This article was originally on GET.com at: 10 Tax Havens In The World - What They Are And Who Goes There
Almost every country in the world, including Singapore, subjects its residents to taxes. The question has always been how high or how low the tax rates are for the particular year. If you've been following the news on the Panama Papers, then you would know that some of the wealthiest people in the world are being suspected of not paying these taxes, all in the name of preserving their wealth.
On one hand there are countries with the highest personal income tax rates in the world and then there are countries with the lowest personal income tax rates. But tax havens are a whole new ball game altogether. We at GET.com are going to try our best to shed some light on this topic.
What is a tax haven?
A tax haven is basically a country with a very low tax rate which sometimes even reaches 0 per cent.
Remember that scene in The Wolf of Wall Street where they stashed a few hundred million dollars in cash in Switzerland? That was no coincidence.
Nations like Switzerland and Luxembourg, were once considered tax havens.
For Switzerland, this changed in 2014 when they were forced to close their tax loopholes.
Currently, these 10 countries are considered to be tax havens - and it's not so easy to become a resident in any of them!
1. Brunei Darussalam
To be considered as a resident in Brunei Darussalam, you have to reside there for 183 days or more within the tax year.
To be considered as a resident in Anguilla, you must have been legally residing in Anguilla for 7 or more years.
3. British Virgin Islands
To be entitled to no tax at the British Virgin Islands, you have to apply for rights to reside long term because of either local employment or self-employment, or if you are starting a business.
4. The Bahamas
There are many criteria which enable you to apply for residency in The Bahamas. One common way is for financially independent individuals or investors to be legitimate owners of a residence in The Bahamas. According to their Ministry of Finance website, those who purchase a residence for BS$1.5 million or more will get speedy consideration!
In Panama, you have to obtain a Temporary Permit before obtaining a Permanent Residency Permit. Once you have the residency permit, you have to reside in Panama for at least 5 years before you can apply for Panama Citizenship.
6. United Arab Emirates
To be a resident of the United Arab Emirates, you have to apply for a residency visa, which has a 2 year validity period. During the 2 years, you must enter the country once every 6 months.
7. Cayman Islands
To be a resident in Cayman Islands, you have to have been living there legally for at least 8 years.
Before applying to be a resident in Bermuda, you have to have been living there for at least 10 years, among other requirements.
9. Island Of Sark
To be a resident on the Island of Sark, you must live with a an existing Island of Sark resident.
In Monaco, you have to go through certain processes that will take about 12 years before you can apply for a privileged residence card, which is valid for 10 years. Upon obtaining this privileged card, you have to spend at least 6 months and one day in Monaco every year.
Who goes to tax havens?
Most of the time, those who are interested in these countries are people or businesses with large amounts of money who want to escape the high tax rates back at home. Wealthy people mostly find themselves stowing away their cash in these countries.
For example, British Formula One drivers, Jenson Button and Lewis Hamilton both reside in Monaco. Instead of having to pay the usual United Kingdom income tax rate of 45 per cent, because they are domiciled in Monaco, they are not required to pay taxes.
However, to move your money to these tax havens, is no simple feat. You have to be able to legally set up a corporate structure within the tax haven country, or be domiciled in that particular country.
These processes though, are not that simple. There is a lot more that goes into setting up a corporate company in these tax havens than meets the eye.
Is Singapore a tax haven?
The answer to that is: somewhat. Look at it this way, a tax haven is defined as a country with a low or no tax rate.
In Singapore, those who earn within the highest tax income bracket, or above S$320,000 per year are only taxed 20 per cent, which is significantly lower that most other developing countries like the US (income tax rate of 55.9 per cent) or the United Kingdom (income tax rate of 45 per cent).
Singapore also has a low corporate tax rate and doesn't put a levy on capital gains. So when you take this combination and put it together, it's easy for the people earning above S$320,000 per year, to think of Singapore as a tax haven.
However, since the UBS tax evasion case which occurred last month, the US has been paying close attention to Singapore's bank secrecy laws.
But while the US Internal Revenue Service (IRS) is clamping down on countries that remotely resemble a tax haven, they seem to have forgotten a haven of their own - the state of Delaware, which is home to no less than 285,000 businesses that are looking for a place to hide from tax rates.
Now that is another article altogether.
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