Definition; what are the advantages and disadvantages? Is it legal? Where is it? What are the benefits that it can offer me? List of offshore centers.
Definition of "offshore island"
Offshore are the investments made by an individual or a legal person/entity in a country different to their country of residence. Offshore investments are also known as investments in tax havens or offshore jurisdictions. The causes that have led large companies and businessmen to move their tax residence to other jurisdictions are mainly due to the tax pressure, wars and socio-migratory changes that we can now observe in developed countries. The free movement of capital from developed countries has contributed to the expansion of offshore investments around the world that now serve as a shelter and protection for assets and savings of many individuals and legal entities.
Is it legal to invest in Tax Havens?
Yes, it is completely legal to have investments in Tax Havens. Being the owner of an offshore company or a bank account registered in a tax haven is not against the law and it is a completely legal choice of any individual or legal entity to make investments in any country different to its place of residence. From a legal point of view, offshore investments are licit structures that allow us to "avoid paying taxes" and this way increase the income and guarantee a sustainable growth of our company or a security for our private assets. We must not confuse the definition "Tax Avoidance" with "Tax Evasion". “Tax Evasion” is the illegal misrepresentation of income and profits that were actually earned by the company or individual in the country where the business is registered or, in a case of individual, where he/she resides. This behavior has nothing to do with “Tax avoidance”.
World Map of offshore centers
The world's best offshore financial centers are: Switzerland, Cayman Islands, Jersey, Guernsey, Belize, Seychelles, Costa Rica, St. Vincent and the Grenadines, Isle of Man, Luxembourg and Hong Kong. Currently countries like Germany, England, Spain, Italy and France are trying to influence the traditionally opaque banking systems of the countries like Switzerland and Luxembourg pushing them to eliminate banking and commercial secrecy. These countries are adapting their tax laws to international standards set by the OECD. List of offshore financial centers 2014
Benefits of Tax Havens
- No tax for non-residents in offshore centers.
- Banking and commercial secrecy: in tax havens there are favorable bank secrecy laws and any information fissure is punished by imprisonment.
- Heritage protection.
- Avoid having to commit to a large initial share capital outlay.
- The presentation of accounting and audit is not mandatory.
- Bank account opening and company formation in tax haven can be done fast and without requiring physical presence No social insurance payments.
- Few requirements for the imposition of money in banks and company formation.
- There are no exchange controls and the movement of capital is free. Banking regulation doesn’t exist Most tax havens are based on common law favorable to the creation of companies, inheritance tax planning and establishment of "trusts".
- Tax havens are both politically and financially stable countries. An investor with little confidence in the tax havens cause the migration of all their investments to other countries that are more stable.
- Offshore centers have no restrictions on the nationality of the investor: regardless of nationality anyone can have their bank account or company in any offshore jurisdiction.
- Prestigious tax havens don’t have Double Taxation Agreements with onshore countries, also known as high-tax countries.
- Tax havens have good telecommunications infrastructure that guarantee the banker 24/7 connection.
- Tax haven bank employees specialize in international finance and speak several languages: English is the official language in finance but is also very common to find support in Spanish, French, German, Russian and Chinese.
Disadvantages of Tax Havens
- The main disadvantage of tax havens is the distance between the investor and the tax haven. However, depending on the location of the investor it is not uncommon to find a tax haven within a few hours by plane.
- The negative image of tax havens in the press: The media currently publishes the news about criminal and corruptive activities related to tax havens. It is totally false that tax havens are used solely for financial criminals or money laundering. A good proof and example of it is that 86% of IBEX 35 companies evades taxes legally and operate in Tax havens.
- The high costs of offshore banking service in tax havens: account maintenance fees, mail, fax and phone calls. In financial centers it is very difficult to find bank accounts with low maintenance cost.