Choosing a Tax Haven – What Are You Trying to Achieve?

There are 19 different reasons to use a tax haven, some legal, and some illegal. No doubt, there are many more, so when choosing a tax haven, we need to firstly look at our objectives – what are we really trying to achieve? Some of the objectives will be complementary (like saving tax and privacy), and others competing (like higher investment returns and lower investment risk). Normally, there are a couple of essential requirements (which are non-negotiable and a deal breaker), and then a long list of desired attributes. For example, saving tax and security of investment funds are normally essential. No point saving tax, to have the investment funds misappropriated and stolen.

Then secondly, we need to review the attributes of each of the tax havens. Each tax haven is different, with particular strengths and areas of expertise. Bermuda, for example, specialises in captive insurance companies and is the world’s leading offshore captive domicile. Although there are 150 or so tax havens, this process is not as exhausting as it sounds. It can be short-circuited by focusing on the top 10 tax havens (which account for 95% of tax haven ‘business’).  

Then thirdly, by cross-referencing our objectives with the different tax haven attributes, we can choose the specific tax haven that has the best ‘fit’ for us. This will not be a one-off process as change is constant. Over time our objectives may change, and tax haven attributes definitely change (for the good and bad).