Although it may be unethical, the trend of parking funds at offshore locations continues. Technology has made it difficult to evade taxes and earn black money, but loopholes still exist. The primary objective is usually to avoid tax or to park funds earned through illegal means. It could also be a way to protect oneself from financial uncertainties that may arise in the future. Many people also do it to secure their retirement life. Globally, a number of tax havens are preferred by the rich. Some of these locations are described below.
British Virgin Islands – With funds flowing in regularly, it is estimated that British Virgin Islands has hundreds of times more funds than what can be represented by its GDP. The country does not have any form of tax treaties with other countries. This ensures that investors can park their funds without the fear of their money getting confiscated. Financial privacy is strictly enforced, making British Virgin Islands one of the preferred tax havens.
Cayman Islands – This location attracts investors from across the globe, as it offers a comprehensive range of investment options. Corporate tax is nil in Cayman Islands, which presents a good opportunity for firms to set up their holding company at this location. There are special rules that ensure that information about investors and their investment is kept strictly confidential.
Luxembourg – Located in Europe, Luxembourg is ranked amongst the wealthiest nations in the world. The country has a robust financial services industry, contributing around 35% of its GDP. The country has business-friendly policies, allowing people to easily invest their funds. Tax rules are fairly relaxed and interest earned via off-shore bank accounts is not taxed. Tax breaks and exemptions are also available on a case-to-case basis.
Panama – This location is preferred because of its territorial tax system. Only the money earned within the country is considered under the ambit of taxation. If any individual deposits income earned outside the country, it is not taxed. Another benefit is that firms in Panama are allowed to own assets across the globe. Rules of the land ensure that information about firms is not revealed to outside world.
Switzerland – This is probably one of the oldest known tax havens in the world. Even though the country has introduced new reforms to discourage funds earned through illegal means, Switzerland is still a preferred tax haven. It’s a socially, politically and economically stable country. This provides peace of mind to people who park their funds in Swiss banks and financial institutions.