Leveraging Tax Havens Legally refers to the strategic use of countries or jurisdictions that offer low or zero tax rates to minimize tax liabilities while complying with legal regulations.
Tax havens often provide favorable tax conditions, such as low corporate taxes, confidentiality laws, and minimal reporting requirements. Businesses and individuals may establish subsidiaries or trusts in these jurisdictions to allocate profits, thereby reducing their overall tax burden.
For example, a corporation might set up a subsidiary in a tax haven to receive royalties or to hold intellectual property rights, allowing it to pay less tax on that income compared to its home country. This practice is legal as long as it adheres to international tax laws and regulations, including transfer pricing rules and the economic substance doctrine.
« Back to Glossary Index