To understand what tax havens actually are, and why they exist, let’s go on a little journey..
Let’s start with who sets your taxes (how much you have to pay and why)? Bureaucrats, politicians, ”civil” servants? And who pays their wages? The “treasury”. Where the treasure is kept… Have a guess where the treasury gets that “treasure” from - YOUR TAX. Starting to see a wee conflict of interest there?
How motivated do you think politicians really are, to reduce the pool of cash they draw on to stay in power with election “bribes” or pay their own salaries? Let's face it, probably not very much.
Wealthy people often structure their finances in a way that is “tax efficient” so they have more control over THEIR money, and when and where to share it for the greater good.
They’re not eating babies or beating serfs, contrary to what many politicians want you to believe. They’re taking care of themselves, and their families. Not waiting for a hand out from the state, or a bureaucrat to do it for them.
This doesn’t necessarily make them bad people, despite propaganda to the contrary by the same bureaucrats (guess why). It simply means that they’ve created the ability to practice a little something that we’d all love to hold on to - freedom.
In many ways, tax has become the ultimate expression of modern slavery. Think about it… Think medieval if it helps.
First of all though, understand that I’m a private citizen. I believe in privacy, freedom and the right to choose (everything).
I’m not a financial advisor and this isn’t financial advice.
It is a personal opinion, and a bit of research into some of the reasons many of the worlds rich and powerful structure their affairs in a certain way.
So, let's explore a scenario, or two…
Say there’s a powerful figure that dictates to you exactly how much of your time you need to spend working their land, before yours. Your labour is then providing food for their table, in equal or greater measure than your own. Let’s call that powerful figure Lord Govt.
If you don’t give him half your crop (or up to 70-80% of it in many cases) he’ll threaten you, publicly shame you, slap you in chains or take away your “freehold” family home and savings.
Fantasy? It’ll never catch on I hear you say… Surely there’ve been revolts and revolutions to fix that very problem. We don’t have lords and masters any more do we? We’re free...right?
Fast forward to the modern-day. What our feudal overlords used to get away with, is, by modern standards, amateur hour. And some people have had enough. The serfs are revolting! Well, some of them at least. Quietly, and legally.
Instead of hiding a fair share of their crop under a little straw in the barn so Lord Govt. can’t find it at tax time, they “freelance”, or “consult” through offshore companies registered in fairer tax jurisdictions. It’s completely legal, and will stay that way (so long as we don’t make a song and dance about it).
In the case of our leaders, large consulting contracts, book deals or “speaker fees” are chanelled through legitimate foreign holding companies.
It’s bread and butter for a retired PM or president. Some could argue, it’s why they put up with the rubbish they do in office for a couple of hundred k a year. Some could anyway.
After all, often the best “consultants”, or freelancers, in many cases using these offshore tax havens is.... wait for it.. the politicians themselves. What sort of an idiot would sell themselves into slavery? Not your friendly MP that’s for sure.
Keep in mind though, our happy “free”lancer (or politician) still can’t avoid paying many of the clever new taxes Lord Govt. has tacked on to literally every aspect of his modern life.
If he still lives physically in a heavy (retail) tax jurisdiction like Britain, there’s the 22% he has to pay on his lunch through VAT (and of course his weekly shop to feed the family), there’s the tax on his glass of whisky at the end of a long day via alcohol tax, council tax on the house his foreign company owns, and of course congestion charges for the privilege of living in a smog filled city under the watchful eye of Lord Govt’s tax collectors.
Finally, and thankfully he doesn’t get to feel this final raping.. the sum total of his life’s work, left in trust for his family to remember him by, is plundered by “Estate Tax” (in the UK), or Death Tax for what it really is - at another 40%!
Seriously, they even get you when you’re dead.
The list of taxes is very nearly endless, meaning, even if he pays no PAYE on his income at all, because he uses one of these havens to structure his business, he is still paying more than 40% of his local disposable income through direct and indirect taxes at home, and of course a chunk of what's left in that jurisdiction when he dies.
Funny thing is, this wasn’t always the case. As the governmental beast has grown over the decades, so has the need to feed it. The tax requirement grows in equal, or greater proportion.
Modern Taxation was introduced in 1799 to help the underprivileged by charging a small sum of money from the rich. However, in just 220 years of the history of taxation, the purpose of tax has changed dramatically. And we all have to pay the price Rich AND poor.
