What is tax shelter?
Tax shelter is very simply defined: it is a country where tax level is lower than the other countries in the world. Cyprus for example is a tax shelter.
In these countries, tax brackets are low, so in such shelters, an individual or a company can benefit from a significant reduction of taxes.
A tax shelter is an inseparable part of good tax planning, to reduce taxes, using the tools and options allowed by the law in Israel and in these countries.
Tax shelter countries
These are typically small countries, where the size and population adversely affect national economy so being a tax shelter helps them develop and improve their economy.
The goal of these country is essentially attract international funds through low tax liability, thus upstarting the country’s banking and commerce systems.
Be advised that once a company’ a corporation or an individual use such tax shelters, an entire operation comes to life and pushes the economy forward.
Under various different laws in these shelter countries, users will be required to submit financial statements, local companies’ registrar fees and so forth, in order to grease the wheels of the banking economy and increase employment.
The competition among these countries for the loyalty and finances of interested parties is fierce.
Organizations like the OECD and others have wedged a war against tax shelter countries, through bans, boycotts and restrictions, such as blocking the trade from these countries and banning them from co-signing treaties with other countries.
The purpose of this war is to reduce tax evasion and to eradicate money laundering around the world.
In Israel, it may be the tax authority, and Israeli banks might refuse to approve loans to companies operating in tax shelter countries, unless documents attesting the company’s ownership and taxes it pays are provided.
Choosing a tax shelter
1. Low tax liability
Low- or zero – tax liability is the most important component and the basis for any good tax planning.
2. Economic stability
It is vital that the tax shelter is financially sound. A collapse of the tax shelter’s economy can cause damages or at least NIS wanted headaches.
Must be taken into account, mainly because of the travel element.
4. International relations
The relations between the country of origin and the tax shelter country must be considered, because if these relations are not good, certain countries might boycott companies and corporations.
CPA Gadi Solomovich specializes in international taxing,
with plenty of practical experience in tax planning and tax shelters,
he provided for hundreds of clients
For a consultation meeting call now 972-3-7269999
Be advised that all of the contents of the foregoing may not be used for legal counseling