A Tax haven is a country or jurisdiction with low or no tax rates, it an attractive destination for individuals or companies to set up their businesses in order to minimize their tax liabilities.
Tax havens often have low or zero tax rates for companies incorporated over there, allowing them to reduce their tax liabilities and increase profits.
A Company can establish a subsidiary in tax havens and can reduce the overall tax burden by transferring profits in various ways to the subsidiary, where the lower taxes were levied and can decrease the profits of Indian entity where the higher taxes will be levied.
A Company can establish a subsidiary in tax havens and can reduce the overall tax burden by transferring profits in various ways to the subsidiary, where the lower taxes were levied and can decrease the profits of Indian entity where the higher taxes will be levied. .
A Company can make use of following strategies to exploit the benefits of tax havens by incorporating subsidiary in tax havens:
Note:However Indian Company may be subjected to Capital Gains Tax in India on “initial transfer” of such Intellectual property
Note: However, In all the above cases, Indian Company needs to comply with "arms-length" pricing rules
Tax havens can offer asset protection benefits to companies, held in offshore entities which can help companies to shield their assets from legal claims, creditors, and lawsuits.
Since, these jurisdictions have secrecy laws that make creditors or other parties difficult to access information about assets held in offshore.
Tax havens may have more relaxed regulations, simpler business laws, and streamlined processes for setting up and operating companies, making it easier and cheaper to do business.
“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received, or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”
Prepared On: 17/10/23
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