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Here are 12 important factors for gauging a tax haven’s suitability

for your purposes and the criteria for determining

the T-7 tax havens. When researching potential tax havens,

have your foreign contacts provide you with current information on

their jurisdiction’s status; changes frequently occur and often go

unnoticed. An offshore professional will gladly provide you with

what you need to make an intelligent decision. The countries profiled

in Part Three cover 40 tax havens, all worth further discussion.

Less notable venues have been eliminated to save you time and unnecessary

deliberation. All tax havens in this book are still viable

and open to consideration or, in the case of certain once-strong

havens that have recently experienced significant changes such as

the Bahamas, they must be addressed even though they are no

longer recommended for use.

Your object should be to secure the most advantages from the tax

haven you have selected while satisfying your primary objective.

These are the most important criteria to consider in choosing your


1. Tax structure

2. Political and economic stability

3. Exchange controls

4. Treaties

5. Government attitude

6. Modern corporation laws

7. Communication and transportation

8. Banking, professional, and support services

9. Legal system

10. Secrecy and confidentiality

11. Investment incentives and opportunities

12. Location

The country profiles in this book give a reasonable amount of information

to help you narrow down your selection. The fastest way

may be to start with the T-7 list of the world’s best offshore havens; if

none of them seem to fit your plans, you can take a more thorough

look into the many other tax havens and their unique characteristics.


This is probably the single most important factor in considering a tax

haven, although several others should be seriously considered as well.

Tax havens commonly have two tax systems, one for local business and

one for those to whom they cater in their offshore trade. As an offshore

client, you need to know what taxes, if any, will affect your banking

or what taxes, if any, might be imposed on the corporation you

establish for business purposes. There are no-tax havens, foreignsourced

income havens, tax treaty countries, and special use tax



Stability is a serious consideration in choosing any tax haven. However

nice Montserrat might have seemed, you wouldn’t have wanted your

offshore business located there when the lid blew off the volcano, taking

much of the island with it. Nor do you want to be in Liberia, a tax

haven that was dumped from my list due to endless murder and mayhem.

Almost all the tax havens here are very stable, with the exception

of Cyprus. But although the Turks and the Greeks apparently would

rather not stop fighting, Cyprus has managed to hold its own as a tax

haven, unlike a venue such as Nauru in the Central Pacific, which was

yanked from international banking after it was discovered that their

banking system was mostly a laundromat for the Russian mob.


Restricting the free flow of funds between countries is a form of governmental

control and annoying to anyone having to conduct international

business within these countries. “Flight capital” occurs frequently when

people are restricted from freely moving their money in and out of their

country. Let’s hope we don’t experience it in the United States anytime

soon. However, it is possible. That is why you want to consider the potential

negative repercussions of geopolitics on your finances, investments,

and assets. Going offshore is the best way to avert these troubles. In recent

history, many people have employed the same methods and then

followed their money out of their country as well. Most serious banking

centers and tax havens do not have exchange controls that would affect

offshore business.


Know where your prospective tax havens stand on tax treaties, particularly

ones signed with your own country. They are important when

doing tax planning. Many tax havens impose a low or no tax on foreign

earned income and have no tax treaties. Where there are tax

treaties, your offshore business might be ideally suited to reap significant

tax benefits. An ordinary tax treaty usually helps you escape double

taxation. Another type of treaty is called a Tax Information

Exchange Agreement (TIEA), but it is not really a tax treaty. The sole

purpose of the TIEA is to permit the U.S. Internal Revenue Service

(IRS) to obtain otherwise secret or highly confidential financial and

other information from foreign financial institutions and from

lawyers, for tax investigations against U.S. tax payers. The TIEA is

being used to crack down on alleged offshore tax evasion, and many

tax havens are expected to agree that it is in their interest to sign such

an agreement. But it is not in your best interest.

The Mutual Legal Assistance Treaties (MLAT) are bilateral agreements

used in criminal investigations to obtain information and evidence.

Although many tax havens are party to this agreement, it does not

cover tax evasion. A list of countries that have signed this type of treaty is

included in Chapter 30. Consult a U.S. attorney who is well versed in

these matters, or an offshore legal professional knowledgeable on how

existing treaties with the United States would affect your offshore plans.


Political parties holding office can have a positive or negative effect

on their offshore industry. Go with a tax haven that promotes the offbarb_

shore field and the benefits of doing business from their venue. If an

election process exists, transitions between administrations may go

smoothly, and you won’t have to run for cover. But, should you ever

need to quickly redomicile an offshore corporation to another venue

(which could be necessary for a variety of reasons), Nevis is an excellent

choice, and the government will honor the original incorporation

date of the company from the country from whence it came.


Today, most tax havens have modernized their corporation laws and

incorporation procedures to keep up with the stiff competition. Tax

haven corporation laws often have features not found in U.S. corporations,

and these usually afford more advantages and flexibility.

The offshore corporate vehicle of choice is the international business

corporation (IBC), which is specifically designed for offshore

use by nonresidents, and is generally exempt from taxes. As for incorporation

and annual maintenance costs, the fees are usually

competitive to get into one, and reasonable to keep it alive. There

are exceptions, such as in Bermuda and Switzerland where these

costs are relatively hefty.


Unless you plan to retire or immigrate to your chosen tax haven country,

or your business warrants shipping, chances are you won’t be staying

there for long, if at all, so transportation isn’t too important. Most

tax havens today have upgraded to state-of-the-art facilities so that

conducting international business without being present should not

be a problem. If you are doubtful, ask your tax haven contact.


Top-notch banking, professional, and support services will make your

life easier, especially if you are operating from long distance. Most of

the tax havens have reliable experts in the field. If a recommendation

or personal introduction is desired, for further information, refer to

“Offshore Evaluation Service” in Part Four.

Banking offshore has been affected by outside influences, as well

as by the internal changes the offshore venues may have experienced.

Familiarize yourself with these developments and assess where your

tax haven stands and may be headed tomorrow. The Bahamas and the

Caymans were touted as ironclad tax havens, but both tanked quickly

under pressure, giving in to outside influences.


Half of all tax havens are based on English common law, which is generally

a good thing. The concept of confidentiality in financial transactions

is customary, and even without secrecy laws, they will generally

provide greater confidentiality than you experience in the United

States. That is because many were former British protectorates or

Crown Colonies, some of whose external affairs are still handled and

protected by England. English common law has a long tradition and

case law history from which to draw. In countries like Panama, Mexico,

France, and elsewhere, civil law is the prevailing system, and is based

on Napoleonic law, or “guilty until proven innocent.”

Confidentiality is being eroded even in certain common law countries

and some attacks on banking privacy are succeeding. In Great

Britain, thanks to a special ruling recently passed, the U.K. Revenue

(the British IRS equivalent), and Customs can now force banks and

other financial institutions to turn over all financial records held in

their databanks on their customers, all in the name of tax evasion prevention,

even though there is little proof to substantiate the claims

against individual depositors. This tactic is similar to the one used by

the IRS against offshore debit and credit card holders. English Revenue

and Customs wasted no time in exercising their new power, and

for starters, have gone after Barclays Bank account holders, including

their offshore accounts held in tax havens like Guernsey, Jersey, and

the Isle of Man. These high-handed measures have become a trend and

will get even worse as the G-7, the European Union, and other nations

try to reduce mounting deficits as a result of pension crises, escalating

health and welfare costs, and all-around poor fiscal management by

many governments. Talk of “harmonizing taxes” and “creation of a

level playing field” and “unfair tax competition” are all lines directed

at eliminating the tax competition offered by lower-taxing countries.

Only if these offshore avenues are significantly reduced or plugged


can the high tax bodies of the world jack up taxes further to support

their missions. Otherwise, they fear that even further revenues will be

lost to tax havens and other lower taxing countries.


Panama is a good example of a tax haven that is attractive for bank

secrecy. There are statutory guarantees protecting financial privacy

and providing a very high level of confidentiality. Stiff civil and

criminal penalties help keep lips sealed. A handful of money havens

stand out as having possibly the strictest secrecy laws anywhere.

Many tax havens and banking centers, however, have succumbed

to the pressures of the OECD and the United States, and have

abandoned their secrecy policies, as with those tax havens that

signed a Tax Information Exchange Agreement (TIEA).

The best money havens for maximum secrecy are the countries on

my T-7 list, and, concerning this topic, I must also add Andorra. Although

in terms of confidentiality these eight are my favorites, still

others (such as Luxembourg, Vanuatu, and even Denmark) have secrecy

laws and could be useful. Although all are subject to change, as

with the T-7, they are likely to remain strong for some time.

Let the buyer beware. Even tax havens peddling secrecy do not want

criminal elements. Secrecy can be penetrated under circumstances

where criminal activity is involved.


Tax havens have many attractive financial benefits and unique characteristics

that draw business to these islands, enclaves, and legislative

wonders. Some of these countries encourage onshore investment to

develop industries in the hopes of creating new jobs and stimulating

their own economies. These incentive programs frequently come in

the form of tax holidays, grants, and loans.


Today’s state-of-the-art communications have transcended the importance

of where a tax haven might be located. The time zone will make

a difference if you are far away, in which case, you will want to adjust

your calling times to reach people during business hours. At times, I

have found myself awake at all hours of the night to talk to people in

certain parts of the world. Certain investors tend to stay close to

home. The English use the Channel Islands; Americans like the

Caribbean; Asians and Australians use the South Pacific and Asian

tax havens; Africans might use Madagascar or the Seychelles. The Italians

like Switzerland and Monaco, or so the story goes. The answer to

which will be your best tax haven is to minimize your concern with location

in favor of the most important factor—solving your financial

objectives, wherever that may take you. You needn’t limit your options

because of your proximity to a tax haven. Language is occasionally a

barrier, but professionals in most sophisticated banking centers and

tax havens speak fluent English, the business language of the world.