If “the masses” looked up from their TV’s long enough (although having paid a TV license why would you), they’d discover an enormous bloated bureaucracy has taken the place of the old feudal lord.
There’s no longer one little castle to fund every few hundred miles, and the odd poor house, there’s layer upon layer of “government” and “government services” in each and every village, town, city and region.
All of this tax take must have made life better though right?
Equality, justice for all. The elimination of poverty. Amazing healthcare free of charge? No. Sadly not. That’s the false promise made every election time. The old “if you give me your vote, and your cash, I’ll fix everything up real nice - so you don't have to...in just 4 easy years” pitch.
The gap between classes (rich and poor) has only increased with time. The pandemic helped show us just how thin the veneer of “public health and safety” really is. All this money we thought we were paying to the government to protect us, should something go terribly wrong, simply seems to have vanished in to the big black hole of bureaucracy.
I’ll never forget the classic “Stay Home, Protect the NHS” message everywhere at the start of the outbreak.
When I actually caught Covid in March of 2020 I was told over the phone to stay home, and no matter what, don’t come to hospital. The phone-based doctor actually wished me “good luck” at the end of the call. I was left angry, unable to breathe and very, very scared.
Wasn’t the point of a massive taxpayer funded, “free” healthcare system to protect ME? Not the other way around?
We watched our screens as law and order completely broke down with mobs of rioting lunatics tearing down public monuments and defacing or destroying private businesses. Not to mention the odd random Islamist stabbing when you’re trying to enjoy a picnic with your children to escape a lockdown in Hyde Park.
When I then had a broken tooth, a few months after the virus, I was told that to see an NHS dentist, I would need to wait 4-6 weeks for “urgent” treatment and that they were only “doing extractions”, for everything!. If you’ve ever had an exposed nerve in a broken tooth you’d realise how painful, and frankly medieval that sounds. I remember a story in The Times of a bloke pulling out his own tooth in total desperation. I didnt didn’t have enough Whisky for that.
Fortunately, for me at least, I could “go private” and afford to pay the massively inflated, opportunistic private dentist my wife found. Just three thousand easy pounds and no more pain.
Of course, if I’d paid every cent that governments had wanted me to over the years, I’d still be writhing in pain waiting for an extraction on the NHS (assuming of course they felt safe and protected first).
It seems a lot of people are facing up to the reality, that what we thought we were getting for so much of our money, simply isn’t there.
There was no real medical protection from the virus, no “PPE“, and no medical care if you caught it. Stabbings and Riots are all too common. No health and no safety. The social contract appears broken.
Now, to add insult to injury, and some serious mismanagement, various governments globally are trying to find ways to pay off the debt that all this incompetence and lack of preparedness cost us, the tax payer. The only way they know how.. Enter..a cunning new tax.. The “wealth tax”.
A new tax, carefully labelled to target the wealthy, as very few of us think of ourselves in those terms, sooooooo… I guess it’s someone else’s pocket and problem. Right? Wrong. Remember the whole start of this tax thing.. A small amount charged to the rich to help the poor. Hardly noticeable and again, really, they’re only after the rich, and they can spare it right?
It’s no wonder then why most people, who can structure their affairs in a way that allows them to keep slightly more fruits of their labour, prefer to bail themselves out when they need it, rather than hoping the government finally gets it right.
So, what’s the secret? How do they do it? What exactly is a tax haven, and how do you join the club to get started?
Firstly, there is no universally accepted definition, but tax havens, also known as offshore financial centres, are generally countries or locations with low, or even no, corporate taxes.
These centres allow outsiders to establish businesses within their jurisdictions quickly and simply.
Tax havens also generally restrict public disclosure about businesses and their owners. Because information can be challenging to obtain, tax havens are also known for their confidentiality in areas of law.
In other words, they are private.. in some cases so private it’s virtually impossible for anyone, or any official to obtain any information whatsoever.
As for joining the club.. feel free to email us to learn more about that - hello@globalinvestorgourp.co.uk
Why are offshore tax-havens still a thing?
Tax havens are known to reduce or eliminate taxes that would otherwise be owed to domestic tax authorities, if the funds were not placed in offshore accounts. Tax avoidance has shifted up to $32 trillion in private wealth to offshore havens around the world.
Tax havens are places where businesses, their owners and those in the know keep money legally in offshore accounts to reduce their domestic tax bill.
