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January 25, 2008
The Best Tax Havens
The world is full of tax havens – the UK can be a tax haven for non-domiciled individuals for example, and certain states in America are even tax havens for those who do not reside therein but who use the states as places to register their business.
However, the UK and US are not high on the list for most people when is comes to considering the world’s best tax havens; naturally enough the locations typically synonymous with low tax that we think of are jurisdictions and nations such as the British Virgin Islands, the Cayman Islands, Switzerland, Lichtenstein and Monaco. But in actual fact, some of the best tax havens in the world are far less glamorous!
The Isle of Man is one of the best tax havens in the world. Lying offshore from the UK, it is not blessed with palm-fringed beaches or year round sunshine like one might assume all tax havens are, but it does have superior investor protection schemes in place that ensure if a financial services company operating on its shores gets into fiscal difficulties, those who have invested therein are protected with up to 90 per cent of what they originally had on deposit insured and guaranteed. The Isle of Man is also a jurisdiction which manages to balance its dual commitments to those seeking tax shelter and the international authorities who are seeking to stamp out illegal tax evasion and money laundering.
The Isle of Man also has excellent client privacy laws in place, which ensure it is chosen time and again as the best tax haven for those seeking taxation shelter for their personal and business affairs. At the same time, the Isle of Man manages to keep the European Union and the Organisation for Economic Co-operation and Development happy by signing up to legislation that means serious crimes such as money laundering can be investigated if they are believed to have taken place within the jurisdiction.
Other exceptional examples of tax havens that offer investors and business persons tax friendly policy, security and privacy but which also adhere to the guidelines laid out to prevent serious crime include the likes of Singapore and Hong Kong which have both benefited from an increase in inward investment since the EU Savings Tax Directive came into force.
The directive requires many nations within the EU and third part countries to automatically exchange information or withhold tax on interest bearing investments and accounts held by investors who reside outside the nation where the money is invested.
As neither Singapore nor Hong Kong have signed up to the directive, those who wanted to ensure their privacy remained intact favoured the locations for their business and many have moved significant amounts of money to these particular offshore tax havens.
As mentioned above, the UK is also a good tax haven for those who are not domiciled in the UK – even if they are a UK resident! For such individuals, as long as they do not remit foreign earned money into the UK they need pay no tax on it. Ireland has a similar policy in place and Switzerland is a decent tax haven for foreign residents who can negotiate the amount of their income that will be subject to taxation within the Swiss canton in which they intend to live.
Monaco and Andorra are both popular with high net worth individuals who want to pay no income tax whatsoever. If you are wealthy you can move to either location and legitimately avoid all personal income tax. The Bahamas also levies no personal income tax and has no capital gains tax or inheritance tax in place either. But depending on which way you look at it, Vanuatu is quite possibly the world’s best (or worst) tax haven.
If you’ve never heard of it, Vanuatu is an island archipelago state in the Pacific, it’s also a tax haven that maintains absolute client confidentiality and will not release any account information to governments or law enforcement agencies no matter how much evidence they may have against an individual or corporation.
In Vanuatu, you can avoid income tax, withholding tax, capital gains tax, inheritance tax and exchange controls. As stated, it depends on which way you see things as to whether Vanuatu is the best or the worst tax haven in the world! Reputedly the location is suspected as having been used as a mechanism for international transfers of cash in many, many illegal transactions.
In terms of which tax haven you should choose for your company incorporation, trust creation, investment or banking business, take legitimate, qualified advice from a professional financial adviser and ideally, favour locations where there are investor protection schemes in place and where the authorities manage to balance their level of cooperation with international bodies determined to crack down on criminal financial activity and their commitment to protect your privacy and your rights.