Using Offshore Banking As Tax Havens
Offshore banking is commonly used as a tax haven by those who either wish to evade taxes in their country of residence or at least pay far less. A tax haven as the name implies is when accounts are made in a foreign country where taxes are considerably less and sometimes are not even charged.
Wealthy individuals and prosperous businessmen exploit the advantages of offshore banking to the fullest. However, on a brighter side, the less developed economies of the world benefit by businesses landing on their shores. There are considerable differences in tax laws in different countries. There are different regulations for commercial and personal accounts. And it is always worth enquiring before you actually open an account and set up your business.
Most countries levy taxes on those who make their money within the country and their incomes from other global sources. Some people prefer to head out for countries with a lenient tax regime and save on their precious bucks. Some others establish businesses or legal bodies like offshore companies or foundations and offshore trusts. They then move these resources to these newly founded companies. These also entail that they do not have to show this income in their native countries.
USA has a creditable method of ensuring that citizens do not have a chance to evade taxes; by taxing them on both their domestic and international incomes. This has prompted some people to give up their US citizenship to avail of greener pastures in foreign lands. US tax laws however exempt a citizen to up to USD 80,000 of their salary and household costs if they are residing abroad. Some of these kinds of incomes are siphoned away from taxes. US citizens can also establish offshore foundations and trusts, which in turn can be operated as tax havens.
There are many advantages for countries to set up tax havens. It is not compulsory for countries to charge as much tax as other industrialized countries. Many countries offer tax exemptions and tax incentives to companies and traders to set up their business in their country, so that they recruit local people which will solve the problem of unemployment. This helps to enhance the country's economy. New businesses increase the standard of living and help the locals to learn new skills. Thus these countries are no more in competition with large developed countries.
Many are against these tax havens declaring them to encourage people to evade taxes in their own counties. They also feel that money laundering can be more widely practiced. This is not necessarily so as these tax havens do cut down on the black markets and sometimes have tougher laws for laundering money.
It is a popular myth that all tax havens are tax-free, as some do levy taxes on incomes and property. There are however differences in tax laws in various countries. It is prudent to enquire about these laws when you are thinking of operating out of a tax haven. In fact, this is the right way to zero in on a tax haven that will be most suited to your needs.
Peter Waterhaze is the owner of F offshore, the #1 source on the internet for information about offshore. For more articles on offshore why not visit: http://www.fyioffshore.com/articles
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