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Tax avoidance is doing everything possible within the law to
reduce your tax bill legally. Without changing country of
residence or giving up one's citizenship, personal taxation may
also legally be avoided by creating, separate legal entities to
which one's property is donated. These separate legal entities
are often, companies, trust or foundations.
Assets are transferred to the new company or foundation so that
gains may be realized, or income earned, within this legal
entity rather than earned by the original owner.
The company/foundation may also be able to avoid or lower
corporate taxation, by using offshore financial centers,
provided they are properly structured. Care must be exercised
when selecting legal entities and offshore financial centers,
also known as offshore structuring, because most countries have
enacted anti-avoidance legislation designed to reduce or
eliminate the effectiveness of offshore structures. Tax
avoidance is sometimes also referred to as the art of lowering
ones tax bill as much as possible, without breaking the law.
On the contrary, tax evasion is the general term for efforts by
individuals, companies, trusts and other entities to evade taxes
by illegal means. Tax evasion usually entails taxpayers
deliberately misrepresenting or concealing the true state of
their affairs to the tax authorities to reduce their tax
liability, and includes, in particular, dishonest tax reporting
(such as declaring less income, profits or gains than actually
earned; or overstating deductions).
For those practicing the illegal act of tax evasion,
confidentiality is of paramount importance!
Traditionally Offshore Financial Centers (OFCs) have been
characterized by low or no taxes, less onerous compliance
requirements, and secrecy.
However initiatives led by the Organization of Economic
Cooperation and Development (OECD) against so-called “harmful”
tax competition and by the Financial Action Task Force (FATF)
against money laundering , have forced most OFCs to increase
transparency and regulation, and to permit the exchange of
information for both criminal and fiscal matters. This means
that, under certain prescribed circumstances, the beneficial
ownership of an offshore structure can and must be revealed on
request by an inquiring tax authority.
The latest press release of the Global Forum on Transparency and
Exchange of information which contains information about the
various peer review reports, indicate that the majority of the
countries reviewed, have changed or are in the process of
changing their domestic legislation, following the
recommendation received from the Global Forum. The Global Forum
membership consists now of 101 countries band another 20 is
expected to join by this year-end.
Also recent news reports indicate that USA and Switzerland (the
bastion of bank secrecy) are in advanced talks on a general
disclosure agreement, whereby Swiss Banks will pay fines and
hand over historical client’s data to the USA Authorities in
exchange for which the US Authorities would agree to drop legal
charges.
None of this means that offshore structures are any less useful,
but it is absolutely critical to arrange the ownership and
management of an offshore structure correctly if they are to be
effective.
By using a blend of offshore companies, life insurance contacts,
offshore trusts and private foundations, one is able to create
offshore structures that legitimately and legally defer and
lower the tax bill in the tax payer’s home country.
As the American judge Learned Hand, once stated; “No one owes
any public duty to pay more tax than what the law demands”.
For more information about this or other structuring
possibilities:
Email us at: info@sadekya.com
Or visit our web-site at: www.sadekya.com
Sadekya Fiduciary Partners.
Rudsel. J. Lucas TEP, Managing Director
The Triangle Office Building
Hoogstraat 20-22
P.O. Box 4750
Curacao, Netherlands Antilles
Telephone: 599 9 4652698
rudsel.lucas@sadekya.com
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