Corporate haven
Encyclopedia
A corporate haven is a jurisdiction with laws friendly to corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

s
thereby encouraging them to choose that jurisdiction as a legal domicile.

History

Corporate Havens are a post 1970s global economic phenomenon. This decade more or less marked the end of colonialism
Colonialism
Colonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...

 and the formation of EU in the form of the EEC. Many legal and taxation processes culminated in this decade that led to the formation of Tax Havens and Corporate Havens throughout the developed world.

North America

Within the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

, Delaware
Delaware
Delaware is a U.S. state located on the Atlantic Coast in the Mid-Atlantic region of the United States. It is bordered to the south and west by Maryland, and to the north by Pennsylvania...

 is considered
Delaware corporation
The Delaware General Corporation Law is the statute governing corporate law in the state of Delaware. Delaware is well known as a corporate haven. Over 50% of U.S...

 the pre-eminent corporate haven for large public corporations, while Nevada
Nevada
Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...

, Wyoming
Wyoming
Wyoming is a state in the mountain region of the Western United States. The western two thirds of the state is covered mostly with the mountain ranges and rangelands in the foothills of the Eastern Rocky Mountains, while the eastern third of the state is high elevation prairie known as the High...

, and Alaska
Alaska
Alaska is the largest state in the United States by area. It is situated in the northwest extremity of the North American continent, with Canada to the east, the Arctic Ocean to the north, and the Pacific Ocean to the west and south, with Russia further west across the Bering Strait...

 are corporate havens for small closed corporations.

Delaware, through its developed legal system and laws protecting shareholder rights, is geared toward the large complex public corporation, whereas Nevada and Wyoming are more attractive to the small privately held corporation. Delaware law tends to protect the rights of boards of directors and shareholders, while Nevada and Wyoming tend to favor management.

Commonwealth & Western Europe

Corporate havens outside the United States include British Overseas Territories
British overseas territories
The British Overseas Territories are fourteen territories of the United Kingdom which, although they do not form part of the United Kingdom itself, fall under its jurisdiction. They are remnants of the British Empire that have not acquired independence or have voted to remain British territories...

 such as
  • Bermuda
    Bermuda
    Bermuda is a British overseas territory in the North Atlantic Ocean. Located off the east coast of the United States, its nearest landmass is Cape Hatteras, North Carolina, about to the west-northwest. It is about south of Halifax, Nova Scotia, Canada, and northeast of Miami, Florida...

     (according to the Foot report Bermuda is the third largest reinsurance centre in the world and the second largest captive insurance domicile)
  • British Virgin Islands
    British Virgin Islands
    The Virgin Islands, often called the British Virgin Islands , is a British overseas territory and overseas territory of the European Union, located in the Caribbean to the east of Puerto Rico. The islands make up part of the Virgin Islands archipelago, the remaining islands constituting the U.S...

     (the leading corporate domicile in the world, with nearly 500,000 active registered companies)
  • Cayman Islands
    Cayman Islands
    The Cayman Islands is a British Overseas Territory and overseas territory of the European Union located in the western Caribbean Sea. The territory comprises the three islands of Grand Cayman, Cayman Brac, and Little Cayman, located south of Cuba and northwest of Jamaica...

     (the leading jurisdiction for hedge funds)
  • Gibraltar
    Gibraltar
    Gibraltar is a British overseas territory located on the southern end of the Iberian Peninsula at the entrance of the Mediterranean. A peninsula with an area of , it has a northern border with Andalusia, Spain. The Rock of Gibraltar is the major landmark of the region...

     (for financial services, and incorporation)


and the British Crown Dependencies:
  • Guernsey
    Guernsey
    Guernsey, officially the Bailiwick of Guernsey is a British Crown dependency in the English Channel off the coast of Normandy.The Bailiwick, as a governing entity, embraces not only all 10 parishes on the Island of Guernsey, but also the islands of Herm, Jethou, Burhou, and Lihou and their islet...

     (for incorporations, offshore back office services)
  • Isle of Man
    Isle of Man
    The Isle of Man , otherwise known simply as Mann , is a self-governing British Crown Dependency, located in the Irish Sea between the islands of Great Britain and Ireland, within the British Isles. The head of state is Queen Elizabeth II, who holds the title of Lord of Mann. The Lord of Mann is...

