April 15th seemed an appropriate day to bring this subject up. Forbes recently ran an article on the World’s Top Tax Havens , suggesting that some US states are joining these ranks. This is based on the fact that some US states are offering “Self-settled spendthrift trusts.” These trusts are not so much a tax-avoidance as a lawsuit-avoidance vehicle. A more detailed description is available here, although I understand they need  to be extremely carefully drafted to ensure this protection.

So, here are the World’s Top Ten Tax Havens according to Forbes, in no particular order.

Luxembourg

Luxembourg, officially the Grand Duchy of Luxembourg (Luxembourgish: Groussherzogtum Lëtzebuerg, French: Grand-Duché de Luxembourg, German: Großherzogtum Luxemburg), also spelled Luxemburg, is a small landlocked country in western Europe, bordered by Belgium, France, and Germany. Luxembourg has a population of under 500,000 in an area of approximately 1,000 sqare miles.Luxembourg has no capital gains, bank interest or dividends tax for non-residents. Taxes are not withheld on behalf of other governments, and it is the individual’s responsibility to report any investment income from their accounts there to the relevent tax authorities.

Liechtenstein

Forbes mistakenly called this country Lichtenstein, which is, in fact a small town in Saxony, Germany. Oh well, you can’t get it right every time. Even I made a mistake once. Just bear in mind the difference.

Liechtenstein is one of the few countries in the world which boasts more registered companies than citizens; it also boasts  a prosperous, highly industrialized, free-enterprise economy, and financial services sector as well as a living standard which compares favorably to those of the urban areas of her larger neighbors. Relatively low business taxes along with easy Rules of Incorporation and low personal taxes encourage this.

In February this year, the country’s LGT Bank was implicated in a tax-fraud scandal in Germany, which strained the ruling family’s relationship with the German government. Crown Prince Alois accused the German government of trafficking in stolen goods for its $7.3 million purchase of private banking information illegally offered by a former employee of LGT Group. The Liechtenstein official tourist site is here.

Bermuda

Bermuda consists of approximately 138 islands, with a total area of 20.6 square miles, and is a British overseas territory in the North Atlantic Ocean, located off the east coast of the United States. Bermuda is highly affluent and, like Liechtenstein, has a large financial services sector and a high GDP per capita. No income taxes, withholding tax or capital gains taxes make it an attractive financial destination. A subtropical climate, deep azure blue seas and beautiful pink beaches don’t damage it’s appeal either. The local wildlife looks good too.

Bermuda is an offshore financial center and is home to many foreign companies, particularly in the insurance, investment fund and special purpose vehicle areas. Don’t mention the subprime fiasco. Although, it’s fair to say the foreclosure mess is unliklely to make it as far as these particular shores, and some local real estate agencies are claiming the average cost of a house in Bermuda has now risen to over $1,8 million.

A more detailed look at Bermuda is here.

The Cayman Islands

The Cayman Islands are another  British overseas territory and are  located in the western Caribbean Sea, comprising: Grand Cayman, Cayman Brac, and Little Cayman. It is another offshore financial centre and with an average income of around $42,000, Caymanians enjoy the highest standard of living in the Caribbean. According to the CIA World Factbook, the Cayman Islands GDP per capita is the 8th highest in the world. The Cayman islands print their own currency, the Cayman Islands Dollar (KYD), which is pegged to the U.S. dollar at a fixed rate of 1 KYD = 1.2 USD.

The Cayman Islands are also home to more than 600 offshore banks and, according to Forbes, there is one hedge fund for every 5.6 Islanders.

Photo Credits

Also on Forbes’ list are The Channel Islands, The British Virgin Islands, Cook Islands, some U.S. states and Dubai.

Dubai

Dubai spends a lot of time in the property news, mostly because of the huge amount of luxury development going on there at the moment. We ourselves have covered a number of recent announcements:

Dubai Luxury developments

My own feeling is that the current tax-free and low-tax levels will, at some point in the future, be revised upwards. Possibly when the oil runs out?

Other tax havens not on the list but worth considering include Monaco and The Isle of Man. (Any excuse for a motorcycle photo)

IOM TT official site

And as a parting piece of fun on Tax day, this is George Harrison and Eric Clapton’s rendition of "Taxman."

Thanks to Luxury Clues for the suggestion.