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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. Wealthy individuals and businesses often take advantage of this. The good part of this is that parts of the world who might not have enjoyed a very strong economic growth are helped by businesses establishing themselves in their countries. Different countries work in different ways regarding jurisdiction of taxes.There are different laws for different businesses and individual accounts. It is wise to check this before starting accounts and establishing businesses. 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. The USA taxes residents on global income as well as domestic, this will prevent residents of the USA from evading the taxes by using these methods. This makes some residents give up their US citizenship to allow them to evade taxes by using the above methods. However US laws will allow a citizen to exclude up to $80,000 of their salary and household expenses if they are living overseas. Some of this type of income can be deducted from taxes. US citizens can also set up offshore foundations and trusts, which can be used as a tax break. It is most obviously advantageous for a country to be tagged as a tax haven. The tax haven country may not be required to levy huge taxes as their more developed counterparts. Some nations offer attractive tax incentives to companies, in order to lure them to set up businesses and hence bring in scopes of employment of local labor. These have obvious benefits like giving their economies, the much-needed push. There's also an improvement in the standard of living and the local labor pool gets to acquire new technical skills. And with businesses coming and setting up units in the less developed nations, the latter doesn't have to go into a competition with their industrialized counterparts. 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. Not all tax havens are completely tax-free and some do charge taxes on income and assets. Different countries will vary in the laws and regulations. It is wise to look into this carefully when considering using a tax haven. In this way you will find a tax haven that is right for your needs.
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