From Wikipedia, the free encyclopedia.
A tax haven is a place where certain taxes are levied at a low rate or not at all. Among tax havens, different jurisdictions tend to be havens for different types of taxes, and for different categories of people and/or companies.
One way a person or company takes advantage of a tax haven is by moving to the tax haven. (US citizens see below.)
Another way for an individual or a company to take advantage of a tax haven is to establish a separate or subsidiary legal entity (a company or a common law trust) in the tax haven. Assets are transferred to the new company or trust, or it earns the income which otherwise would be earned by the beneficial owner.
Whether all this is tax avoidance or tax evasion is not always entirely clear and depends upon the legislation of the countries involved and the particular circumstances of the companies or individuals.
The UK is a tax haven for people of foreign domicile, even if they are UK resident (residency and domicile being separate legal concepts in the UK), in that they pay no tax on foreign income not remitted to the UK. Similar arrangements are to be found in other countries including Ireland and Canada.
Switzerland is a tax haven for foreigners who become resident after negotiating the amount of taxation with the canton in which they intend to live.
Neither Monaco nor the Bahamas levy personal taxes.
In the various Channel Islands and in the Isle of Man no tax is paid by corporations or individuals on foreign income and gains. Local taxation is low.
The United States is unlike other countries in that its citizens pay US tax on their worldwide income even if they are not resident in the USA. US citizens therefore find it difficult to take advantage of practically all personal tax havens. By contrast, most other countries tax their citizens who are not resident only on income arising in the country itself, not on worldwide income.
This onerous position of non-resident US citizens is ameliorated if (s)he can prove tax has already been levied by another country with whom the USA has a tax treaty.
Examples of Tax Havens
USA Citizens
See also
