Offshore tax havens have long been associated with tax evasion and money laundering. However, not everyone who uses these offshore havens is a criminal. Many people use these havens to reduce their tax liability legally.
However, navigating the world of offshore tax havens can be daunting, especially if you’re new to the concept.
But don’t worry, we’ll cover the steps involved in hiding your money offshore, including setting up an active non-financial entity, changing tax residency, opening an account in a non-CRS country, and creating a corporation or other entity in this comprehensive guide.
Be an Active Non-Financial Entity
One of the best ways to reduce your tax liability is to become an active non-financial entity (ANFE). ANFEs are entities that are primarily engaged in business activities other than finance or investing. These entities are often exempt from tax or pay reduced rates.
Examples of ANFEs include trading companies, holding companies, and intellectual property companies. To set up an ANFE, you’ll need to register a legal entity in an offshore jurisdiction and engage in a legitimate business activity.
Change Tax Residency or Acquire a Second Passport
Another way to reduce your tax liability is to change your tax residency or acquire a second passport. If you’re a citizen of a high-tax jurisdiction, you can legally reduce your tax liability by changing your tax residency to a low-tax jurisdiction. This can be achieved by moving to a new country and establishing your residency there.
Acquiring a second passport can also be beneficial, as some countries offer beneficial tax regimes to their citizens. Countries like Malta and Cyprus offer citizenship by investment programs that can provide you with a second passport and access to their beneficial tax regimes.
Open an Account in a non-CRS country
The Common Reporting Standard (CRS) is a global initiative that aims to combat tax evasion by sharing financial information between countries. As a result, if you’re a resident of a country that participates in the CRS, your offshore bank account information could be shared with your home country’s tax authorities.
One way to avoid these reporting requirements is to open an offshore bank account in a non-CRS country. Some of the non-CRS countries that offer offshore banking facilities include the Cayman Islands, the British Virgin Islands, and Seychelles. However, it’s essential to ensure that your banking activities comply with the laws of the country where you hold the account.
Create a Corporation or Other Entity
Creating a corporation or other legal entity can provide anonymity and tax benefits. One of the most common types of corporations used for offshore tax planning is the International Business Company (IBC). An IBC is a legal entity that’s often located in a tax haven jurisdiction and conducts business activities outside the country of incorporation.
To set up a corporation or entity in a tax haven jurisdiction, you’ll need to engage the services of a local law firm that specializes in offshore company formation. The law firm will guide you through the set-up process and ensure that you comply with local laws.
Final words
Hiding money offshore in a tax haven can provide significant tax benefits, but it’s essential to ensure that your activities are legal and compliant with local laws. We recommend seeking the advice of professionals who specialize in offshore tax planning to help you navigate the complex process of hiding money offshore. In addition, it’s essential to stay up-to-date with tax laws and regulations to ensure that you don’t run afoul of the law. For updated information on offshore tax planning, you can visit offshorecorptalk.com.