Simply, they’re still (and will remain) in existence as those in power need them the most. Like David Cameron (former UK PM).
This is a serious industry, servicing serious players. It’s become so poplar, that there are many companies that help us common folk set them up too.
Here, I review my Top 20 Global Tax Havens. Many exist on the continent, avoiding capital gains taxes, income taxes, and corporate taxes. These areas have attracted large corporations and wealthy private investors seeking to avoid taxation policies in their native countries.
One thing you may also notice is that most of them not only offer great tax advantages, but could be rather lovely to work remotely from for a week or two once in a while!
1. British Virgin Islands
The British Virgin Islands is a popular tax haven for legal business corporate entities, celebrities, millionaires, and criminals alike. It provides inexpensive and convenient shell companies that allow their holders to avoid publicly registering their names
Citizens are not taxed in the British Virgin Islands unless they work there. There is no withholding tax in either region. While holding and channelling money through British Virgin Islands companies is totally legal, shell companies formed on the island are sadly often featured in the world's most notorious controversies.
2. Cayman Island
The Cayman Islands are among the world's most well-known tax havens. Unlike most nations, the Cayman Islands do not have a corporate tax, making it ideal for multinational companies to establish joint venture entities to shield most or all of their earnings from taxation.
Additionally not having a corporate income tax, the Cayman Islands levy no taxation on citizens. They do not have an income tax, property tax, capital gains tax, corporate tax, or withholding tax. As a result, they are viewed as tax neutral.
3. Bermuda
Bermuda is considered a tax haven; however, Bermuda does impose several taxes, including an employer payroll tax and property taxes. Bermuda has no corporate tax, and a company that is integrated into the country is regarded as a tax resident of Bermuda. Bermuda has not signed any double tax treaties.
4. The Netherlands
The Netherlands is a tax haven, according to most empirical data. In the Netherlands, corporate taxes, as well as interest and licencing income taxes, are meagre. This is because it purposefully provides companies that might not otherwise seek to be native within their territory with the opportunity to reduce their taxable income on interest, royalty payments, dividend income, and capital gains revenue from overseas affiliates.
Involvement exclusions include tax breaks that remove tax liability from dividends and capital gains earned outside the country. Royalty payments and interest payments are also tax-free, though the Netherlands started withholding tax in 2021 for entities established in low-tax areas of the law.
5. Switzerland
Switzerland is one of the most popular tax havens and one of the world's largest global offshore financial centres. With favourable tax rates, a booming economy, and an economic system best known for its secrecy, it attracts wealthy people and international companies.
Once home to many anonymous banks, Switzerland, which no longer extends functions anonymously, remains a popular tax haven due to the country's adherence to privacy and confidentiality in banking activities.
Despite the efforts of U.S. tax evasion law enforcement officials, Switzerland continues to remain mainly on the list of major European tax-havens. Russia has also defined Switzerland as an offshore jurisdiction that refuses to share account holders' bank details.
6. Luxembourg
The role of Luxembourg as a tax haven for giant organisations across the world is well-known. The nation's tax rules have the potential to save corporate entities tens of billions of dollars.
German banks are prone to benefit from Luxembourg's tax system, as many business dividends are not taxed. Long-term investment income on stocks is tariffed if a majority share of 10% or greater is not kept.
Luxembourg has become so well-known for its tax laws that much of the nation's attractiveness to outside business owners is owed solely to these features, and Luxembourg's economic system is built in part on the profits gained from its tax system.
If the country is no longer appealing to any outside businesses for these reasons, the country's financial stability may be jeopardised. European decision-makers have urged the government to change its tax structure to boost trade and individual taxation.
7. Hong Kong
Hong Kong includes more companies per year than any other jurisdiction, and the vast majority of these are trading companies engaged in legitimate business rather than asset protection or tax avoidance vehicles. There is no guarantee that the company is also being used to avoid tax. Hong Kong is a very well-recognised jurisdiction that is not on any blacklist.
8. Jersey
Jersey is a favourite haven for UK money and is one of Europe's leading tax havens. They offer their residents a 0% corporate tax rate and low personal income tax rates. Aside from a beneficial tax regime, Jersey Island attracts investors with various other economic advantages, such as low social security benefits, no stamp duty on equity transactions, and a simple method of making tax and social security payments. Jersey has become a popular destination for high-net-worth individuals looking to reduce the tax burden due to its appealing economic structure. Currently, the island holds nearly €2 trillion in investors' funds (that we know of).
