How Crypto Is Better Than Off-Shore Tax Havens
We all have heard how the rich avoid paying taxes by using tax havens.
At times, this term “tax haven” has been associated with setting up shell companies in order to operate in anonymity by people with shady dealings. Before I show you how crypto are better than off-shore tax havens, what exactly is a tax-haven?
One way that tax havens operate is to shift the profit made to a country with low rates of corporation tax by registering a company there. For example, if company A operates actively in country A where it makes most of its profits, it may register its headquarters in country B with low rates of taxation on corporate profit. This company pays substantially lower taxes by booking its profits in country B.
The above example is with regards to corporations. For the individual, there are two ways to avoid taxation. One is by simply becoming a resident of a country with low-taxation and paying your taxes there. The other option is to keep your assets in a trust within a country with low taxation. In this case, you can avoid paying the capital gains tax in the country in which you are currently residing which may have a higher taxation.
There are obvious challenges of using tax havens for the common person with limited resources. One is the problem of getting residency just for the purposes of avoiding paying taxes. It is not easy for one to just wake up one morning and to decide to apply for residency in these low-taxation countries. Most of such countries would prefer persons who have a high net worth.
The second challenge is the legal costs of setting up a trust in these tax haven countries. You will have to engage lawyers who specialize in this type of service and who do not come cheaply. It might not be worth your money if you are not significantly wealthy.
Most crypto platforms are cloud-based and operate outside the jurisdiction of most government structures. The US, for example, can tax any entity that operates within platforms based in its jurisdiction. These platforms do not work with correspondent banks and this allows them to be virtually untouchable. Thus, your `crypto wallet` becomes the new tax haven. Your assets and wealth in crypto are free from the reach of the taxman.
When compared with tax havens, it is better because you do not need the involvement of third parties such as lawyers. It gives you complete anonymity while avoiding paying taxes. While you pay a certain percentage of tax in the tax haven, with crypto you have zero tax to pay. You also do not have to register for residency in a foreign country in order to pay lower taxes. By now you should agree with me that crypto is better than off-shore tax havens.