Tax Haven

Usually associated with a zero tax rate, a tax haven can include a place that has a low rate of tax as well as where zero taxes are levied upon entities.

The issue of a tax haven can most likely be attributed to the competition amongst various governments to attract investment by proclaiming the specific area or jurisdiction as a tax haven, which implies that tax is levied upon certain entities, products and services on a zero rate or a very low rate. This in turn will encourage the desired investment or relocation of an entity to this geographical location, to take advantage of the tax haven status that is found there.

The definition of a tax haven is somewhat difficult to describe and pertains largely to the tax structure of a jurisdiction or legal area. One should rather look at the existence of these tax havens based upon the desire by individuals and firms to avoid as much taxation as possible, via a legal and justified manner. Companies and individuals can be taxed at exorbitant rates and therefore attempt to pay a lower rate or avoid the taxation completely and therefore find the attraction of a tax haven necessary in there financial and fiscal planning.

The attraction of foreign investment into a country is one of the major decisions made by the lawmakers in establishing a tax haven in their jurisdictions, although the investor needs adequate and correct advice prior to depositing their funds in a tax haven.