Updated
GL-T-04
Glossary · Taxes and residency
Tax haven - low tax without the old anonymity
A country or territory with very low or zero taxes and strong financial privacy. Because of transparency rules (CRS, substance, BEPS) classic tax havens no longer work the way they used to.
01 / In 30 seconds
The short answer
- What it is
- A country or territory with very low or zero taxes and privacy
- Why it is used
- For reducing taxes and holding assets
- What has changed
- Transparency (CRS, substance, BEPS) has ended the old anonymity
- Does it work now
- Differently: the relief remains, but secrecy and shells without presence do not
- Can it be used
- Yes, but lawfully: with substance, disclosure and regard for CFC rules
02 / In plain words
What Tax haven means
A tax haven is a country or territory with very low or zero taxes and traditionally high financial privacy. Classic examples are a number of Caribbean, island and offshore jurisdictions. The idea for which they were chosen was to pay less tax and not disclose the ownership structure.
But in recent years the rules have changed radically. The automatic exchange of tax information (CRS), the requirements for real presence (substance) and the OECD’s BEPS plan have ended the old anonymity: registering an “empty” offshore company and hiding money in it without consequences is no longer possible. The data will become visible anyway, and income without presence will be taxed through CFC rules in the owner’s country.
That is why a tax haven today is not about secrecy but about lawful optimisation with transparency. A low tax is not in itself a protection: what matters is real presence, honest disclosure of the beneficial owner and regard for CFC rules and exchange of information. Otherwise the savings turn into additional assessments and reputational risk.
A case from practice
An owner wants to route profit through a company in a classic tax haven. Without an office and employees this is dangerous: under CFC rules their country of residence will tax the profit on them, and the exchange of information will make the structure visible. The solution is real substance and transparency, not a bet on secrecy.
Where the concept arises
- International tax planning
- Registering companies abroad
- Holding structures
- Holding and protecting assets
- Assessing a jurisdiction for a business
- Planning with CFC rules in mind
03 / What it covers
What matters about tax havens
Indicators
- Low/zero tax
- Financial privacy
- Preferential regimes
What has changed
- CRS exchange
- Substance requirements
- The BEPS plan
Risks
- CFC rules
- Additional assessments
- Reputation
How to do it lawfully
- Real presence
- Disclosing the beneficial owner
- Accounting for exchange
04 / How it works
How to use it lawfully
Define the goal and residence
Why the structure exists and where you are tax resident.
Assess substance and CFC rules
Substance requirements and CFC rules.
Ensure real presence
An office, staff and decisions on the ground.
Disclose ownership transparently
The beneficial owner is disclosed to the bank and registers.
Lawful optimisation
Lower tax within the law, with no reassessments.
05 / Key facts
What you need to know
01What it is
Low tax and privacy
Countries and territories with zero or very low taxes, mostly island and offshore jurisdictions.
02What has changed
CRS, substance, BEPS
Automatic exchange, substance requirements and OECD rules have removed anonymity.
03An empty company
Taxed in the owner's hands
Income of a company with no substance is taxed through CFC rules in the owner's country.
04What works
Lawful tax planning
Real presence, a disclosed beneficial owner and CFC rules taken into account.
Common mistakes
Counting on offshore anonymity
Assume account and ownership data will be visible.
Setting up a company with no substance
Provide an office, people and management in the jurisdiction.
Ignoring CFC rules at home
Work out how your tax authority will treat the company's profit.
06 / Expert advice
How to prepare in advance
A low-tax jurisdiction is used today only lawfully: with real presence (substance) where needed, transparent disclosure of the beneficial owner and regard for CFC rules and exchange of information. The tax consequences under your residence are calculated in advance. Then the savings remain sustainable rather than turning into additional assessments.
What we do for you. We build structures using low-tax jurisdictions lawfully: real presence, transparent ownership and regard for CFC rules and exchange. That way a tax haven gives savings rather than a risk of additional assessments when the data become visible anyway.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
Differently from before. The low tax remains, but the anonymity does not: because of exchange of information and substance requirements, money can no longer be hidden without consequences.
Yes, but with real presence, transparent disclosure and regard for the CFC rules of the country of residence. Relying on a low tax alone without presence does not work.
The automatic exchange of information (CRS), substance requirements and the OECD’s BEPS plan. Data on your structures and accounts have become visible to tax authorities.
Not in itself, but without substance and with a non-transparent structure, yes: additional CFC assessments, questions from banks, reputational risk. It is important to do it lawfully and transparently.
No. The CFC rules of your country of residence may tax the company’s profit on you if there is no real presence. The jurisdiction itself does not protect you.
By the goal, taking into account substance, CFC rules and exchange. We choose a structure that gives lawful savings and withstands transparency.
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
