Section 4

Best Tax Havens to Use

Tax havens, often referred to as offshore financial centers, are located in every corner of the globe. They come in every shape and size. The IRS defines 29 "official" tax havens, but there are closer to 60 countries or more that can be considered a tax haven.

Although the selection is very broad, it can be narrowed down to a handful that rate better than the rest. It is important to determine which one will best suit your plans.

The factors used to pick a tax haven include:

·Tax structure
·Political and economic stability
·Exchange controls
·Tax treaties
·Government attitude
·Modern corporation laws
·Simple incorporation procedures and competitive fees
·Communication and transportation
·Banking and professional services
·English common law
·Secrecy and confidentiality
·Investment incentives and opportunities
·Location

Aside from personal preference, a tax haven should have certain attributes that make it more attractive than others.

For instance, political and economic stability ranks high. The Bahamas has always been a favorite for this reason. Without it, a situation can occur such as what happened in Panama with Noriega. Other features of the Bahamas include its location only 50 miles from the U.S., it is in the Eastern Standard Time zone and no passport is required to visit. Also, only a "1" is needed to dial the "242" area code.

Many tax havens promote themselves as a tax haven and welcome offshore business and investment capital, others only tolerate it. A tax haven that is not gung-ho on being a financial refuge may adversely change their policy overnight. Also, minimal or preferably no exchange controls allow the free flow of investment capital.

Some tax havens have initiated very modern corporation laws, making them attractive vehicles for international business and investment purposes. The more progressive tax havens have streamlined incorporation procedures, like an International Business Corporation (IBC), and have kept their fees competitive.

State-of-the-art telecommunications is essential in international transactions, making tax havens like the Bahamas attractive.

Professional services such as accounting, banking, legal, management and trust services are usually excellent since these are vital services to offshore business. But there are exceptions.

English common law tax havens are the best choices. Half of all tax havens are governed by English common law. This legal system has a long tradition, substantial case law to rely upon, and it features built in confidentiality in fiduciary matters. Although not a secrecy law, it automatically affords confidential banking relations between banker and client. In addition to this, some tax havens have imposed strict laws concerning secrecy in banking and stiff penalties for non-compliance, including fines and jail sentences.

Tax havens by their nature inherently have capital and investment incentives, but some additionally encourage onshore investment and extend incentives to investors in the form of grants, loans, guarantees, and tax deferments, usually in certain industries that they wish to develop.

Often location is considered important, but in reality few investors will visit their tax haven unless it is just a great vacation mecca. Time differences have more bearing, but that is a matter of familiarizing yourself to international time and occasionally being inconvenienced at a strange hour. An international investor will adjust to the many time zones, 24 in fact, and begin thinking in international time and how distant parts of the world connect by time. Fortunately, with the rapidly growing use of the internet and e-mail, the inconvenience of time zone differences is largely reduced for some types of communication requirements.

CRA International and its affiliates worldwide provide incorporation, management and other business support services in all major tax havens and banking centers worldwide including the following: