Several multinational corporations are generally slapped with heavy tax rates every year; in an effort to evade hefty tax payments, several companies restructure their assets around tax havens. Simply put, a tax haven is a country that offers both individuals and businesses little or almost zero tax liability. On top of reducing tax liability, offshore tax havens also offer extreme privacy, something that is necessary when trying to downsize profits and earnings from tax authorities in the home country. Let us now explore a few commonly preferred tax havens across the world, and what makes them unique. Generally speaking, the Bahamas, Panama, and the Cayman Islands are a few common tax havens in the Caribbean.
Several tax havens end up charging only a business license fee on an annual basis, which still translates to zero tax liability. Several Caribbean countries have specialised as tax havens to improve their economy and become independent from the stronghold of other dominant nations of the world. While tax havens sound like a highly profitable avenue for stashing away excess money, it is advisable to consult with a seasoned tax and wealth management professional before venturing into the tax-free lands.
The Cayman Islands is a commonly preferred tax haven which also happens to be one of the world’s five largest and most prominent offshore financial centers. A few services such as offhsore banking, offshore trusts, and incorporation of offshore entities are commonly offered by The Cayman Islands. One of the fundamental reasons behind charging zero taxes is the fact that offshore income is deemend untaxable in these tax havens. Moreover, The Cayman Islands have no corporate tax, inheritance tax, capital gains tax, and gift tax as well. Combined with such lenient taxation system, The Cayman Islands have a strict set of banking laws with no foriegn treaties that may require these financial institutions to reveal banking data of their cusotmers. Ultimately, The Caymans government also doesn’t require its financial institutions to share any reports with regard to the financial transactions happening in the country’s banking institutions. A simple streamlined onboarding process combined with no exchange controls, and zero offshare pay stamp duty on asset transfers makes The Cayman Islands an ultimate tax haven of the Caribbean islands.
After The Cayman Islands, The Republic of Panama is considered the next most secure tax haven. One of the few aspects exclusive to Panama is the fact that the country’s offshore jurisdiction law permits companies to conduct business operations both within and outside the offshore jurisdiction. Much like The Caymans, the Panamanian companies are also not required to pay any income, corporate, and local taxes. It also offers extreme privacy to offshore entities by law. The Panama also has no tax treaties and exchange control laws with other countries, making it a classic and trusted tax haven.
The Bahamas become a widely popular tax haven after the 1990s when it passed a legislation enabling incorporation of offshore international business corporations. Several businesses and individuals of the United States and Europe commonly prefer stashing their money in The Bahamas. The offshore entities registering under the financial institutions of The Bahamas are not required by law to submit accounting records to tax authorities. A few services offered by this tax haven are registration of offshore entities, offshore banking, and offshore trust management. Among all the Caribbean tax havens, The Bahamas was the first to introduce strict and privacy centered banking secrey laws. Details of account holders in the financial institutions of the country can only be obtained by a specific order issued by the Supreme Court of The Bahamas. All offshore business profits are free from liability under the Bahamian laws, making the country a trusted offshore tax haven.
Dominica is a highly trusted and secure tax haven that is often confused with the Dominician Republic. The Dominician Commonwealth has put several tax laws in place that streamline the creation of offshore corporations, trusts, and foundations in a hassle-free manner. The country imposes no corporate and income taxes, and also charges zero capital gains on any income that is earned abroad. Moreover, Dominica doesn’t charge any withholding, estate, inheritence and gift taxes, making it a seasoned tax haven. Offshore entities do not have to pay stamp duty whilst transfering assets, making asset transfer and relocation a breeze. The identity of offshore entity owners in Dominica are protected by the country’s stringent privacy laws. Finally, there is no taxation of interest that is earned as a result of storing assets in the country’s financial institution, making Dominica a highly secure and a trusted tax haven.
Apart from the aforementioned list of tax havens, Nevis, Anguilla, and Costa Rica are a few other popular tax havens. While assets stored in these tax havens are generally safe, there have been few privacy invading scandals such as the Panama Leak wherein the details of several offshore entities have been released, leading to several countries prosecuting the offshore account holders and thereafter, taking them under custody for tax violations and so on.