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 Rate

    The percentage at which an individual or corporation is taxed. ...
  5. Income Tax

    A tax that governments impose on financial income generated by ...
  6. Foreign Tax Deduction

    One of the itemized deductions that may be taken for taxes paid ...
Related Articles
  1. 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.
  2. 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.
  3. Taxes

    Why America's Taxes Are Too Low

    The solution to America's economic woes may not be in lowering taxes further, but may, in fact, lie in increasing them.
  4. Economics

    Calculating Net of Tax

    Net of tax is a figure that has been adjusted for taxes.
  5. Taxes

    Get A Tax Credit For Your Foreign Investments

    The foreign tax credit provides a break on investment income made and taxed in a foreign country.
  6. Taxes

    States That Pay The Most Taxes

    These five states may pay through the nose in taxes - but the benefits may just be worth it.
  7. Taxes

    The Unseen Taxes That You Pay Every Day

    Taxes are embedded in the price of everything we buy to an extent that most people don't even realize.
  8. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  9. Taxes

    Do The Rich Work Less As Taxes Rise?

    We look at how high taxes might provide incentive for people to work less.
  10. Taxes

    The Impact Of U.S. Corporate Taxation On Investment Decisions And CFC Transfer Pricing

    To avoid taxation, businesses do careful tax planning, taking into consideration more than one country's taxation system.
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. 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 >>
  3. Why is Luxembourg considered a tax haven?

    Learn about Luxemburg's role as a tax haven for large corporations around the world. Discover how the country's tax laws ... Read Answer >>
  4. How does the marginal tax rate system work?

    The marginal tax rate is the rate of tax that income earners incur on each additional dollar of income. As the marginal tax ... Read Answer >>
  5. What is the difference between a regressive tax versus a progressive tax?

    Determine how progressive and regressive taxes impact your personal finances, and learn more about how you pay both types ... Read Answer >>
  6. What is the difference between income tax and capital gains tax?

    Understand the difference between a person's income tax and his capital gains tax. Learn when a person needs to pay taxes ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center