We’ve all heard the term in the media, or tossed around by savvy financial planners or accountants. But what are corporate tax havens? Are they legal? And can they help you reduce your tax liability?
Read on to learn more…
What is a Corporate Tax Haven?
In lay terms, a “tax haven” refers to any jurisdiction or country that offers minimal or substantially reduced tax liability to foreign businesses and individuals.
These so-called havens typically place an emphasis on privacy, sharing little to no financial information with other foreign tax authorities, and often do not require residency or a physical business presence within their borders for a business or individual to benefit.
Criteria to Qualify as a Tax Haven
Interestingly, there are a number of qualifying factors that a jurisdiction must meet in order to qualify as a tax haven. The OECD (Organization for Economic Cooperation and Development), in 1998, offered a number of criteria that could be used to identify such financial centers worldwide.
Tax Haven Characteristics:
- Zero, or minimal imposed tax on income
- Privacy standards and no exchange of information with other parties
- A lack of transparency (to improve privacy/anonymity)
What do Governments Have to Gain?
Tax havens are certainly attractive to investors, business professionals, and wealthy individuals. But what do governments stand to gain by establishing their jurisdiction as a tax haven?
Turns out tax havens have a lot to gain as well.
Benefits of Tax Havens for Countries and Governments:
- Despite the name, tax havens aren’t typically “free” of cost or fees. Although favorable from a tax liability perspective, they often charge a nominal tax rate while making up for fees in other areas such as high import duties.
- Registration fees and annual renewals. Some tax havens charge fees for registration, annual licensing and other fees.
- The attraction of foreign investors and money brings with it a vital infusion of capital into the local economy. Further, the country may benefit from ongoing business operations within its borders, such as investments in local infrastructure, offices, job opportunities and more.
As you can see, there are a number of built-in incentives for a government to operate a tax haven, including capital injection into the country’s economy where investments may flow into local businesses, financial institutions, and other vehicles.
Key Tax Haven Benefits
International tax havens have long been the preferred domicile for Fortune 100 companies, astute investors and privacy-minded individuals. But why?
1. No (or minimal) Tax Liability
As the name clearly suggests, these domiciles are havens for corporations, individuals and investors seeking to reduce their tax liability. Many developed countries have implemented a “progressive” tax system that places an increasing burden on those with higher income.
International tax havens offer a clear path to minimizing taxes safely and effectively, with many locales having zero corporate taxes, capital gains tax, personal income tax and more.
2. Privacy and Discretion
Corporate tax havens offer more than just tax savings. These locations boast unmatched privacy for individuals and corporations alike. Many tax havens accomplish this by not keeping any publicly accessible bank account or company information, and policies preventing them from sharing any recorded information with outside third parties (such as international tax agencies). For example, in Antigua and Barbuda, it is actually illegal for a bank to disclose account holder information to any third party. Interestingly, not even Antigua and Barbuda’s own government can access this information.
3. Security and Peace of Mind
International tax havens often play by their own rules, outside of the jurisdiction of (sometimes) overbearing nations such as the United States or the governing bodies of the EU. This level of independence can be a major benefit for individuals who have concerns about their privacy and outside governmental agencies such as the IRS, FAFT, OECD, and others overstepping their bounds.
Furthermore, most corporate tax havens do not participate in what are known as TIEAs or “Tax Information Exchange Agreements” with the EU or USA.
This means that even if outside organizations try to investigate or uncover information, there is no legal framework in place to allow them to do so.
For those seeking alternative locales to do financial business, corporate tax havens are attractive options due to their simplicity and well-defined processes for setting up new accounts. In fact, due to their business-friendly legislation, getting set up with many tax havens can take as little as 2-4 days. Not to mention business registration is typically low, with many jurisdictions charging $500 or less and can be done all without even visiting the country.
But that’s not where the convenience factor ends. In an effort to attract more business, many corporate tax havens work to make the process of running and managing a business within their domicile as easy as possible. This typically manifests as less paperwork and administration.
Highlighted Tax Havens
The number of popular tax havens is extensive. Below we’ll highlight two popular corporate tax haven destinations.
