Basic Techniques of International Tax Planning

It's important to keep in mind, as one navigates the shoals of international tax planning, just what the hazards are.8 min read

Basic Techniques of International Tax Planning

It's important to keep in mind, as one navigates the shoals of international tax planning, just what the hazards are.

We have tax codes throughout the world to thank for the development of the offshore financial world. Without their assistance, the Cayman Islands would probably be a set of desert islands and no one would ever have heard of Vanuatu. One of the main purposes of this work is to reduce or eliminate taxes. The countries we have been talking about here are called "tax havens" after all.

What Is the Essence of Offshore Financial Operations?

Tax planning is the essence of offshore financial operations. Most of the players of the international money game are overseas because of taxes. They share with all the peoples of the world a desire to pay less taxes.

What Is International Tax Planning?

In principle, international tax planning is quite simple; the details are what drive one mad. International tax planning is based on the fact that the revenue laws of any state are largely restricted to its domestic economy. The tax authorities have a hard time crossing borders but people and wealth can do so easily.

What Changes Can Be Made through Offshore Tax Jurisdictions?

A person can make three basic changes in his tax situation through offshore tax jurisdictions. He can change his residence, the geographic source of his income, of the form of the tax planning entities that he uses.

What Is a Tax Haven?

A tax haven is a country that imposes no taxes on the income of companies and other entities so long as they do no local business beyond spending money.

What Is a Treaty-Haven Jurisdiction?

A treaty-haven jurisdiction is a country that has a tax treaty in force with the United States or other high-tax nations.

What one wants to do is to accumulate different forms of income through different companies and trusts in various jurisdictions in such a way that the total tax bill is minimized. Once the plan is in place, it might operate something like this: