Tax Haven

What is a 'Tax Haven'

A tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. Tax havens also provide little or no financial information to foreign tax authorities. Individuals and businesses that do not reside a tax haven can take advantage of these countries' tax regimes to avoid paying taxes in their home countries. Tax havens do not require that an individual reside in or a business operate out of that country in order to benefit from its tax policies.

BREAKING DOWN 'Tax Haven'

Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, the Isle of Man, Mauritius, Lichtenstein, Monaco, Panama, Switzerland and St. Kitts and Nevis are all considered tax havens. However, pressure from foreign governments that want to collect all the tax revenue they believe they are entitled to has caused some tax haven countries to sign tax information exchange agreements (TIEAs) and mutual legal assistance treaties (MLAT) that provide foreign governments with formerly secret information about investors' offshore accounts.

RELATED TERMS
  1. IRS Publication 514

    A document published by the Internal Revenue Service that provides ...
  2. Effective Tax Rate

    The average rate at which an individual or corporation is taxed. ...
  3. Direct Tax

    A tax that is paid directly by an individual or organization ...
  4. Tax Treaty

    A bilateral agreement made by two countries to resolve issues ...
  5. Tax Break

    A tax break is a savings on a taxpayer's liability. A tax break ...
  6. Tax Rate

    The percentage at which an individual or corporation is taxed. ...
Related Articles
  1. Economics

    3 Ways Tax Haven Governments Make Money

    If the governments of tax haven countries impose little, or no, income taxes, how exactly do these nations generate revenue?
  2. Taxes

    Tax Haven Vs. Tax Shelters: Is There a Difference?

    Learn about the difference between tax havens and tax shelters, and how both are used to reduce tax liability or avoid paying taxes altogether.
  3. Tax Strategy

    The Top 10 European Tax Havens

    While the popular stereotype of a tax haven is a Caribbean island, these countries in Europe serve as attractive places for foreign individuals and companies to store funds.
  4. Professionals

    Foreign Securities and Taxation

    Series 7 - Chapter 2: Foreign Securities and Taxation
  5. Professionals

    Types Of Taxes

    These taxes are unavoidable for corporations.
  6. Taxes

    The Top 10 Caribbean Tax Havens

    Discover relevant tax policy information about the top 10 tax havens located in the Caribbean, including the Cayman Islands and the Bahamas.
  7. Taxes

    Switzerland's Declining Tax Haven Appeal

    Switzerland's tax haven allure is being threatened by efforts by the US and other governments to make Swiss banks give up their much-vaunted secrecy.
  8. Taxes

    Understanding Taxation Of Foreign Investments

    Technically, any gains from foreign investments owned by an American citizen are subject to tax by the company's home country as well as the IRS. However, the Foreign Tax Credit enables you to ...
  9. Taxes

    Countries With The Highest & Lowest Corporate Tax Rates (AAPL, IBM)

    The United States is No. 2 in the world for its high corporate tax rate. There are ways around paying it, and many nations with lower rates are worse off.
  10. Professionals

    Tax Accounting

    Tax Accounting
RELATED FAQS
  1. Why is the Cayman Islands considered a tax haven?

    Find out why the Cayman Islands is considered a tax haven and why this location is so popular among those looking to reduce ... Read Answer >>
  2. Why is Andorra considered a tax haven?

    Find out why Andorra is considered a tax haven and how developments have lessened its appeal due to increased taxation and ... Read Answer >>
  3. In which countries do high-income earners pay the most tax?

    Find out which countries require high net worth individuals to pay the most taxes. Most of these countries are in the European ... Read Answer >>
  4. What's the difference between the marginal tax rate system and a flat tax?

    Find out about the difference between marginal tax rates and flat taxes. Gain insights on both systems and the arguments ... Read Answer >>
  5. What are the differences between regressive, proportional and progressive taxes?

    Understand the differences between the most common tax systems including regressive taxes, proportional taxes and progressive ... Read Answer >>
  6. What are the tax incentives or disincentives to vertical integration?

    Merging companies through vertical integration can provide companies in the United States with a marginally advantageous ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center