tax haven

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Tax haven

A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific activities such as exporting or investing.

Tax Haven

A country that has a low tax liability compared to other countries or no taxes at all. Some countries deliberately set themselves up as tax havens in order to encourage international corporations to register themselves there. Some countries that are not tax havens have loopholes in their tax codes in order to allow certain persons and companies to place some of their assets in an account in a tax haven.

tax haven

A country or other political entity that offers outside businesses and individuals a climate of minimal or nonexistent taxation. In some cases, the low taxes apply not only to those levied by the tax haven itself but also to the possibility of reducing or avoiding taxes levied in the investor's home country.

tax haven

a country which imposes low rates of personal and corporate TAXES, and which as a consequence tends to attract wealthy individuals, MULTINATIONAL ENTERPRISES and FINANCIAL INSTITUTIONS seeking to minimize their taxation liabilities. At the present time, countries operating low-taxation systems include Bermuda, Jersey and the Cayman Islands. An OECD report published in 2000 listed 35 ‘offshore financial centres’ which it classed as ‘tax havens that harm trade and investment’. The OECD defined harmful jurisdictions as those that offered zero or low tax rates but fell short in legal and administrative transparency. The latter factor makes it difficult for other countries ‘tax authorities’ to detect and observe the complex financial transactions undertaken by criminals and MNEs (MULTINATIONAL ENTERPRISES) to ‘hide’ their tax liabilities.

There are two main types of tax haven arrangements:

  1. tax exempt companies beneficially owned by non-residents of a country which pay a small annual administration fee (under £2000) in return for being exempt from income and withholding taxes; there are no capital gains or inheritance taxes. Tax haven countries themselves ‘gain’ from the creation of local employment and the extra income this creates, often in an impoverished country or a country lacking other resources (e.g. the Channel Islands and the Isle of Man);
  2. international business companies that are ‘accommodated’ by ‘designer’ taxation, whereby tax havens ‘tailor’ rates of tax to help individual MNEs to minimize their ‘onshore’ tax liability. MNEs negotiate low tax rates which in turn allows them to meet thresholds for tax exemptions in onshore jurisdictions. See also TRANSFER PRICE, MIXER COMPANY, MONEY LAUNDERING.

tax haven

a country that imposes low rates of personal and corporate TAXES, and as a consequence tends to attract wealthy individuals and MULTINATIONAL COMPANIES seeking to minimize their taxation liabilities. See MIXER COMPANY. See also TRANSFER PRICE.
References in periodicals archive ?
Transfer pricing, triangular transactions, tax haven countries, privileged tax regimes, jurisdictions with absolute guarantee of banking secrecy, capitalization companies, etc.
Perhaps one reason the capital neutrality paradox, based on minimum revenue assumptions, has not been identified in the past is because many tax haven countries adopt income tax rates of zero or near-zero either explicitly through rates or through granting tax holidays--and thus the assumption has been that such jurisdictions raise little to no revenue through tax competition.
The participation can be total or partial, and can be restricted to certain types of income, such as active business income, and can be used to guard against accumulating income in tax haven countries.
In the wake of controversy stirred by the so-called Panama Papers, which revealed widespread use of tax havens and shell companies by wealthy global elites, officials from the Group of 20 major economies Friday threatened to penalize tax haven countries that do not comply with new information-sharing efforts and moves to reduce tax mismatches between countries.
396) to treat certain controlled foreign corporations located in specified tax haven countries as domestic corporations for federal tax purposes.
Likewise, some corporations that report having a subsidiary in a tax haven country could have additional subsidiaries in tax haven countries that they have not reported.
Service fees may be paid only through the official--direct--routing to the beneficiary, and not to any corporation domiciled (or even bank accounts) in tax haven countries.
In addition, some companies that were incorporated in the United States have reincorporated in tax haven countries through "corporate inversion transactions.