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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 prosperous businessmen exploit the advantages of offshore banking to the fullest. However, on a brighter side, the less developed economies of the world benefit by businesses landing on their shores. There are considerable differences in tax laws in different countries. There are different regulations for commercial and personal accounts. And it is always worth enquiring before you actually open an account and set up your business. These days all countries impose or demand taxes from residents earning within the country. Thus traders and businessmen, first check various laws of different countries, to see which one will benefit them the most and where they will have to pay the least amount as tax, before starting their industry. Many traders even choose countries where they can legally set up offshore companies, offshore foundations and offshore trusts. They later transfer their assets to their new companies or trusts. Hence they do not pay income tax in countries where they are residents of. USA has a creditable method of ensuring that citizens do not have a chance to evade taxes; by taxing them on both their domestic and international incomes. This has prompted some people to give up their US citizenship to avail of greener pastures in foreign lands. US tax laws however exempt a citizen to up to USD 80,000 of their salary and household costs if they are residing abroad. Some of these kinds of incomes are siphoned away from taxes. US citizens can also establish offshore foundations and trusts, which in turn can be operated as tax havens. There are some obvious advantages for countries to set themselves up as tax havens. They may not need to charge as much tax as another more industrialized nation. Some give tax incentives to companies to set up their companies in their country so that they will employ some of the local people. This helps to boost their economies. It also helps their people to learn new skills and improve their living standards. This also means that these countries do not have to compete with larger more 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, a fantastic resource for information about offshore. For questions or comments about this article why not visit: www.fyioffshore.com/articles Feel free to grab a unique version of this article from the Unique Articles Submissions Service
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