The government levies no corporate taxes on businesses permanently formed on the island, for either domestic or international use. Financial companies pay a flat 10% corporate tax, while major multinational retailers and utilities pay a 20% rate. Dividends and capital gains are not taxed in Jersey.
9. Singapore
Singapore qualifies as a tax haven due to its low taxes and other perks for foreign investors. Residents are subject to a progressive tax on their income, with a top marginal tax rate of 22%. For the 2019 tax year, the highest tax bracket is defined as incomes exceeding USD 320,000. In general, capital gains are not taxed.
The effect of tax policy, combined with the island city-location state's as a gateway for companies looking to expand into emerging Asian economies, has made it a global hub for foreign investment and e-business.
Singapore's corporate income tax rate is a flat 17 percent. However, other incentives presented by Singapore's Inland Revenue Board may reduce the effective rate.
Start-up businesses in Singapore can benefit from a tax exemption of up to $125,000 on the first $200,000 of income for the first three years of operation. Companies must be integrated into Singapore and have a maximum of 20 shareholders to meet the criteria for start-up exemptions. One shareholder must be an individual who owns at least 10% of the company's stock.
10. United Arab Emirates
The United Arab Emirates is a magnet for the world's ultra-rich. It also has started to emerge as one of the fastest-growing corporate tax havens, with more than $200 billion flowing into the country.
The UAE government implemented a value-added tax (VAT) on January 1, 2018, at a standard rate of 5%.
11. Ireland
People claiming to live in Ireland but are not residents and have a residence elsewhere can take advantage of the country's favourable tax environment. Ireland has a long history of offering low corporate taxes to attract international companies to relocate their operations on paper rather than physically.
Because of its taxation and economic policies, Ireland is known as a tax haven. The law heavily favours the formation and implementation of corporations, and the business environment is indeed very favourable for all corporate entities, particularly those investments made in digital transformation.
Ireland is booming and has a 12.5 percent business tax rate, while artists receive tax-free income. It’s a good example of how keeping taxes low to inspire commerce can have massive upside for a society Ireland has attracted a who’s who of major corporates who now base their head offices there, such as Facebook and Google.
12. Bahamas
After introducing laws allowing the incorporation of offshore corporations in the 1990s, the Bahamas became widely popular as a tax haven. It is still one of the most popular tax havens for people in the United States and Europe. The Bahamas provides offshore bank accounts, shell company registration, shipping registration, and offshore trust management.
The Government of the Bahamas is in charge of collecting taxes in the Bahamas. Because there is no income tax, capital gains tax, inheritance tax, or company tax in the Bahamas, it is considered a tax haven. Consumption, assets, and import fees, as well as licence fees generate government revenue.
13. Mauritius
Mauritius has one of the world's lowest tax systems. Individual and corporate income tax rates are both set at 15%.
Mauritius's offshore businesses, which do not conduct business with Mauritians but don't use Mauritian currency, are exempt from Mauritian taxes. Mauritius has prioritised access to emerging and developed markets, such as the E.U. and the United States.
After at least three years, foreign citizens who have lived in Mauritius and earn a salary beyond a certain threshold can apply for residency. Permanent residents can purchase property on the island. One of the benefits of forming a Mauritius offshore company is the high level of privacy protection offered by a structured business.
14. Belgium
According to a European Parliament commission, Belgium has the qualities of a tax haven. Belgium tends to attract multinational corporations looking for tax relief. Simultaneously, Belgian money is being diverted to offshore tax-havens. The Belgian state itself appears to be an investor in tax havens. While anti-tax evasion measures have since been put in place, Belgium still lags behind the rest of Europe.
The Belgian Corporation for International Investments (BMI) encourages Belgian companies to make foreign investments. The Belgian state owns 63 percent of the Belgian Corporation for International Investments through the National Bank and the Federal Holding and Investment Company.
15. Guernsey
Guernsey is the highest-rated international financial centre with a solid reputation and high standards. The general tax rate for Guernsey businesses is zero.
There is no capital gains tax, inheritance tax, value-added tax, or withholding tax. Income taxes are usually taxed at a flat rate of 20%. The only exclusions to the zero-rate corporate tax are earnings from banking, domestic insurance, insurance intermediary, and insurance manager businesses, which are taxed at 10%. Consequently, income from trading activities governed by the Channel Islands Competition and Regulatory Authority (CICRA) and income from the ownership of the land and buildings in Guernsey are taxed at 20%.
