Ta Havens and OFCs

1. Tax Havens & OFCs
DR RAJU INDUKOORI

2. Taxation Methods &
Approaches
 World wide Approach
 Territorial taxation approach
 Re invoicing Canters.
 Tax Havens
 Offshore Financial Centres (OFCs)
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3. World Wide Approach
 Irrespective of origin of the company and
origin of the income, government taxes all
sources of corporate income
 US has world wide approach
 India is also close to WW approach, only
exemption is it doesn’t charge its NRIs
income.
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4. Territorial Approach
Local Income of
 Non Resident
 Resident Citizens
 Resident foreigners
Foreign Income of
 Non Resident
 Resident Citizens
 Resident foreigners
Tax is exempted or it varies based on the
following areas
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5. Re invoicing Center
 A subsidiary or department of a multinational
corporation where all intrafirm transactions are
centralized and foreign currency related
receivables and liabilities are netted.
 The means of hedging the entire multinational
firm's foreign currency exposures are also
determined by the re-invoicing centre.
 Limit the firm’s to transaction exposure.
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6. Tax Havens
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7. Tax Havens
 Laws and other measures can be used to
evade or avoid the tax laws or regulations
of other jurisdictions.
 Existence of a composite tax structure
established deliberately to take advantage
of, and exploit, a worldwide demand for
opportunities to engage in tax avoidance.
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8. Tax Havens
Organisation for Economic Co-operation
and Development (OECD) identified 3 key
factors to consider as tax haven.
1. No or only nominal taxes
2. Protection of personal financial
information
3. Lack of transparency
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9. 1) No or only nominal taxes
Tax havens impose no or only nominal taxes
(generally or in special circumstances) and
offer themselves, or are perceived to offer
themselves, as a place to be used by non-
residents to escape high taxes in their country
of residence.
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10. 2) Protection of personal financial
information
 They have laws or administrative practices under
which businesses and individuals can benefit from
strict rules and other protections against scrutiny
by foreign tax authorities.
 This prevents the transmittance of information
about taxpayers who are benefiting from the low
tax jurisdiction.
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11. 3) Lack of transparency
 Lack of transparency in one country can make it
difficult, if not impossible, for other tax authorities
to apply their laws effectively.
 ‘Secret rulings’, negotiated tax rates, or other
practices that fail to apply the law openly and
consistently.
 Limited regulatory supervision or a government’s
lack of legal access to financial records are
contributing factors.
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12. Examples
Sovereign
1) Luxembourg
2) Switzerland
3) Netherlands
4) United States
Non Sovereign
British
1) Jersy
2) Isle of Man
3) Bermuda
4) British Virgin Islands
5) Cayman Islands
United States of America
1) Delaware
2) Puerto Rico
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13. OFCs
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14. Off Shore Finance Center
(OFC)
 International Monetary Fund (IMF) defines an
offshore financial centre as "a country or
jurisdiction that provides financial services to non-
residents on a scale that is incommensurate with
the size and the financing of its domestic
economy.
 It is a small, low-tax jurisdiction specializing in
providing corporate and commercial services to
non-resident offshore companies, and for
the investment of offshore funds. The term was
coined in the 1980s.
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15. Off Shore Finance Center
(OFC)
 OFC play a legitimate and integral role in
international finance and trade, and that their
zero-tax structure allows financial planning and
risk management and makes possible some of the
cross-border vehicles necessary for global trade
 Overseas Private Investment Corporation (OPIC),
a U.S. government agency, when lending into
countries with underdeveloped corporate law,
often requires the borrower to form an offshore
vehicle to facilitate the loan financing.
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16. Off Shore Finance Center
(OFC)
 Have low burden of regulation
 give the synergies of tax havens
 Provide high confidentiality
 Act as conduits for global trade and
ease international capital flows.
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17. Off Shore Finance Structures
Off shore company
Offshore partnership
Offshore trust
Private foundation
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18. OFC Verticals
 Ship and Aircraft Registrations
 Insurance
 Collective Investment Vehicles
 Banking
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19. OFC s
 Bahamas
 Bermuda
 British Virgin Islands
 Cayman Islands
 Dominica
 Jersey
 Luxembourg
 Mauritius
 Panama
 New Zealand
 Switzerland
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20. Thank You
DROP YOUR QUESTIONS IN COMMENTS.
YOUTUBE : PROFESSOR RAJU