What Are the Best Tax Havens in the World?

Are you exploring tax-friendly jurisdictions to optimize your tax strategy and reduce costs within legal frameworks? The favorable policies of tax havens can offer significant financial benefits and enhance budgeting efficiency. However, they may pose compliance challenges.

In this blog, you'll discover how to choose the right place, what characterizes these destinations, how they work, and we'll show you how Deel can help you manage compliance, even in complex jurisdictions.

What is a tax haven?

A tax haven is a territory characterized by low or zero taxes on income, capital, or corporate profits. These tax advantages are often very attractive to individuals and companies because they also offer banking secrecy. In other words, they are financial centers where it's not easy to know who the owners of the accounts or assets registered there are.

However, these advantages often come with challenges in terms of regulatory compliance, as many jurisdictions are under the scrutiny of international organizations like the European Union or the Organization for Economic Co-operation and Development (OECD) for tax evasion that undermines financial transparency.

Which are the best tax havens in the world?

The following tax havens stand out for not imposing significant withholding taxes:

• American Samoa: Offers benefits for global companies while operating under U.S. laws.
• Anguilla: Known for its simplified tax system with no taxes on income or capital gains.
• Fiji: Encourages foreign investment with reduced tax rates, especially in tourism and tech sectors.
• Guam: A U.S. territory offering attractive exemptions and deductions.
• Palau: Provides low taxes and straightforward regulations.
• Panama: Taxes only income generated within the country, exempting foreign-sourced income.
• Russia: Special economic zones with reduced tax rates attract foreign businesses.
• Samoa: Offers tax exemptions for foreign income and confidentiality.
• Trinidad and Tobago: Attracts energy industry investments with competitive tax policies.
• U.S. Virgin Islands: Provides exemptions on federal and state taxes.
• Vanuatu: No personal or corporate income taxes, capital gains taxes, or inheritance taxes.

Is Switzerland a tax haven?

Switzerland is globally recognized as one of the most attractive tax destinations due to its low corporate taxes. With a corporate tax rate among the lowest in the world, this country offers significant incentives for companies and high-net-worth individuals.

Perhaps the following data exemplifies it better: according to the 2024 Index of Economic Freedom, Switzerland holds a prominent position in the ranking with a score of 83, making it the second freest economy in the world. Within Europe, it even ranks first. Additionally, Switzerland's economic freedom score is above global and regional averages.

Moreover, the Tax Justice Network, a global organization dedicated to combating tax evasion, points to certain tax havens for facilitating money laundering, tax avoidance, and lack of cooperation in terms of tax transparency. This network also identifies countries and territories that allow the use of opaque financial structures that negatively affect the economies of developing countries and favor the accumulation of wealth by a few.

According to the report "The State of Tax Justice 2024", countries lose approximately $492 billion annually due to the use of tax havens by multinational corporations and wealthy individuals seeking to evade taxes. The major facilitators of this tax evasion include countries like Australia, Canada, Israel, Japan, New Zealand, South Korea, the United Kingdom, and the United States, which have been blocking the UN tax agreement.

And, according to the Corporate Tax Haven Index by this same network, the most harmful include: British Virgin Islands, Cayman Islands, Bermuda, Switzerland, Singapore, Hong Kong, Netherlands, and Jersey. This index is based on indicators such as aggressive tax treaties, controlled foreign company rules, and withholding taxes.

European Union criteria for compiling the list of non-cooperative jurisdictions for tax purposes

The European Union (EU) evaluates countries and territories based on criteria defined by the EU Council, focusing on tax transparency, fair taxation, and measures against base erosion and profit shifting. These categories aim to identify tax practices that may facilitate international tax evasion or avoidance. Let's see what they consist of:

1. Tax transparency criteria

Tax transparency aims to ensure EU countries can get the information they need about their citizens’ money and property in other countries. This helps stop individuals from hiding their money to avoid paying taxes.

The tax transparency criteria include requirements such as:

• Automatic exchange of tax information: Countries must share data on financial accounts with EU member atates under international standards like the OECD's Common Reporting Standard (CRS)
• Exchange of information upon request: Territories must respond to specific requests for tax data according to OECD norms
• Membership to the OECD multilateral convention on mutual administrative assistance in tax matters: Jurisdictions should be a part of the OECD multilateral convention on mutual administrative assistance in tax matters

2. Fair taxation criteria

Fair taxation is about stopping unfair practices where some jurisdictions attract money without having real businesses or jobs there. It ensures that taxes are based on actual economic activity, not loopholes.

The fair taxation criteria include requirements such as:

• The absence of harmful preferential tax measures, such as tax regimes designed solely to attract companies without economic substance
• Avoiding offshore structures that promote profits without real economic activity

3. Measures against base erosion and profit shifting (‘anti-BEPS measures’)

Anti-BEPS rules are designed to prevent countries from using tricky tax setups to avoid paying their fair share. These rules include:

• Commitment to OECD minimum standards against base erosion and profit shifting
• Exchanging country-by-country reports (reports from multinationals that contain aggregate data on the global allocation of income, profit, taxes paid, etc.) with all member states.

What is the European Union’s gray list?

The European Union's "gray list" is a list of countries and territories that don’t fully follow the EU’s rules on tax fairness but are working to make changes.

These places might have tax policies that could encourage tax evasion or avoidance, but they’ve promised to improve and follow international standards. The EU keeps an eye on them to make sure they follow through.

On 8 October 2024, the Council adopted the EU list of non-cooperative jurisdictions for tax purposes. There are 11 countries on the list:

• American Samoa
• Anguilla
• Fiji
• Guam
• Palau
• Panama
• Russia
• Samoa
• Trinidad and Tobago
• US Virgin Islands
• Vanuatu

How Deel helps manage compliance in 100+ countries

Deel offers solutions to manage payroll, taxes, and compliance for international teams, ensuring regulatory adherence even in countries with unique tax systems. Learn more about Deel for Legal Teams.