     (for incorporations, offshore back office services)
  • Jersey
    Jersey
    Jersey, officially the Bailiwick of Jersey is a British Crown Dependency off the coast of Normandy, France. As well as the island of Jersey itself, the bailiwick includes two groups of small islands that are no longer permanently inhabited, the Minquiers and Écréhous, and the Pierres de Lecq and...

     (for incorporations, offshore back office services)


Other havens include
  • Andorra
    Andorra
    Andorra , officially the Principality of Andorra , also called the Principality of the Valleys of Andorra, , is a small landlocked country in southwestern Europe, located in the eastern Pyrenees mountains and bordered by Spain and France. It is the sixth smallest nation in Europe having an area of...

  • Zug
    Zug
    Zug , is a German-speaking city in Switzerland. The name ‘Zug’ originates from fishing vocabulary; in the Middle Ages it referred to the right to ‘pull up’ fishing nets and hence to the right to fish.The city of Zug is located in the Canton of Zug and is its capital...

    , Switzerland
    Switzerland
    Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....

  • Dutch Crown Colonies: Aruba
    Aruba
    Aruba is a 33 km-long island of the Lesser Antilles in the southern Caribbean Sea, located 27 km north of the coast of Venezuela and 130 km east of Guajira Peninsula...

    , Bonaire and Curaçao
    Curaçao
    Curaçao is an island in the southern Caribbean Sea, off the Venezuelan coast. The Country of Curaçao , which includes the main island plus the small, uninhabited island of Klein Curaçao , is a constituent country of the Kingdom of the Netherlands...

  • Nauru
    Nauru
    Nauru , officially the Republic of Nauru and formerly known as Pleasant Island, is an island country in Micronesia in the South Pacific. Its nearest neighbour is Banaba Island in Kiribati, to the east. Nauru is the world's smallest republic, covering just...

     (mostly for financial services, and banking)


Increasingly, multinational corporations are using the leading corporate havens, either by incorporating subsidiary corporations in these locations or by moving their corporate domicile (the home company of the corporation) there.

Corporate havens are often not beneficial to small corporations operating in one legal jurisdiction because of the complexity of creating a corporation elsewhere and then having to re-register in the local area as a foreign corporation
Foreign corporation
A foreign corporation is a term used in the United States for an existing corporation that is registered to do business in a state or other jurisdiction other than where it was originally incorporated...

.

North American legal issues

United States tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

 law (since the 1980s) has made these offshore corporate havens very unattractive to individual citizens. US citizens are statutorily taxed by the U.S. government on their worldwide income, unlike the citizens of many other nations.
  • It must be noted that tax deductions and tax credits are allowed to individual citizens in certain instances for income from foreign sources to avoid double taxation
    Double taxation
    Double taxation is the systematic imposition of two or more taxes on the same income , asset , or financial transaction . It refers to taxation by two or more countries of the same income, asset or transaction, for example income paid by an entity of one country to a resident of a different country...

    .


Revenue Canada loses billions each year to the Tax Haven phenomena.
  • The US, for many Canadians is used as a tax haven.
  • Canada has no taxes on Lottery winnings or any Estate Transfer taxes. These would typically be taxed in most European Tax Havens.

See also

  • Corporate Inversion
    Corporate inversion
    When a corporation moves its headquarters to a low-tax nation or corporate haven while retaining its material operations in its higher-tax country of origin, this is termed to be a corporate inversion.Corporate inversion is a form of tax avoidance....

  • Internal affairs doctrine
    Internal affairs doctrine
    The internal affairs doctrine is a choice of law rule in corporations law. Simply stated, it provides that the "internal affairs" of a corporation The internal affairs doctrine is a choice of law rule in corporations law. Simply stated, it provides that the "internal affairs" of a corporation The...

  • Offshore financial centre
    Offshore financial centre
    An offshore financial centre , though not precisely defined, is usually a small, low-tax jurisdiction specializing in providing corporate and commercial services to non-resident offshore companies, and for the investment of offshore funds....

  • Tax haven
    Tax haven
    A tax haven is a state or a country or territory where certain taxes are levied at a low rate or not at all while offering due process, good governance and a low corruption rate....

  • Tax treaty
    Tax treaty
    Many countries have agreed with other countries in treaties to mitigate the effects of double taxation . Tax treaties may cover income taxes, inheritance taxes, value added taxes, or other taxes...

  • Tax exporting
    Tax exporting
    Tax exporting occurs when a country indirectly encourages economic activity to move to another country with a lower tax burden. This is more likely if the economic activity is more mobile....


External links

The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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