Privileged tax regime

A privileged tax regime refers to a tax system that offers unusually low or zero taxes, often associated with tax havens. It is a softer or more neutral term used to describe jurisdictions that attract foreign investment or capital by providing favorable tax conditions. Key Features Low or Zero Tax Rates Offers minimal taxation on income, profits, or capital gains. Designed to attract individuals, corporations, and investors. Limited Transparency Often characterized by confidential financial practices. Provides privacy for investors and corporate structures. International Appeal Attracts foreign capital, multinational corporations, and high-net-worth individuals. May facilitate tax planning and structuring to reduce global tax liabilities. Associated with Tax Havens Jurisdictions offering privileged tax regimes are commonly referred to as tax havens. Examples include Bermuda, Cayman Islands, Luxembourg, and Monaco. Legal and Regulatory Considerations While legal, these regimes are often scrutinized under international anti-avoidance rules. OECD and other international bodies monitor such regimes to prevent base erosion and profit shifting (BEPS). Importance Encourages foreign investment and economic activity in the jurisdiction. Enables corporate tax optimization for multinational enterprises. May influence global tax policy and international regulatory frameworks. Example A multinational company establishes a holding company in a country with a privileged tax regime to benefit from reduced corporate tax rates, while complying with international tax regulations.