Using Offshore Tax Havens to Your Advantage

An offshore tax haven can be described simply as a jurisdiction which offers taxation advantages to the individual or corporate body.  Such advantages can include levying low rates of corporate tax against companies or income tax against individuals, or levying zero tax on an estate or on capital gains accrued for instance.

There are many examples of tax havens around the world and each location - from Andorra to Vanuatu - can offer you a complex array of features and benefits.  In this article we examine the four main ways you should be using offshore tax havens to your advantage and how you can get professional advice to help you select the ideal jurisdiction for your personal requirements.

1) Using an offshore tax haven as a place to reside - as many high net worth individuals regularly discover, becoming a ‘tax exile’ and moving to reside elsewhere other than your country of birth means that you can often structure your personal financial affairs carefully so that you can avoid certain types of taxation entirely legitimately.

Generally speaking, the nation in which you reside for the majority of time has the right to tax you, and so by moving to reside in an offshore tax haven you will be taking advantage of their attractive low or zero rates of taxation.

2) Using an offshore tax haven as an asset protection location - offshore companies and trusts or offshore companies within trusts which are structured across a variety of offshore tax havens can be used as the most effective vehicles for the protection of an individual’s assets.

3) Using an offshore tax haven as a base for business - companies that are not required to have a specific presence in a given location as well as those which have little or no requirement for direct staff can establish operations offshore and benefit from obvious and immediate taxation advantages.

4) Using an offshore tax haven as an efficient location for financial intermediaries - a great deal of activity conducted through offshore tax havens in this day and age relates to the financial services industry – whether that activity can be attributed to offshore banking and investing or life insurance and mutual fund operation and management for example. 

Often a financial intermediary establishes operations in a low tax haven and attracts funds from investors, they can then lend this money forward or invest the capital outwards – often in a high tax country.  While this can negate any tax benefits, it does ensure that the financial house involved in managing the funds can span jurisdictions for beneficial investment purposes without adding to the tax burden of the funds in question, or indeed the individual investor looking for the best offshore investment products.

If you would like to learn more about specific offshore tax havens or ways in which you can structure your overall personal and/or business financial situation in the most secure and tax efficient manger possible, please contact us immediately.  Together with our strategic partners we are best placed to assist you.

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