When we talk about tax havens, we refer to those territories that have the most lucrative tax regimes in place. Investments of non-residents in these places are not liable for income, corporate, or any other kind of tax. By allowing to hold assets in offshore accounts, tax havens save foreign entrepreneurs from paying exorbitant income taxes in their home countries.
Factors that make a tax haven stand out among others:
Political Stability: No country, irrespective of the tax benefits it offers, can lure foreign investors without a stable political environment. Switzerland and Monaco rank amongst the most politically stable regions and make it to our list of popular tax havens.
Economic Stability: The ideal tax haven should be economically stable. A strong economic system along with flexible economic policies go a long way in attracting investors towards a tax haven. A striking example is the UAE which continues to attract investors mainly due to its solid economy.
Location: A major factor influencing a tax haven’s popularity is the geographical location. Investing in a European country like Switzerland may have a stark difference from investing in an African tax haven like Liberia. Moreover, neighbouring countries strongly influence the economics of a nation. The Bahamas, a Caribbean tax haven is popular among American investors mainly for its proximity to the U.S. state of Florida.
Blacklist Status: Relationship with other countries plays a major role in determining the popularity of a tax haven. Once blacklisted by FATF or the European Union, tax havens lose their appeal. With growing international pressure for tax transparency, many tax havens have been blacklisted by major economies. For example, the U.S. Virgin Islands were recently added to the EU list of non-cooperative jurisdictions for tax purposes.
Legal Security: Tax havens are known to have sound legal systems. Though their laws are similar to those of countries with high taxes, they are structured well enough to reduce the tax burden of foreign investors.
Provision to Register Private Jets & Yachts: The ultra-high-net-worth individuals across the world turn to offshore tax havens for registering their luxury planes and boats. A jurisdiction that helps wealthy investors shield their assets for tax purposes is bound to gain popularity.
Personal Safety: People prioritise personal safety when they travel to foreign locations. No foreign investor would like to hold assets in an unsafe region irrespective of the benefits the tax haven has on offer. As an example, the UAE which consistently ranks amongst the safest countries in the world is a much-preferred tax-haven compared to an unsafe country like Liberia.
List of most popular tax havens in the world
Here are the top 7 popular tax havens in the world:
- UAE – For long, the UAE has been the most popular tax haven in the Middle East and is our top recommendation for setting up any business including mainland, free zone, and offshore companies. Despite the introduction of corporate tax on the mainland companies, UAE’s free zone and offshore companies will continue to enjoy tax exemptions. With offshore jurisdictions like RAK ICC in the UAE, investors benefit from affordable setup options besides getting to own real estate in Dubai and Ras al Khaimah.
- The British Virgin Islands (BVI) – Having no tax treaties with other countries, this tax paradise ensures banking privacy to foreign investors. With over 40% of the world’s offshore companies registered here, the country draws around 1/3rd of its GDP from licensing fees and other services.
- Jersey – Though a part of the UK’s monarchy, Jersey is a self-governing territory mostly preferred for registering ships and aircraft. With a large financial services industry, Jersey attracts investors who are looking for inheritance planning.
- The Bahamas – Being one of the richest countries in the Caribbean, The Bahamas is a reputed offshore finance hub. With 1500 registered vessels, The Bahamas operates one of the largest open registries for vessels in the world.
- Monaco – This sovereign city-state in Europe is a preferred tax shelter for ultra-high-net-worth individuals since they can obtain tax residency here.
- Luxembourg – One of the richest European countries, Luxembourg attracts investors mainly for its financial privacy laws. Besides providing banking secrecy, it does not tax interests accruing in offshore bank accounts.
- Switzerland: Backed by a strong economy and a banking system guaranteeing privacy, Switzerland has for long been the most popular offshore tax haven in Europe.
Investing in tax havens has always been the preferred option for tax planning. However, besides the tax benefits, one must also focus on the socio-economic characteristics of the region. Among these, factors like location, political and economic stability stand out as the most important.
If you are keen on investing in an offshore company in the UAE, RAK ICC should be the ideal jurisdiction for the host of benefits it offers. InZone is a registered agent with RAK ICC and can help you set up an offshore company at the most competitive pricing.