The nation island of Malta is a member state of the EU (European Union), a key reason why Malta passports are highly sought after around the world. Malta is a safe country, rich in culture and strategically located between Africa and Europe. Their program, simply named Malta’s Individual Investor Program (MIIP) is a popular option for many investors worldwide.
Malta’s Individual Investor Program (MIIP) Requirements:
- Contribution of €650,000 to the National Development and Social Fund
- Contribution of €25,000 for minor children and a spouse of the primary applicant
- Contribution of €50,000 for each dependent child age 18-26 or dependent parents age 55 or older
- Due diligence fees
- Residence in Malta for 5 years
- Purchase of property valued at €350,000 or lease a property at €16,000 or more per month
- €150,000 deposit in a government-approved financial instrument
Benefit of the Program:
- Advantageous tax system
- Tax concessions
- Centralized business hub
- Tax treaties with over 50 countries
- English as the primary language of business
- Access to free EU healthcare and education systems
- Malta passport opens up visa travel to over 160 countries
- Stable and safe country
- Lifetime citizenship can be passed to future generations
2. Saint Kitts and Nevis
The duel island nation, also sometimes referred to as the Federation of Saint Christopher and Nevis, represents one of the most popular corporate tax havens. Known for its charming islands and beautiful backdrop, the two offer what is known as the St. Kitts and Nevis Citizenship by Investment Program. This program, established in 1984 is the longest-running economic citizenship program worldwide.
Benefits of the Saint Kitts & Nevis Citizenship Program:
- Passport can be obtained within 6 months
- Enjoy citizenship in a Commonwealth country
- Dual citizenship is allowed
- Enjoy visa-free travel to more than 168 countries
- No physical residence required
- No education, test or interview requirements
- No tax on worldwide income
- Full citizenship for life that can be passed on to future generations
3. Other Popular Corporate Tax Havens Include
- Cayman Islands
- Isle of Man
- The Channel Islands
Corporate tax havens provide a myriad of benefits for those businesses and professionals seeking to reduce their tax liability, increase privacy, obtain second citizenships/passports and more. These benefits are key drivers for so many corporations, large and small, to seek out these domiciles for their business and investments. With proper due diligence and planning, you too can take advantage of all these havens have to offer.
The various ways you can buy gold
Gold is usually valued as a commodity, currency, and investment for many years. This is why it’s still popular nowadays among investors because you can use gold as a hedge against inflation, currency devaluation, or deflation.
And, because of its ability to give you financial protection during times of economic uncertainty, it can be a good idea to invest in physical gold. Keep in mind that the gold market can be quite liquid and there are various ways in which you can gain exposure to gold including gold bars and coins. This page discusses the various ways you can buy gold.
Physical gold can offer you a direct exposure to gold. When gold is in bulk form, it’s called a bullion, and it can be minted into gold coins or cast into bars. The value of a gold bullion is usually based on its purity and mass rather than the monetary face value. Remember that if gold coins are issued with the monetary face value, the market value still depends on its fine gold content.
You can purchase physical gold from private mints, government mints, jewelers, and precious metal dealers. Because different gold sellers can give the same gold at different prices, it’s crucial for you to do research so that you can find the ideal deal. When you buy physical gold, you need to pay the full price.
Physical gold ownership can involve several costs like the insurance costs, storage costs, transaction fees, and markups related to purchasing and selling the commodity. Also, there can sometimes come with the processing fees as well as a small lot fees, especially if you are making small purchases. Collectively these costs cannot be that significant to affect you when you decide to invest a small portion of your portfolio in gold, but they can also be overwhelming if you want to have a large exposure. Check https://goldtrends.net/gold-ira-companies/ before you invest in gold.
EFTs are not like physical gold because you can buy them like shares on any stock exchange. The good thing about EFTs is that it allows you to get access to gold and you can avoid some costs like storage costs, markups, and many more. However, you should expect that you can lose a certain percentage of your investment’s value to the expense ratio of the fund. An expense ratio refers to the recurring annual fee that is charged to the funds to pay for administrative costs and management expenses. As a result, it’s always a good idea to weigh your options when it comes to choosing gold EFTs or having a gold IRA.
It’s also important to note that you need to pay a commission when you decide to purchase and sell an EFT. Many online commissions are usually affordable, but they can always add up if you happen to be an active trader. Besides, most brokers usually charge a high commission, especially for broker-assisted trades, special order types, and automated phone orders. To address the cost concerns that come with EFTs, some brokers are now giving commission-free online trading for some type of EFTs.
How to ensure your Canadian public documents will be recognized in the EU?
If you are moving to the EU for work or educational purposes, or you want to live there for a long time and you plan on using your Canadian public documents in different countries throughout the European Union, you must first go through a process so these documents are recognized in the EU. In Canada, this process is called Document Authentication and Legalization, however, others call it Attestation. Before going abroad, you might consider asking a professional company that handles document authentication Canada to help you out with the requirements needed, especially if time isn’t on your side.
Although you can organize the legalization of your documents yourself, if this is your first time authorizing these documents, it might take up a lot of your time and energy. Reputable agents can help speed up the process, so you can get on with the rest of your tasks before your travel to the EU.
If you want to get your documents authenticated in Canada, you have to get the Department of Foreign Trade and International Affairs to stamp each document. If you are traveling to the EU for business, you might need to get the following documents authenticated:
- Certificate of export
- Shipping Document
- Corporate documents that can be used while in the EU
- Commercial invoice
- Certificate of free sale
- Pharmaceutical certificate
- Distributorship Agreements
If you travel to the EU without these documents in order, you might find it difficult to carry out the work you had planned. Expect the European Union authorities to inspect these documents thoroughly. If you decide to go it alone instead of hiring an agent to help you out, make sure that you have plenty of time because a lot of these documents can take a long time to get legalized.
Although you won’t need these documents if you want to travel to the EU, if you plan on staying there for an extended period, you might need them at some stage. For these files to be recognized throughout the EU, you will need them authenticated. Here are a few examples of the documents you will want to get authorized before you hop on the plane:
- Original birth certificate
- Police check
- Medical history documents
- If you are going to Canadian to teach, you will need to have your credentials legalized
- References from your previous employers
- Job certification
- Official marriage certificate
- Death Certificate
- Colored copy of a valid driving license
- If you are planning on getting married in the EU you will need your single status to marry documents legalized
- Academic credentials
If you arrive in the EU without this documentation authenticated, trying to get them recognized in the EU won’t be easy. To make sure your time in the EU goes smoothly, you should make sure that everything is finalized in Canada first.
Since the outbreak of Covid-19, a lot of areas around Europe have enforced quarantines on those entering from Canada. Each country has its own rules, so before you jet off, find out what the current situation is like. These Covid-19 regulations normally depend on the current situation in Canada, and most embassies will post details on their official website. If you can’t see them on their website, consider making direct contact with the embassy’s officials. Keep in mind that these rules are subject to change, so you should find out the details before you travel.
If you are fully vaccinated, you should have no problems getting into most countries throughout the EU. However, the EU doesn’t recognize every vaccine, even some that are approved by the WHO.
Most of the European countries are accepting fully vaccinated Canadians, but they will ask to see your proof of vaccination. Make sure you bring your travel health certificates with you, as they will show the dates when you received your first and last vaccination. If you haven’t received your vaccinations, then you might be allowed to enter without going into quarantine if you have already had the virus, as long as you have your PCR test completed.
At the moment, as long as you have your Covid-19 documents prepared and a valid Canadian passport with at least three blank pages, Canadians should have no issues entering the EU. However, this is going to change in the near future. From the beginning of 2023, Canadians who wish to go on a vacation or plan on working in the EU will have to apply for a travel pass. If you want to enter all the countries in the Schengen Area, you will need to apply for this travel pass online first. This pass is known as the European Travel Information and Authorization System (ETIAS). This electronic scheme was made so the EU can keep track of those travelling around the EU. Canada already has a similar system in place known as the Canadian Electronic Travel Authorization.
You must apply for this before your travel to the EU, but until then, you can still enter with a valid passport. A lot of folks misunderstood the new process and thought it was going to start in early 2021, but the EU released a press release to explain that the changes will be enforced in 2023. However, this isn’t a visa that grants people access to the EU.
