Offshore Banking As A Tantalizing Tax Haven

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.

According to the laws of United States of America, residents cannot evade or escape from paying tax, whether they have a local or global business or industry. It is compulsory for all American citizens to pay taxes. Thus many people give up their citizenship to take advantage of tax exemptions. However, the strict laws of America do not permit residents to exclude their income over and above $80,000 if they are living over seas. US citizens are allowed to set up offshore trusts and companies which can be used only to reduce tax.

There are some obvious advantages for countries to set themselves up as tax havens. They may not need to charge as much tax as another more industrialized nation. Some give tax incentives to companies to set up their companies in their country so that they will employ some of the local people. This helps to boost their economies. It also helps their people to learn new skills and improve their living standards. This also means that these countries do not have to compete with larger more developed countries.

There are critics who cry foul at these tax havens, accusing them of encouraging people to evade taxes in their native lands. They also feel that these alluring tax havens also give rise to money laundering. However, all of these are not true as tax havens mitigate the emergence of black markets and sometimes brandish quite stringent money laundering laws.

Moreover, you should be aware of the fact that not all tax havens are completely tax free. They always charge some tax on income and assets. Various countries however have different tax laws. Thus you should be very careful and logical while opting for tax havens.

Article Source: http://www.mp-spain.com/articles

Peter Waterhaze is the chief editor for F offshore, the web's premier resource for information about offshore. For questions or comments about this article visit: www.fyioffshore.com/articles
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