The fact that billionaires hide their money to dodge paying tax has gone public.
Paying tax sucks. If you think paying your current tax is handful enough, imagine you make millions of dollars a month. That only means more effort and more money to spend. Then, you will understand why billionaires hide their money to avoid it.
Where do they hide it? Is it under the pillow? Or is it in a safety deposit?
Well, they are not trying to hide it from burglars. They are hiding it from their countries’ money authority. Thus, they send it far across the sea (in some cases, just beyond the border, though) to a tax haven country. Although it is considered cheating, it is not illegal to do.
One that is arguably the current most popular tax haven among billionaires is discussed in another article: Reasons Why Rich & Famous People Live in Monaco.
Before you check out that article, let’s take a look at another fifteen popular tax havens in the world where billionaires hide their money.
15. United Kingdom
United Kingdom (UK) is considered to be the most important global player in the secrecy of financial world. The country treats it as one nation without its influence and support to a network of secrecy jurisdiction around the world.
UK offers not only secrecy but also low corporate tax. Its corporate tax is 20%. That is relatively low compared to the global average rate (23.63%).
The City of London, or as the financial industry calls the City, is the heart of UK’s tax haven. Also known as Square Mile, it is a 1.2-square-mile area (1.93-square-km) of prime London real estate.
The City is governed by the City of London Corporation. On some measures, the City is the world’s largest financial center for it is connected and controls large network of British secrecy jurisdictions. They are the three Crown Dependencies (Jersey, Guernsey, and the Isle of Man) and the 14 Overseas Territories spread around the world.
14. Marshall Islands
The Republic of the Marshall Islands is a 181-square-km archipelago in the middle of Pacific Ocean. In spite of its small size, it has become a popular jurisdiction for offshore companies.
Any company registered in Marshall Islands but conducts its business elsewhere and collects no locally sourced profits is 100% free from taxes. Isn’t that sweet?
Besides that, setting up a company to be registered in Marshall Islands is relatively easy. In fact, it can be done remotely and in a jiffy. Consultants stand by 24 hours a day to assist you in completing the registration online in just one day.
The identity of the company owners, directors, and stakeholders remains confidential. It is because the registers are not available for public inspection. In addition, there is no requirement to file annual accounts.
Marshall Islands is listed on “Gray List” of OECD (Organization for Economic Co-operation and Development). Thus, like all countries on this list, Marshall Islands may seem as tax havens but it is committed to implementing the organizations international tax standards.
Panama is arguably the infamous tax haven in America. It has been receiving drug money from Latin America and ample other sources of dirty money from the United States and elsewhere for ages.
Besides having over 350,000 secretive International Business Companies (IBCs) registered, Panama is active in forming tax-evading foundations, trusts, and insurance. It also covers boat and shipping registration.
There are no taxes for offshore companies that conduct business outside Panama. They are exempt from any sort of tax. Among them are corporate tax, withholding tax, income tax, capital gains tax, local tax, and estate or inheritance tax.
Panama ensures corporates and individuals financial privacy with strict confidential laws and regulations. They are applied to documentation of offshore corporations, trusts, and foundations. Thus, any violation of confidentiality will receive severe civil and criminal penalties.
Japan began its role as a tax haven in 1986 when the so-called Japan Offshore Market was set up. It was a reaction to the rapid growth of offshore Euromarkets in London. Overall, it was an effort to attract foreign financial business by exempting it from tax and financial regulation.
In 1999, Japan launched special tax exemption for Japanese government bonds. And later on in 2007, for municipal bonds. Then tree years after that, the tax exemption was even widened to include corporate bonds.
Japan does not require the company ownership details and company accounts available for public inspections. And the company does not have to publish country-by-country financial reports either.
In addition to that, Japanese legislation does not require a minimum share capital at registration of a limited liability company. Company ownership details in Japan are not maintained in official record, therefore the confidentiality is assured.
While America has Las Vegas, Asia has Macau. It is the second special administrative region of China, after Hong Kong. It is also considered as the world’s largest casino market. In fact, it generates five times more revenue than Las Vegas.
