Most people are looking for ways that they can legally pay less tax, and one of the options to do this is to move to a country which has lower or no tax. Countries that have favourable tax options are known as ‘tax havens’.
It’s important to remember that tax is not always straightforward. Most countries will have varying corporate tax, income tax, VAT, sales tax, and capital gains tax, as well as other forms of tax. They might be considered ‘tax-free’ in one way, but compensate for the taxation elsewhere.
However, there are some countries which offer almost no taxation in any form. Here is our list of the most popular tax-free countries.
What are the best tax havens?
1. United Arab Emirates
Dubai and Abu Dhabi are normally first mentioned when it comes to tax havens. These two cities of the UAE are also popular with UK expats, with approximately 240,000 British expats currently living there.
There is no personal income tax, capital gains tax, wealth tax or inheritance tax in the UAE, so it can be an incredibly attractive place to live in. There are some minor taxes, such as a 9% tax on companies above a certain threshold, and in 2018, VAT was added at 5% to help maintain and improve public services.
Convert money from the UAE to the UK here.
2. Saudi Arabia
Saudi Arabia has become a popular tax haven in recent years, and currently charges no income tax, and only 2% corporate tax for all nationally owned businesses – 15% for all other ownership.
There are currently around 30,000 British expatriates in Saudi Arabia, and in total around 13 million expatriates from all over the globe. If you’re moving to Saudi Arabia, we have a guide on how to obtain an Iqama (Saudi Arabia’s residence permit).
Convert money from Saudi Arabia to the UK here.
The Bahamas is a popular destination for those looking to pay less tax due to the country’s incredibly lenient tax policies.
There is currently no tax for individuals or corporations, and instead, the country derives most of its revenue from import and stamp duties, as well as excise taxes.
4. Cayman Islands
The Cayman Islands is a popular tax haven. There is no income tax, capital gains tax, or corporation tax on individuals or companies. The government operates in a similar way to the Bahamas, where it will generate revenue through indirect taxes such as import duties, tourism taxes and work permit fees.
Monaco is one of the most well-known tax havens and is synonymous with a high standard of living. There is no tax on individual income, and as long as a company makes 75% of its profits within Monaco, they are also exempt from any tax.
However, there is a slight catch for French citizens, whereby they need to prove that they have been living in Monaco for at least five years in order to benefit from the tax rules. This is due to the Franco-Monegasque tax treaty established in 1963, which was ratified to make it harder to avoid French tax.
6. British Virgin Islands
The British Virgin Islands (BVI) is another hugely popular tax haven. There is currently no capital gains tax, inheritance tax, gift tax or sales tax.
The BVI is often used for international business structuring and asset protection.
Another island territory providing a tax haven for businesses and individuals, Bermuda does not impose any tax on individuals or corporations. Much of its income comes from import duties, payroll tax and social insurance contributions. Bermuda is often used by offshore insurance and financial services.
Other tax havens
There are many other tax havens which provide some great options, all of which carry their own advantages and disadvantages.
- Antigua and Barbuda
- Saint Kitts and Nevis
- Channel Islands
- Isle of Man
- Pitcairn Islands
- Wallis and Futuna
It is not just the tax level of a country that is important to think about. The economic security of a country is also a key factor, and the fact that a country demands no tax doesn’t necessarily mean that it will be good as a tax haven. Many countries are tax-free, but their economic stability is weak, so it doesn’t present an attractive option.
It’s also worth bearing in mind that some countries might offer good tax options, but disadvantages in other ways due to the way the countries are run. For example, Qatar is considered a tax haven, but is quite restrictive in many ways, and may not be the ideal place for your finances.
Are tax havens legal?
Tax havens are perfectly legal, as long as all the appropriate laws are followed.
Whether tax havens are ethical is another debate in itself, as many argue that corporations and individuals should remain in the country they operate in, to give back to the public services and government in that country. It’s also worth noting that the process of using tax havens can often go hand-in-hand with illicit activities, such as tax evasion and money laundering.
However, using tax havens can also benefit the country itself, as it brings in foreign interest and investment, and provides security for the country as well as employment opportunities.
Low tax regions
As tax and business are complex, it is not always zero tax that is the most attractive for businesses and investors.
For example, Switzerland and Luxembourg are not tax-free but are still recognised as tax havens. Switzerland is favoured as a tax haven due to its strict bank secrecy laws and favourable tax rates, as well as the rock-solid economic stability of the country. For an individual or corporation interested in these qualities, Switzerland is the ideal tax haven. Luxembourg is another popular choice for similar reasons.
Singapore is another upcoming option as a tax haven, due to its competitive corporate tax rates, as well as its generous tax incentives. The country is also poised to be one of the most successful economies in the world in the decades to come, so investing your money in the country has been attractive to many investors already.
Convert money from Singapore to the UK here.
Tax havens and their rules are constantly shifting as countries are working to incentivise or limit investment, and also organisations are working to combat tax evasion and financial foul play. Therefore, the tax havens of today could be drastically different in the future.
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Caleb is a writer specialising in financial copy. He has a background in copywriting, banking, digital wallets, and SEO – and enjoys writing in his spare time too, as well as language learning, chess and investing.