Tax hubs, more popularly known as Tax Havens, are those states or countries in the world which deliberately allows tax relaxations to the foreign visitors. The individuals or foreign businesses usually have to pay very little tax or none at all in these countries. Tax Havens or Hubs generally are used by the people to set up personal residencies or for asset holding purposes (like a trust or company). These can also be utilized for trading and business purposes, or even for other financial investments as in mutual funds, bank etc. A Tax Hub or Haven usually presents the following features:
- It charges less or no taxes.
- No significant tax information is usually exchanged with foreign tax officials.
- The legislative, administrative as well as law implementing procedures are not carried out clearly.
- Local presence is not always required, if you want to buy a property in the tax havens.
- It is generally used as an off-shore financial hub, for tax avoidable purposes.
- Most of the tax hubs use a double monetary control system with domestic and foreign currencies. This helps them to distinguish between the residents and non-residents of the country.
Pros and Cons of Tax Hubs
Tax Hubs have found popularity amongst the people, due to the benefits they provide. Some of them are mentioned below:
- Tax Hubs present variety of taxation levels before you, from which you can choose yours.
- The complex and exhaustive legal procedures helps to preserve the privacy of the property owners.
- Lack of access to financial and tax related information helps to safeguard assets, even in distant countries.
However, there are certain limitations associated with the Tax Hubs as well. Investment in tax hubs might not be the best option for you due to the following reasons:
- Since the Tax Hubs or Havens are at offshore locations, the business or the property might be difficult to access.
- Tenders from the companies established in the tax hubs are disapproved by many governments or governmental agencies. Thus it becomes difficult to secure any kind of civil contracts for your business purposes.
It is advisable to consult financial experts who would be able to guide you, whether or not to take part in any kind of tax hub investments. Your financial requirements might be different from others. So before buying any kind of tax haven products, you must ascertain about your requirements. Although your investments in tax hub products will reduce your tax payments, yet it won’t be profitable if you are unable to get governmental approvals for transactions. Measure your options before buying any assets, and find out if it is worth it.
Here is a list of Top 10 Tax Havens of the world as per Forbes:
- Cayman Islands
- The City of London
- Hong Kong