Using Offshore Banking As Tax Havens

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.

Many countries which do not have a strong economic growth let foreign traders and business men invest in their banks and trade to increase their economy, trade and industry. Most wealthy traders and businessmen take advantage of this facility. However, different countries have different governing rules and regulations, which exempt foreigners from paying tax. There are a variety of laws, for different account holders, such as traders, businessmen and personal account holders. Thus you should always research on all the laws before investing in foreign economy and 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 many advantages for countries to set up tax havens. It is not compulsory for countries to charge as much tax as other industrialized countries. Many countries offer tax exemptions and tax incentives to companies and traders to set up their business in their country, so that they recruit local people which will solve the problem of unemployment. This helps to enhance the country's economy. New businesses increase the standard of living and help the locals to learn new skills. Thus these countries are no more in competition with large developed countries.

Many are against these tax havens declaring them to encourage people to evade taxes in their own counties. They also feel that money laundering can be more widely practiced. This is not necessarily so as these tax havens do cut down on the black markets and sometimes have tougher laws for laundering money.

It is a popular myth that all tax havens are tax-free, as some do levy taxes on incomes and property. There are however differences in tax laws in various countries. It is prudent to enquire about these laws when you are thinking of operating out of a tax haven. In fact, this is the right way to zero in on a tax haven that will be most suited to your needs.

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Peter Waterhaze is the owner of F offshore, the best place on the internet for information about offshore, For questions or comments about this article why not visit: www.fyioffshore.com/articles
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