The Best Tax Haven Countries | A Complete Guide
Around the world, there are a few countries offering low to no tax rates in order to attract foreign investment. Tax havens provide offshore banking opportunities to individuals and corporations to shield them from taxation in their countries of residence and have long been popular with the ultra-wealthy and large businesses.
Tax Havens For Expats
Nowadays, tax havens are starting to attract a growing number of middle-class expats and investors who are growing tired of increasingly high tax rates after working hard for years to accumulate a moderate amount of wealth.
As some of these tax havens do not require foreign investors to become residents and promise complete financial confidentiality, more and more people are exploring their options when it comes to using offshore accounts to hold their money.
If you are seeking a place to invest to protect your wealth from income, capital gains or corporate taxes, with privacy and without breaking any tax evasion laws, our guide will familiarise you with the best options around the world.
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Best Tax Havens in Europe
Luxembourg
Since the 1960s, Luxembourg has been a favoured tax haven amongst investors and offshore companies, and it has become a financial centre for the trade of offshore European bonds. As one of the world’s smallest countries, a large part of the economy here is based on the foreign business drawn in by the favourable tax structure it offers.
Whilst its residents are subject to income tax, foreign investors and companies based here are only taxed on income which is earned within Luxembourg itself. The country also offers high levels of privacy to foreign investors, as only businesses conducting operations within the country are required to declare financial reports on public records.
As a result, this small jurisdiction attracts roughly the same amount of foreign direct investment as the United States. In fact, many large corporations have their subsidiaries in Luxembourg including the likes of Amazon, Apple, FedEx, Heinz and IKEA.
Cyprus
Cyprus had to end its status as an offshore tax haven and had to adjust its tax laws to international and EU standards after the country’s entry into the EU.
As part of its reforms, and to increase transparency, the country agreed to participate in the Automatic Exchange of Financial Account Information program, so it can no longer keep financial accounts secret, which was previously a huge draw for foreign investors.
Despite this, Cyprus does remain an attractive location for businesses and still offers considerable tax benefits and advantages for individual investors. Cyprus offers many offshore business formulation opportunities which are fully compliant with EU policies and have the benefit of access to various EU economic and trade treaties.
In 2019 they introduced corporate tax rates of 12.5%, which is still one of the lowest rates in Europe, and non-resident companies are free from all local taxation.
Best Caribbean Tax Havens
Cayman Islands
As the Caymans do not impose corporate tax, they are known to attract a multitude of businesses which use it as a base for subsidiaries, shielding some or all of their income from tax.
These islands are also a tax haven for residents- they are free from all income tax, property taxes and capital gains tax. Strict privacy laws around identity and assets held in the Caymans ensure peace of mind for investors.
With no revenue sourced from corporate and income taxes, the islands rely on income from tourism, permit fees and duty taxes, which can be extremely high on certain items. The cost of living can also be considerably higher compared to most European countries.
If you are considering the Cayman’s, it’s best to consult an adviser and be aware that it may be very difficult to start a business or invest here due to strict regulations.
Bahamas
The Bahamas are another Caribbean country which imposes no taxes- including income tax, inheritance tax and capital gains tax- on both its citizens and residents. The Government sources revenue from tourism and VAT, property tax, stamp and import duties and licence fees.
The Bahamas is also known to offer tax advantages and a stable and secure environment for foreign business. The strict laws here not only protect the privacy of financial clients, but also prohibit any illegal activities such as money laundering. As a result, it has become an international hub for finance and banking activities, with over 250 banks licensed here.
These islands also offer the opportunity to establish Bahamian- based business entities known as IBCs, which are exempt from corporation tax as long as they do not earn revenue locally. IBCs offer shareholder privacy, though a register of directors and officers must remain public.
Sole foreign investors can benefit from the same tax exemptions through obtaining a business licence and are free from capital gains tax. Foreigners can also purchase real estate in the Bahamas, subject to a stamp tax between 2.5 to 10%.
Best Tax Havens To Live In
Monaco
With no personal income, capital gains or inheritance tax, it’s no wonder that Monaco has become an international hub for finance, business, casinos and luxury. For decades, this small coastal principality has become a hotspot for entrepreneurs and the rich and famous – it has even been claimed that one in every three people living in Monaco is a millionaire.
With its tax advantages, lavish lifestyle and beautiful scenery, Monaco is not just known as a tax haven, but as a desirable location for expats who can afford to live here permanently.
If you are considering a move to Monaco, be aware that as with most other tax havens, you can expect a high cost of living. Obtaining residency can be difficult as you need to show proof of accommodation and sufficient finances.
The United Arab Emirates
Thanks to its wealth of oil reserves, the Government of the UAE does not tax its residents or foreign nationals and investors. As a result, this Arab nation has attracted a large amount of international business and a community of expats from all over the world.
The Emirates have recently introduced a VAT of 5% on some goods and services and a corporate tax of 9% on some businesses which operate within the UAE.
Despite this, the UAE remains one of the most attractive tax havens for individuals and businesses, offering asset protection, free trade, low to no taxes and complete financial privacy, whilst remaining fully compliant with anti-money laundering standards. It's no surprise this jurisdiction has seen a rapid rise in foreign investment and growth in many industries in the past few decades.
The UAE can offer a high quality of life for expats, and a cosmopolitan network of foreigners to connect with. Although, some drawbacks to consider are the high cost of living and difficulty in obtaining permanent residency.
Best Retirement Tax Havens
Deciding on the best tax haven to retire in will depend on your personal finances, goals and circumstances. The optimal approach is to discuss your favoured destinations with a specialist expatriate financial and tax adviser.
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It’s important to consider other tax advantaged countries which may offer ‘golden visas’ or bonds which are designed for retired expats, such as Spain, Portugal and France. Although these countries do not have official tax haven status, they may provide significant tax benefits for retirees.
