Corporate Tax Havens
What is a Corporate Tax Haven? Simply put, a corporate tax haven is an offshore jurisdiction that entices companies or corporations to use them as a legal domicile in order to benefit from a lower rate of tax, or for purposes of avoiding tax.
There are numerous offshore tax haven locations which cater to individuals and families, but an emerging trend over the past few decades is the corporate tax haven. This is an offshore financial centre which has worked its legislation so that it is friendly towards companies in terms of operating and taxation. It is surprising to note that some of the countries in the world that one would not consider to be an offshore tax haven are, actually, a corporate tax haven. These would include Ireland and certain states in the USA such as Delaware. Unsurprisingly, the Offshore Financial Centres friendly to corporates also include the famous tax havens of the Cayman Islands and Bermuda.
Ireland took it upon itself to actively compete for corporate business as a corporate tax haven. Dublin by offering a number of tax haven benefits, particularly by creating a series of incentives to the manufacturing companies to entice them to settle in Ireland. In exchange for favourable taxation, the Irish Government benefited from increased local employment and, naturally, taxation of the employees upon their income which would not have occurred if not for the taxation incentives for the corporation.
Despite being seen by the OECD as ‘harmful to the global economy’, one could argue that corporate tax havens actually promote business and revenue. Consider this: If a company is only just viable, it is unlikely to prosper and grow. The business owner may well give the business up and move on to a different venture. If the company is domiciled in a corporate tax haven, then the owners have to pay less tax. This makes the business substantially more viable and more likely to grow and develop over the initial, difficult years and become a prosperous business in time. Therefore, it could be argued that corporate tax havens and corporate offshore financial centres actually help businesses to keep making money and employing staff and, consequently, becoming successful.
The Offshore Company UK can help you with the usage of a corporate tax haven to ensure efficiency and legality. Call us today to talk to one of our advisers.