The recent leak of Panama papers indicating names of famous personalities, celebrities, sportsmen, politicians having accounts and companies in safe tax havens has created a stir.
Here are few things you should know about tax haven countries.
1) What is a tax haven?
Taxes havens are countries where foreign individuals and companies are not taxed or taxed at very low percent. In such countries business are operated out side hence they are called offshore companies and they tend to enjoy the benefits offered in that countries.
Such companies are operated by maintaining secrecy of the owner identity such as name and personal information.
2) Reasons, why tax havens, are popular
Individuals or companies can be taxed at low rates or virtually zero rates, really depending on a whole lot of things. One of the biggest advantages is the high level of secrecy, though with wikileaks and the recent Panama case, even secrecy is something that is questionable.
However, in the foreseeable future it may be difficult to conceal things. Indian Finance Minister Arun Jailey recently said: ""With G20 initiatives, FATCA and bilateral transactions in place with effect from 2017, the world is going to be a far more transparent institution and therefore, this kind of an adventurism will prove to be extremely costly for those who have indulged in it," Jaitley. He was referring to unaccounted wealth in tax havens.
There are also little worries of inheritance or corporate governance rules.
3) Top Tax haven countries
Among the countries that are considered as safe havens include: Switzerland, Hong Kong, USA, Singapore, Cayman Islands, Luxembourg, Lebanon to name a few. Swiss Accounts are known for their secrecy and getting account information is not very easy.
4) Offshore companies
Offshore companies tend to benefit as such countries do not ask to pay income tax on international transactions, fees or sales tax.
5) Shell Companies
There are many shell companies which are being operated in tax havens, encouraging money laundering.
Shell companies are those which exists only on papers with no employees and office.
6) Offshore accounts
Many offshore banks in select locations offer a great amount of tax efficiency. This, of course, would depend on the local laws and guidelines from time to time.