax haven countries.
Keep reading to explore the Best havens for American citizens.
What Is a Tax Haven?
A tax haven is a jurisdiction with low or no taxes. It attracts foreign capital by offering tax benefits to businesses and individuals.
Taxpayers move their money to tax havens to avoid taxes. They help people, companies and even governments to hide assets and income from public scrutiny.
Who Needs a Tax Havens?
Tax havens have been around for a long time. During the 1920s, Switzerland and Luxembourg were popular tax-havens. Today, more than 50% of the world’s wealth is held in tax havens.
Two main types of people use tax havens:
- Politically Exposed Persons (PEPs)
- Ordinary Citizens
Tax havens are not just for the rich and famous anymore. Today, it is easier than ever to move your wealth overseas. The new generation of tax havens gives you access to all of the benefits of offshore accounts without a headache.
You could be forgiven if you thought that tax haven services were only for the super-wealthy. After all, who wants to pay an arm and a leg in taxes? But that’s not the case at all.
Anyone can move their money overseas to avoid the heavy taxes from their home country.
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The Best Tax Havens in the World
The International Monetary Fund released the first-ever ranking of offshore financial centres.
The ranking was based on ten criteria. Covering banking, tax transparency, exchange of information, and other country’s regulatory system determines the ranking.
Working with the best havens can help in tax reduction. However, you need to follow proper legal procedures to avoid IRS audits.
Here is a list of the best tax havens:
The Bahamas has steadily increased popularity as a tax haven over the past few years.
There are no income taxes in The Bahamas. Corporations don’t pay taxes on their profits. There are no capital gains tax and inheritance tax.
The Bahamas reformed their laws for other nationalities to move money into the country and invest in real estate. This makes The Bahamas a prime location for international investors.
Cayman Island tax laws attract foreign investors. The country has no income tax or capital gains tax. The government has accepted an OECD code of conduct. This reduces financial services industry secrecy and makes it open to authorities.
In 2010, the Cayman Islands tax law introduced a 15% withholding tax on interest from corporate bonds and fixed-term deposit accounts.
The Cayman Islands is not only a great tax haven, but it’s also a great place to do business. The island has more than USD 6 billion of investment from foreign investors.
For years Luxembourg has been considered a tax haven for the European Union. It’s a small country with less than 600,000 inhabitants. This means that there are plenty of investment opportunities and legal loopholes.
Luxembourg’s success influences an increase in new laws and regulations. There are critics about Luxembourg’s tax system and its use as a tax haven. However, no one can deny that Luxembourg is an attractive location for foreign investments.
Hong Kong is famous for its low-tax system. The tax haven maintains a low tax regime as it is primarily a service economy.
In 2016, Hong Kong had the third-lowest tax burden among 111 countries.
The territory’s lack of natural resources and self-sufficiency in food contributes to its low tax rate. Also, the government is relatively transparent about its income tax policy.
According to KPMG, Singapore is a leading destination for setting up a company in Asia. The country’s corporate tax haven is 17%, which is among the lowest in the region.
Singapore (and Hong Kong) is part of the ASEAN Free Trade Area. ASFA members have zero tariffs on almost all types of goods.
Singapore has free trade agreements with China, India, Japan, and other trading partners. This means it enjoys tariff-free access to more than 50 markets globally.
Bermuda has a comprehensive body of legislation and a transparent judicial process. It affords foreign companies a range of competitive advantages, including.
The country has no:
- local taxes on income, profits or capital gains
- exchange controls
- restrictions on remittances of dividends, interest or royalties
- restriction on repatriation of capital
- withholding tax
Bermuda has favorable corporate-tax rates and incentives for foreign business investors.
The British Virgin Islands
The British Virgin Islands is located in the Caribbean. It has been a major offshore financial center for over forty years.
The British Virgin Islands has no income tax and no capital gains tax. There is no requirement to report or pay taxes in BVI. This makes the territory a haven for offshore companies.
Investors benefit from its favorable corporate tax laws.
Ireland has been a tax haven since the early 1990s. The concept of Ireland as a tax haven was given a boost in the late 1980s. The 1988 introduction of the International Business Companies Act allows foreign investors to invest in shares.
People buy and sell shares in Irish companies without ever setting foot on Irish soil. The Irish government intended to attract foreign investment and job creation.
Ireland has the lowest corporate tax rate in the European Union, 12.5%. The nation is a significant contender for firms looking to relocate from the UK due to Brexit.
Ireland’s low corporate tax rate attracts many major tech companies like Google, Facebook, and Apple.
Switzerland is known for their watches and chocolate. However, it is also a tax haven for the wealthy. It is a place where people hide their money from their governments.
The Swiss have made it easy for people to do this. They have an extremely secretive banking system. The country imposes strict laws on banking to protect its client’s privacy.
Switzerland has astonishing 120 different kinds of trusts. They are all are legal. The rich use them to park and manage their wealth.
You can send your money offshore easily, anonymously, and at a low cost.
The Netherlands has a long and venerable history of tax havening. When the British Empire ruled the waves, it was one of the few countries with no direct ties with England.
The Netherlands is a center of influence for the Dutch East India Company. The firm had its fleet of merchant ships. It also held a monopoly on trade throughout much of Asia.
Today, the Netherlands remains one of the world’s most important financial centers. Amsterdam is home to the European Banking Authority. It boasts over 150 foreign banks.
Amsterdam is also a regional hub for international commodity exchanges like metals and agricultural products.
How the US Compares to the Best Tax Havens Countries
The United States (US) is not a tax haven. It has tax rates higher than most countries. The US does not provide any significant incentives for offshore investment.
The US government’s goal with the taxation system is to generate revenue.
It has no system of incentives for investors to relocate their funds offshore.
In contrast to these world’s best tax havens, the United States has the highest corporate tax rate in the world at 39%. Compare that to Bermuda, which has zero percent corporate tax.
With such a big difference between these two countries, you’d think everyone would move to Bermuda. However, this isn’t true. Only 23,000 people are living in Bermuda.
United States tax laws are among the world’s most complicated. These regulations and rules affect practically every business or individual investment.
Tax laws determine how to buy a car in America or the health insurance benefits citizens receive. American citizens seeking to protect their wealth from brutal tax systems should consider tax haven countries.
US citizens and corporations pay graduated rates up to 39.6% on their income. The rates are more than twice for best tax havens. Some of the best tax havens countries only tax individuals and corporations at flat rates of 15%.
Invest in Tax Haven Countries Today
Taxes are valuable assets for the government’s revenue. However, high tax rates can cripple citizens disposable income and financial growth.
Individuals and corporations seek tax havens to boost financial growth. Tax haven countries offer incentives for investments and wealth protection. You don’t have to be a politician or US’s biggest billionaire to have an offshore account.
Best Tax havens in the world are open to everyone but more practical for the wealthy.
If you are uncertain how to achieve tax reductions, we got you covered. Tax Savers Online equips with valuable information on taxes. Learn more about how you can avoid capital gain taxes.
Written by: Navjeet Chahal, EA