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The normal distinction between a tax planning, as opposed to a tax haven, jurisdiction is that the former normally involves the exploitation of double taxation treaty provisions and/or the use of domestic tax ‘loop-holes’. The primary advantage of using such territories is that they have no ‘offshore’ stigma and can often withstand the application of tax anti-avoidance provisions. Notwithstanding this, tax-planning jurisdictions are often used in conjunction with tax haven undertakings (see below) Tax Planning JurisdictionsExample tax planning jurisdictions would include: The Netherlands: The Netherlands is perhaps the most established, albeit expensive, ‘treaty shopping’ jurisdiction having a very advantageous and extensive double taxation treaty network. In brief, the modus operandi behind its use is to employ local companies as catalysts to receive dividends, royalties and interest, often with no or little withholding tax implications from the payor country. When payments derived from such sources are received in Holland, the full local tax of 35% will be charged in respect of the ‘turn’ amount - This normally being a small percentage of the actual sum received. The tax tree balance is then often forwarded to a zero or low tax jurisdiction, such as Luxembourg or the Netherlands Antilles
Madeira (Portugal): For those wishing to register a vessel, Madeira is without doubt the most fiscally advantageous territory’s within the European due to its very low VAT rate of 12%. However, despite the concession such companies based on the island will fully benefit from the Portuguese double taxation treaty network and EU directives/ regulations. The Madeiran Development Company (SDM) has also created a special holding company called a S.P.G.S. (Sociedade gestora de participacOes sociais) which is fully exempted from EU withholding taxes on dividends (which can be up to 33.3%) despite the fact that the maximum tax liability of such a company is only 1.7%
Labuan (Malaysia): Labuan is a strategically placed Malaysian island, which can justly claim to be Asia’s premier international offshore financial centre. Labuan is located within 3 to 4 hours by air from many of the regions leading capital cities such as Jakarta, Hong Kong, Singapore, Manila, Brunei, Bangkok and of course the Malay capital of Kuala Lumpur. Most impressively, this jurisdiction has fully coordinated legislation and a ‘one stop’ regulatory body, the Labuan Offshore Financial Services Authority (LOFSA), ensuring an efficiency level comparable to the best that the United States, Britain or Ireland can offer. From a tax planning perspective Labuan allows investors to select either an annual exempt duty or a minimal taxation liability depending upon the needs of the individual. Further, Labuan companies operating within South-East Asia can enjoy the full benefits of the Malaysian double taxation treaty network. In fact, Labuan is an ideal conduit for those wishing to invest in China where direct financial repatriations could expose a company to high taxation. Uniquely in Europe, the Hibernian/SCF Group has its own fully licensed management company, namely SCF TRUST (MALAYSIA) SDN BHD
The Republic of Ireland: The Republic of Ireland is not generally thought of as a ‘tax planning’ jurisdiction, but nevertheless has one of the most sophisticated tax treaty networks in the world combined with very favorable domestic tax legislation for both companies and individuals. For example, since 2003 all Irish companies have been subject to a universal corporate tax rate of only 12.5%. For non-domiciled but resident individuals, Ireland can also be an ideal place of residence. Not only are such individuals taxed on a remittance basis only, but also they have tax treaty protection against the anti avoidance provisions of their former jurisdiction of residence. For resident individuals, domiciled or not, actually employed by an Irish company it is often possible to significantly reduce domestic tax levels using various Finance Act provisions. For writers and “artists” there are no individual taxes. Finally, Ireland can also offer non resident companies that are externally managed and controlled, provided there is either a domestic director or management occurs in a country with which Ireland has concluded a tax treaty or is part of the EU [see Finance Act (No. 2) 1999]
Cyprus: Apart from offering significant personal tax concessions for foreign resident individuals, Cyprus also offers a ubiquitous corporate tax rate of only 10% on corporate worldwide profits. As a full member of the European Union, Cyprus is now becoming a genuine ‘competitor’ to the Republic of Ireland especially where access to the East European market is needed. Unlike the past, current discrimination against the Cypriot tax regime is becoming less pronounced due to its EU compliant tax regime and its unique tax treaty network with most of Eastern Europe. In fact, for those who wish to invest in Eastern Europe Cyprus has few rivals and can, as a tax-planning jurisdiction, access Western countries through its very favorable tax treaties with complimentary jurisdictions such as the Republic of Ireland
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