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Tax Fraud- Offshore Tax Havens
What are offshore tax havens and can I legally use them to avoid paying taxes?
This is a question many of you may ask yourself as April, 15th draws nearer. If stashing your cash offshore
seems like a good idea to you, perhaps you should learn a little more about what they are and what consequences
you could face if caught. So what exactly are these offshore tax havens that you feel you should be taking
advantage of?
What is a tax haven?
A tax haven is a country with either low taxes or, in some cases, no taxes at all. Believe it or not, some
countries consider the US to be a tax haven. It all depends on your perspective and your own country's tax
rates and laws. In some offshore jurisdictions the reduced tax regime is aimed towards entities organized
in the country with all operations occurring outside the country. These countries seek to encourage investment
and make up revenue losses by charging a variety of fees for the start up of the entity and on an annual basis.
How People Use Tax Havens to Avoid Paying Taxes
There are many diferent ways that people can take advantage of the benefits offered by tax havens. The first is to simply move to that country and become a resident for tax purposes. Another method used to take advantage of tax havens is to create a corporation in that country and transfer funds and assets to it. Once that's done any new income generated by the company or trust would be subject to the tax laws of the haven jurisdiction. While this sounds like a great idea it may or may not be legal depending on the particular tax haven used and the specific circumstances. It's often illegal for an individual to own a stake in a corporation or trust located in a tax haven. Not only that but it's very likely that there are laws that make sure you pay taxes no matter what you've tried to set up offshore. There may be laws making sure that you're not subject to double taxation which is nice but you often end up paying whichever tax rate is higher.
Are Offshore Tax Havens Legal for US Citizens?
Some companies try to entice US citizens into taking advantage of tax havens but it's illegal for US citizens to do so. If you use a tax haven and get caught you can be prosecuted for tax evasion! Citizens of the United States have to pay taxes no matter what their source of income is which sometimes causes them to renounce their citizenship so that they can take advantage of tax havens.
Related Tax Fraud Links:
IRS Free Online Filing
The "Dirty Dozen" Tax Scams
Tax Scams - How to Recognize and Avoid Them
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