Authentication or legalization of a document that is issued in Canada is a process that will verify, prove, and confirm the genuineness of the position of an official. Each document needs to be stamped by authorized people to allow for it to be recognized throughout the EU.
A lot of the time, the process is theoretically easy. You must submit the documents to get Global Affairs Canada. Every single document must get an official stamp if they are to be recognized. Once they are all stamped, you might have to submit them to the country’s embassy in Canada on where you are planning on going to in the EU so they can be legalized.
Although the process sounds easy, if you are an individual company wanting to do business in the EU, the process can cause a lot of stress. Trying to source the correct documentation and other paperwork might prove to be a lot more challenging than you initially thought. If you have invested heavily, and you are desperate to get to the EU as soon as possible, the process might take a lot longer if you plan on doing it all yourself.
There are plenty of agents out there that can help you through the entire process. They will review your documents before you hand them over to Global Affairs and the embassy, and they will be able to give you expert advice on the process. Experienced agents will understand the current requirements that the Global Affairs officials are looking for. Without having these documents organized before your trip who will struggle to do business in the EU. If you do business without having the paperwork on hand, you could find yourself in trouble with authorities in the EU, which will reflect badly on your business the next time you plan on working inside the European Union.
Hungary: Reforms to raise productivity would strengthen recovery from COVID-19
Hungary’s economy is emerging from the crisis caused by COVID-19, yet sustaining the country’s robust pre-pandemic levels of growth will require reforms to foster productivity and job creation, according to a new OECD report.
The latest OECD Economic Survey of Hungary says that with labour shortages being felt as the economy picks up, it is vital to invest in vocational training, digital skills and apprenticeships to match skills with market requirements. Improving transport links and the availability of housing would make it easier for workers in low-employment areas to take up jobs elsewhere. Creating a more competitive and transparent business environment and accelerating firms’ adoption of digital technologies would also bolster the recovery.
“Hungary’s economy was doing well before the crisis, and with external demand picking up, prospects for a solid recovery are good. It is important to use this period, and the forthcoming inflow of EU funds, to raise productivity and competitiveness to ensure a strong and lasting recovery,” said OECD Director of Economic Country Studies Alvaro Pereira, presenting the report alongside Hungary’s Secretary of State for Financial Policy Gábor Gion.
The COVID-19 crisis hit Hungary’s export-oriented economy hard, ending a period of steady growth over 2016-19 that lifted incomes and brought down the unemployment rate to a 30-year low. Policy support to workers and firms, and the swift rollout of vaccines, has smoothed the path to recovery, and the Survey projects growth of 4.6% in 2021 and 5% in 2022, following a drop of 5.1% in 2020. An annual injection of EU structural and Next Generation COVID recovery funds equivalent to around 3.5% of GDP in total from 2021 will support growth if invested well.
Short-term risks remain, such as the impact of a global shortage of semiconductors on Hungarian car production. Targeted support to households and businesses should be continued as long as is needed. Once the recovery is self-sustained, the focus should return to strengthening public finances ahead of looming increases in health and pension spending from an ageing population, the Survey says, including by completing an ongoing increase in the retirement age to 65 by 2022 and linking further increases to gains in life expectancy.
The ageing and shrinking workforce makes it urgent to raise labour productivity. In addition to strengthening vocational and tertiary education, it is key to produce more of the highly skilled engineers and ICT graduates that businesses increasingly demand. In this context, the Survey recommends making high-speed mobile Internet cheaper and helping firms to rapidly adopt digital technologies. Intensifying efforts to fight corruption, including continuing to strengthen the institutional framework, and ensuring the independence and accountability of the judicial system would improve the investment climate and support business dynamism.
Worker mobility could be enhanced by improving transport connections from rural areas into cities, modernising housing regulations to expand the private rental market, and easing some of the rigid licensing and certification requirements on professional occupations. Hungary could also consider increasing the duration of unemployment benefits from the current three months.
Finally, Hungary’s economy would benefit from a more growth-friendly tax structure. The Survey suggests continuing to reduce labour taxes and phasing out distortionary taxes on turnover in sectors like energy, finance and retail which hinder new entry and investment. This could be balanced by increasing consumption, property and environmental tax revenues, while simplifying the value-added tax system by moving to a lower but broader-based VAT rate.
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