TAX HAVENS COUNTRY

Sukanto Tanoto used Tax Haven Countries as a way of tax evasion.

A phenomenon that has emerged from the philosophy that foreign source income shouldnot be taxed at all or should be taxed only wen declared a dividend is the tax haven. A tax haven is defined as “a place where foreigners may receive income or own assets without paying high rate of tax upon them”
Tax havens offer a variety of benefits, including low taxes or no taxes on certain classess of income. Because of these benefits, thousands of so-called mailbox company have sprung up insuch exotic places as Lichtenstein, Vanuatu, and the Netherlands Antilles.

Some examples of types of taxhaven countries are as follows:

1. Countries with no income taxes, such as Bahamas, Bermuda, and the Cayman Islands.
RGE, APRIL, Sateri all are registered in Bahama.

2. Countries with taxes at low rates, such as the British Virgin Islands.

3. Countries that tax income from domestic sources but exempt income from foreign sources, such as Hong Kong, Liberia and Panama.

4. Countries that allow special privileges: generally their suitability as tax havens is limited.

To take advantage of a tax haven, a corporation would ordinarily set up a subsidiary in the tax haven country through which different forms of income would pass. The goal is to shift income from high-tax to tax haven countries. This is normally accomplished by using the tax haven subsidiary as an intermediary.

For example, an Indonesia manufacturer (Asian Agri or APRIL) could sell goods directly to a distributor in Germany and concentrate the profits in Indonesia, or it could sell the goods to a tax haven subsidiary at cost and then sell the goods to the German distributor, thus concentrating the profits in the tax haven subsidiary with no income taxes or with tax at low rates.

Every tax haven has advantage, such as having a low or zero rate of tax on all or certain categories of income, and offering a certain amount of banking or commercial secrecy. and disadvantages depending on what you hope to achieve. The 13 indicators identified here for judging a tax haven’s potential will help you gauge how each potential tax haven stacks up against your goals. The object, of course, is to find a tax haven with the maximum number of advantages that satisfy your requirements. (1) tax structure (2) political and economic stability (3) exchange controls (4)tax treaties (5) government attitude (6) modern corporation laws (7) simple incorporation procedures and competitive fees (8) communications and transportation (9) banking and professional services (10) English common law (11) secrecy and confidentially (12) investment incentives and opportunities (13) location

Extracted from:

Mohammad Zain. TAX MANAGEMENT THROUGH TAX HAVENS COUNTRY, TRANSFER PRICING AND PROFIT SHIFTING (With special reference to Indonesia case). 2nd INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2nd ICBER 2011) PROCEEDING

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