Tax Havens: What Are They and Where Can You Find Them?

Tax Havens: What Are They and Where Can You Find Them?

Comparte esta noticia

Share on linkedin
Share on facebook
Share on whatsapp
Share on twitter
Share on email

The name “tax havens” is a term in vogue, which has been used for several decades now; however, it came to the fore again with the famous case of the “Panama Papers” in 2018.

Dear businessmen and severely judged by different countries, there is a great struggle to put an end to these, since it is alleged that they help tax evasion with their low or almost zero tax rates to foreign capital companies and favor money laundering due to the lack of transparency in the information.

For this reason, the different tax legislations have incorporated within their tax system special rules, for when operations are carried out with companies or entities resident in tax havens, these are the already known transfer pricing and international tax transparency regulations.

Chile is not unaware of this, which is why it has also regulated within its transfer pricing regime operations carried out with entities domiciled or resident in tax havens or also known as low or zero tax countries.

The purpose of this article is to be able to absolve certain doubts regarding these, such as their definition, origins and treatment in the Chilean law.

What are tax havens?

A tax haven can be defined as a territory, country or state that has fairly low or almost no tax rates.

With respect to these the Organization for Economic Cooperation and Development (OECD) has pointed out certain characteristics in order to recognize them, which would be the following:

  • Null taxation or nominal taxation of taxes.
  • The lack of fiscal transparency.
  • The existence of laws or practices that do not allow the exchange of tax information with other countries.
  • The lack of need of any real activity to the companies that are domiciled in this country or territory.

What are the origins of tax havens?

The term as we know it today comes from the nineteenth century and contrary to what can be believed its beginnings were not found in countries or islands of the Caribbean, but in some states of the United States as is the case of Delaware, which incorporated a policy of buying companies in less than 24 hours and created highly favorable conditions for them.

This model was taken to Europe due to its success at the beginning of the 20th century, being Switzerland one of the first countries to practice them and incorporate banking secrecy.

Later, these expanded especially when in 1950 the Bank of England decided that the operations carried out by the banks of this country, by non-resident foreign clients, would not be regulated by this Bank, so that the capitals migrated to British territories such as the Man Islands, Guernsey and Jersey.

What is Chile’s definition or concept of tax havens?

The tax legislation in Chile refers to tax havens as territories with low or no taxation or with preferential tax regimes.

These are defined in Article 41-G(b) and Article 41-H, which state that in order to be considered as such these territories or jurisdictions must meet at least two of the six requirements set forth below:

  • The effective tax rate on foreign source income must be less than 50% of the Additional Income Tax rate (35%). Effective taxation will result from dividing the net foreign tax determined by the adjusted net income.
  • That, the jurisdiction or territory does not have an agreement with Chile for the exchange of tax information.
  • That, the territory or jurisdiction has legislation empowering its Tax Administration to exercise an audit of transfer pricing.
  • That they do not meet the conditions to be considered compliant or partially compliant with the internationally accepted standards on transparency and exchange of tax information, according to OECD.
  • That they maintain one or more preferential tax regimes and that they do not comply with the standards dictated by OECD.
  • Those jurisdictions or territories that tax based on a territorial system.

It also states that it will not be considered as a country of low or no taxation or preferential regimes when it is a member of the OECD.

Is there a list of tax havens in Chile?

Yes, this list was published by means of Exempt Resolution No. 55 of 2018, according to the following:

The United Arab Emirates 

Guam  Palestine, State of Afghanistan 
Afghanistan  Guinea-Bissau 

Palau

Antigua and Barbuda 

Guyana  Qatar
Anguilla Hong Kong

Reunión

Armenia

Heard Island and McDonald Islands Serbia
Angola  Honduras 

Rwanda

American Samoa 

Haiti  Solomon Islands
Islands of the Earth Islands of the Earth

Seychelles

Bosnia-Herzegovina

Iraq Sudan
Bangladesh Iran (Islamic Republic)

Saint Helena, Ascension and Tristan da Cunha

Bahrain

Jordan Svalbard and Jan Mayen
Burundi Kyrgyzstan

Sierra Leone

Benin 

Cambodia  Somalia
Saint Barthélemy  Kiribati 

Suriname

Bermuda 

Comoros  South Sudan
Brunei Darussalam  Korea (Democratic People’s Republic of Korea) 

Sao Tome and Principe

Bonaire, Sint Eustatius and Saba 

Kuwait  El Salvador
Bahamas  Cayman Islands 

Sint Maarten (Dutch part)

Bhutan 

Lao  Democratic Republic Syrian Arab Republic
Bouvet  Island Sri Lanka 

Swaziland

Botswana

Liberia  Turks and Caicos Islands
Belarus  Libya 

Chad

Belize 

Moldova (Republic)  Southern Territories of France
Cocos (Keeling)  Montenegro 

Togo

Congo (Democratic Republic)

St. Martin (French part)  Thailand
Central African Republic  Madagascar 

Tajikistan

Congo

Marshall Islands Tokelau
Ivory Coast  Mali 

Timor-Leste

Costa Rica 

Myanmar  Turkmenistan
Cuba  Mongolia 

Tonga

Cape Verde 

Macao Trinidad and Tobago
Curasao  Northern Mariana Islands 

Tuvalu

Christmas Island 

Martinique Taiwan (Province of China)
Djibouti  Mauritius 

Tanzania, United Republic 

Dominica 

Maldives  United States Minor Outlying Islands
Algeria  Malawi 

Uzbekistan

Egypt 

Malaysia  Holy See
Western Sahara  Mozambique 

Venezuela (Bolivarian Republic)

Eritrea 

Namibia  Virgin Islands (British)
Ethiopia  New Caledonia 

Virgin Islands (USA)

Fiji 

Niger  Vietnam
Falkland  Islands Norfolk 

Island Vanuatu

Micronesia (Federated States)

Nicaragua  Wallis and Futuna
Grenada  Nepal 

Yemen

French Guiana 

Oman  Mayotte
Gambia  French Polynesia 

Zambia

Guinea 

Papua New Guinea  Zimbabwe
Guadeloupe  Saint Pierre and Miquelon

Equatorial Guinea 

Pitcairn
South Georgia and the South Sandwich Islands  Puerto Rico

What is the treatment of tax havens in Chile?

As indicated, the tax legislation in Chile has regulated the operations carried out between a taxpayer domiciled in this country and one domiciled or resident in a territory with low or no taxation or with a preferential tax regime (tax haven) through the transfer pricing rules.

These are established in Article 41 E of the Income Tax Law.

Therefore, any transaction carried out with a tax haven must be in accordance with the principle of full competition, which will occur if prices are at market value.

Noticias Relacionadas

Aplicación de las NIIF en Brasil
Niif English

IFRS Application in Brazil

The adoption of the International Financial Reporting Standards (IFRS) began in Brazil in 2005 through the first pronouncements of the CFC (Conselho Federal de Contabilidade

LEER NOTICIA »
Transfer Pricing Regime in Spain
Transfer Pricing

Transfer Pricing Regime in Spain

Transfer prices are those prices or considerations agreed for operations carried out between related parties, which are commonly referred to as intercompany transactions. In Spain,

LEER NOTICIA »

How can we help you?

    To communicate with us you need to fill out the following form

    I have read and agree the privacy policy