Despite being a part of China, Macau retains political autonomy with separate executive, legislative, and judicial power. And it has its own stable currency, the Macanese Pataca (MOP).
Unlike the previous tax havens on this list, offshore companies in Macau are required to have business activities. The first 600,000 MOP (approximately $75,098.57) earned by the company is tax exempt. Thereafter, income exceeding the exempt threshold is taxed at a top rate 12%.
So how do billionaires’ companies dodge the tax? Offshore companies can be fully tax exempt if they do not operate in MOP currency, target Macanese people, or focus on other Macanese companies.
10. United Arab Emirates
The offshore financial center of the Arabian world is based in Dubai City. Dubai is not only known as the home to most luxurious real estate in United Arab Emirates but also as tax sanctuary.
As you can tell, the identity of registered company owners along with the shareholders and directors is not registered publicly. Even though they are obligated to prepare annual accounting reports, they will not be presented to any government authority in Dubai. This is the result of Dubai Corporation’s privacy.
On top of that, the strong culture of ask-no-questions and see-no-evil approach to commercial or financial regulation becomes a special attraction to some shady investors.
And like many other tax havens in the world, offshore bank accounts in Dubai are tax free. All information in stored is confidential and will only be given out in case of criminal investigations. In addition to that, the absence of exchange controls makes it easy for individuals or companies to transfer funds in and out of Dubai.
Bahrain has transferred itself from “the island of oil and gas industry” to “the island of hospitality” to financial businesses, especially in banking sector. The banking sector in this country has the largest number of employment. It is contributing to over 25% of GDP (gross domestic product). And it is employing around 14,000 people.
Bahrain loosens its banking secrecy enough to comply with OECD requirements. It has signed 43 treaties and is able to exchange bank accounts information.
Setting up companies in Bahrain is expensive. And the process can take up to three weeks. So what makes this country a good place for billionaires to hide their money? As long as their companies do not engage in oil, gas, or petroleum activity, they will be exempt from any kinds of tax.
Bahrain allows offshore companies to conduct business in the jurisdiction. As for the shareholders and directors detailed information, the records are available for public due to signed treaties.
Offshore companies incorporated in Germany are not required to disclose their beneficial owners to the authorities. Therefore, they remain confidential. Besides that, the profits earned in and out of Germany are tax-levied.
In terms of bank accounts, they are tax exempt as long as no interest is gained. Therefore, the accounts’ owners are not required to report to tax authority.
However, despite being known as one of the world’s tax havens, Germany recently appealed for a fight against tax havens. As a proof of commitment, Germany signed treaties with about 90 other countries.
Nevertheless, Germany still has a long way to go to fight tax crimes in the jurisdiction itself. It is reflected by negligent enforcement of anti-money laundering rules and the insufficient tax-related information exchange.
Lebanon may not offer the best secrecy in the world for its offshore investors, but it commits to provide the most stable one. Due to strict bank secrecy obligation, even the Lebanon’s Ministry of Finance himself cannot access information regarding transaction or bank customers’ identity within the financial sector.
Because of this commitment, the country might end up on the black list of uncooperative tax havens by OECD for not willing to participate to curb financial secrecy.
Most of the assets in Lebanon come from Arab Countries and large Lebanese diaspora or Lebanese descents that live outside the country.
Besides those in banking sector, Lebanon also offers other benefits for offshore companies. Offshore companies in Lebanon are freed from many kinds of tax. Among them are profits, stamp duties, inheritance, corporate income, dividend distribution, capital gains, and interest taxes.
Being one of the founder members of Europe, Luxembourg has privileged access to the European market that other offshore centers do not have. Even better, it is protected by European economic elites who benefit from its offshore services.
Luxembourg has been a tax haven since back in the 1970s. Its business-friendly laws. And the strong secrecy regulation make Luxembourg one of the most improved tax havens in the world.
Offshore bank accounts in Luxembourg are tax exempt. In addition, long-term capital gains on stocks are also tax exempt if 10% or more of the share is not held.