Individuals who are resident but not entirely or primarily resident in Guernsey can be appointed to be taxed only on Guernsey source income, subject to a £30,000 standard fee. Guernsey will not tax any additional income earned outside of Guernsey in this case.
Alternatively, a resident who is not the sole or principal member of Guernsey can choose to be taxed on his or her global income. Special provisions are accessible to those who live in Guernsey solely for work.
16. France
Given current tax increases, France continues to be a financially appealing relocation destination for the E.U. and many other countries.
Expats moving to France are now excluded from the French wealth tax on assets held outside France for the first five years of residency.
The tax has been a significant obstacle for some, although it does not affect many people, affecting only those with a global estate worth more than €1.3 million. The good news is that it appears that this tax is turning into a property tax and will therefore only apply to the property. As a result, trying to avoid this tax has never been easier.
There are also allowances to consider, such as 30 percent off the primary residence and offsetting all taxation and debt.
17. China
China is considering tax breaks to entice more global funds to register and stem the money flow to international tax havens. International funds registered in China are currently subject to taxes of up to 25% on capital gains earned worldwide, highlighting the country's attractiveness as a base. According to the data, Chinese money flowed into the British Virgin Islands increased by nearly 60% in 2017, despite a drop in overall outflows.
If such a tax break exists, it will undoubtedly attract funds that invest globally but want to register in China. Regulatory constraints, such as those governing the use of foreign currencies must first be lifted.
18. Isle of Man
The Isle of Man is a well-known tax haven and a self-governing territory that is part of the British Crown but enjoys individual autonomy and is known for its well-established finance and offshore banking sectors.
The Isle of Man is regarded as a low-tax jurisdiction. As a result, there are no corporate taxes, capital gains taxes, wealth taxes, stamp duties, or inheritance taxes. Residents are subject to an income tax ranging from 10% to 20% of their yearly earnings, but businesses are exempt. All offshore and foreign private companies formed on the Isle of Man are exempt from local taxation. Non-residents, on the other hand, are taxed at a rate of 20%.
The Isle of Man has no corporate taxes, though there is a 10% tax on banking and retail with an income of £500,000 or more. In addition, all land and property purchases, sales, or development projects are subject to a 20% income tax.
If such a tax break exists, it will undoubtedly attract funds that invest globally but want to register in China. Regulatory constraints, such as those governing the use of foreign currencies, must first be lifted.
19. Malta
Malta has a traditional tax-based system, but many people regard it as a tax haven due to many potential benefits for foreign companies and shareholders.
The 'offshore' sector had existed for some time, but due to Malta's acceptance into the E.U., they had to restructure their international financial industry to comply with E.U. legislation.
Malta was forced to give up its tax-haven status and reform its offshore company structures; however, due to its excellent reputation, low tax and rebate policies, EU-compliant corporate legislation, and world-class banking system, it has been able to retain many of the desired aspects, attracting many international companies and offshore investments. Malta has signed over 70 Double Tax Treaty agreements.
Non-resident companies enjoy many of the same advantages as resident companies.
20. Turks & Caicos Islands
See how we buried the best at the bottom? You’re welcome! For the lucky one who read this far…
The Turks and Caicos Islands (the Islands, the TCI) are an intentional "offshore finance centre" created by the United Kingdom in 1970 due to a U.K. government-sponsored study.
There is legislated bank and commercial secrecy, with some of the most severe penalties for breaches of confidentiality found in any tax haven.
Non-payment of tax in another country is not considered an offence that would require a company or bank to share client information with the tax authorities of another jurisdiction.
There are no tax treaties with other countries, so privacy from foreign tax authorities is possible.
By default, the Turks and Caicos Islands have neutral tax jurisdiction. As a result, you will not be required to pay capital gains or income taxes. Whether you are a local or a foreigner doing business on the island, you will not be required to pay any taxes on your earnings.
Summary
With dozens of highly regarded, cleverly constructed, and perfectly legal “tax-efficient jurisdictions” floating around the globe, you don’t have to suffer the indignity of economic slavery anymore. Well, not entirely.
Why not join thousands of politicians, sports stars, business leaders and major corporations in one of these sunny little havens today?
Looks a whole lot better to me than touching my toes every time the taxman decides the PM needs a new flat makeover.
Well… time to celebrate. It’s Monday after all!
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