• Sushant S Narvekar

• Smriti Nair
• Dev Anand
• Krutika Dadlani
• Mamta Tawade
• Nikhil Pawaskar
•Attractive to move by Individual &/or Corporate to Tax
Heven areas

•Different Jurisdictions

Different Types of Taxes

for Different People/Companies

•Tax Competition among Government

A Tax Haven is a place where there is no tax on income or it is taxed at low rate of
tax structure. These are mainly foreign jurisdictions that offer financial secrecy laws
in an effort to attract investment from outside their borders.

Tax havens are associated with tax avoidance

Or
Country which modifies its tax laws to attract foreign capital could be considered
a tax haven.
Modus Operandi
•Personal Residency: Where wealthy individuals reallocate themselves
from high tax zones to low tax zones.

•Asset holding: Usually in this case, an entity from high tax jurisdiction
transfers its assets to trust in a low tax jurisdiction and settles his share in
the trust on himself and later to is descendents without going through the
vagaries of probate or inheritance tax.

• Business activity: Many corporate entities do not require location or

factor leverage to establish their business entities. Simply by transferring
activities to low tax jurisdiction, they can earn “margin”.

•Financial intermediaries: Majority of business activities done in tax

havens is through professional financial services such as mutual funds,
banking, life insurance and pensions.
 Common in Tax Havens
• Very stringent privacy laws

• Secrecy laws and Non-disclosure policies

• Do not release account information to other

governments and law enforcement agencies

• Most of these Tax Havens have a legal system

based on the British common law
Attributing the income and gains of the
company or trust in the tax haven to a
taxpayer in the high-tax jurisdiction on an
arising basis.
Controlled Foreign Corporation legislation
is an example of this.

Transfer pricing rules, standardization of

which has been greatly helped by the
promulgation of OECD guidelines.

Restrictions on deductibility, or
imposition of a withholding tax when
payments are made to offshore recipients.
 Taxation of receipts from the
entity in the tax haven,
sometimes enhanced by
notional interest to reflect the
element of deferred payment.
The EU withholding tax is
probably the best example of
this.
 Exit charges, or taxing of
unrealized capital gains when
an individual, trust or company
emigrates.
 Many jurisdictions employ
blunter rules. Example, in
France securities regulations
are such that it is not possible to
have a public bond issue
through a company
incorporated in a tax haven.
 Vodafone Essar Ltd
v/s
Income Tax Department
(I)Vodafone bought Hutchison Telecommunications
International Ltd. Deal value - $11.2 billion

(ii)Hutchisson controlled its India operations through a

Cayman Island Company – CGP

(iii)CGP’s shares were sold to Vodafone

Indian Tax Authorities claim:

Vodafone should have deducted tax at source before
paying Hutchison, which would amount to $2 billion
(a) Tax can be imposed on income which (i) is received in
India; (ii) which accrues and arises in India; and (iii) which is
deemed to accrue or arise in India.

(b) The transaction related to transfer of a share outside

India, contracted to be delivered outside India and the
transfer of which was registered outside India;

(c) The governing law of the contract pursuant to which it

was transferred was English law;

(d) Payment was made from a bank account outside India to

a bank account outside India, there is no question of
deduction of tax on such payments
Vodafone has lost the case in the Bombay High Court against the
Income Tax Department.

(i)Jurisdiction to Tax.

(ii)Transfer of share is part of the arrangement.

(iii)The court found that the Hutch-Vodafone deal price factored in

diverse rights and entitlements and as a result the transaction was
in fact a composite transaction not just that of one Cayman Island
company share. Transfer of these rights and entitlements
constitutes capital, which can be taxed as part of NRI income.
The
Organisation for Economic Co-operat
ion and Development
(OECD) identifies three key factors in
considering whether a jurisdiction is
a tax haven

 Nil or normal tax on relevant income

 Protection of personal financial information. There is
no system of exchange of information with respect to
the tax regime in the tax haven country
 The Government of the country facilitates the
establishment of the foreign owned enterprises
without the need for strict compliance of local laws or
prohibits such entities from having any co
mechanical impact on the local economy.
•Andorra – No personal income tax.

• Switzerland is a tax haven for foreigners who become resident after negotiating the
amount of their income subject to taxation with the canton in which they intend to live.

•The Isle of Man does not charge corporation tax, capital gains tax, inheritance tax or
wealth tax.

•Hong Kong's tax rates are low (17%) enough that it can be considered a tax haven.
Hong Kong does not levy tax on capital gain as well.

•Mauritius – based front companies of foreign investors are used to avoid paying taxes
in India utilising loopholes in the bilateral agreement on double taxation between the
two countries, with the tacit support of the Indian government, who are keen to
improve figures relating to inward investment.
Tax Haven serving all major and financial centres

Largely categorised in three groups

UK Based Tax Havens, European Havens,, Disparate Groups

OECD – ill equipped to deal with tax havens

Treatment in tax havens is not uniform for residents and non-residents

(i) Wikipedia

(ii) Investopedia