Tax haven

A tax haven is a jurisdiction that attracts foreign individuals and businesses by imposing extremely low—or sometimes no—tax on certain types of income or wealth. These jurisdictions often combine favourable tax rules with strict financial secrecy and limited cooperation with foreign authorities, making it difficult for other countries to trace ownership or financial activity. As a result, tax havens are frequently used to route profits, create holding companies, or obscure financial arrangements.

Example: Consider a multinational that establishes an affiliate in the Cayman Islands, where corporate taxes are negligible. By shifting part of its global earnings to this entity through internal transactions, the company can significantly lower the amount of tax owed in countries with higher tax rates.