Since secrecy is another priority in Luxembourg. Thus, all information in offshore bank accounts is regarded as confidential. And it cannot be given out without written authorization from the bank accounts holder. On top of that, anyone who breaks professional secrecy can be put behind bars.
5. Cayman Islands
Cayman Islands is a part of what people call the Caribbean tax havens. It is one of the world renowned tax havens because it offers no corporate tax. And any form of corporation formed in Cayman Islands can retain assets without paying tax at all.
Another factor that makes Cayman Islands grows rapidly as a tax haven is the fact that they make the assets owners’ privacy as top priority.
According to the report provided by Tax Justice Network, Cayman Islands is now the world’s sixth biggest banking center. In June 2014, it has $1.4 trillion worth of banking assets.
In addition, the country has a $2.1 trillion net asset. Most of it comes from Europe and the United States. Pepsi, Pfizer, and Marriott are among hundreds of companies having subsidiaries in Cayman Islands
Singapore and Hong Kong are racing against each other to be the leading offshore financial center in Asia. Even though Singapore mostly covers Southeast Asian investors, many of those from North Asia and China prefer to save their money in Singapore rather than Hong Kong.
One of the reason why is the fact that registered companies conducting business outside Singapore jurisdiction are not required to pay annual income tax. In the other hand, companies conducting business in Singapore have to pay 17% tax rate if their annual income is over $2 million.
However, this can be turned if the companies meet the requirement of IRAS (Inland Revenue Authority of Singapore). The tax rate can be lowered or even cleared.
In terms of bank service, information related to offshore accounts’ holders and offshore bank accounts are not to be released by banks officers. And disclosure of the information is punishable by prison or fines. I guess that is another thing to be added to the fine list of Singapore.
3. United States of America
In spite of the country’s vocal fight against foreign tax haven countries, the United States has developed rapidly into becoming a big tax haven itself. It has not yet signed the new global disclosure standards. These standards force anonymous companies to reveal its real owner.
The country creates stable and regulated environment for haven seekers. In fact, it even encourages them to move their assets from other tax havens to United States.
Compared to other tax haven countries, the United States is the most lenient and secure destination for global wealth and fortune now.
Delaware, Nevada, Arizona, Montana, New York, and Wyoming are the home to thousands of alleged “ghost companies.” Even though these companies are often used for criminal activity, the country claims that it is fine to have such companies for they can be used for legitimate purposes.
2. Hong Kong
Being the first special administrative region of China, Hong Kong enjoys its own autonomy. But it is still protected by China. Thus, this ensures its stability to attract money from investors oversea.
As one of the world’s fastest growing tax havens, Hong Kong holds a great record. In 2015, Hong Kong was the world’s highest in terms of Ultra High Net Worth Individuals.
The individual wealth was over $100 million per capita. In the other hand, it is also the home to $2.1 trillion in fund management industry and over $350 billion in private banking asset.
Hong Kong tax regulation is based on territories. Profits earned by companies conducting business in Hong Kong are tax-levied. And the tax rate itself is fixed at 17.5%. However, income gained outside Hong Kong is tax exempt. In addition to that, companies’ interests, capital gains, and dividends are not subjected to any form of taxation.
The stability of banking sector in Switzerland is arguably the best in the world. This is one of many reasons why Switzerland is the world’s best tax havens, secrecy jurisdiction, and financial center.
In September 2015, the Swiss Bankers’ Association reported that banks in Switzerland hold 6.65 trillion CHF (approximately $6.5 trillion) in asset under management.
Nevertheless, due to some pressure from the US and the European Union (EU), Swiss bank accounts information may be made available to tax authorities. And certain information about the accounts’ owners can be revealed directly to relevant tax authorities in 60 countries. This condition applies if the accounts worth over $50,000.
As for the corporate tax, Switzerland offers tax exemption to companies that hold 20% or more shares of other companies. The tax rate will be reduced based on the share percentage owned by the companies. However, holding companies in Cantons (Sates) are tax exempt. In the other hand, companies registered in Switzerland but conducting business abroad are subjected to pay around 10% tax of the world wide profits earned.