Offshore tax evasion is crime in several onshore countries and includes jail time so it should be avoided. On the other hand, offshore tax planning is NOT a crime.
What is the difference between tax planning and tax evasion? If you can answer "no" to each of the following questions then your tax plan is not tax evasion:
1. Did you do anything illegal as part of your tax plan?
2. Does your tax plan involve hiding money or information that if revealed would cause you to owe more taxes? (We are NOT implying that banking secrecy is tax evasion. Rather your plan cannot involve hiding money to avoid taxes.)
3. Is the only purpose of your tax plan to avoid paying taxes? (This a grey area that draconian tax agencies use to determine if you are into tax evasion territory. It is really an unfair rule because it involves the tax auditor making business judgements he/she is not qualified to make. To keep clear of this rule make sure what you do makes business sense and that you can clearly articulate the business reason for doing what you did.)
If you answered "yes" to any of the above questions, you are into tax evasion. Do NOT do tax evasion. It is far too easy to setup a legitimate tax plan that will reduce your taxes due.
Large corporations use offshore tax shelters all the time but they do it legally. If they brought a tax auditor in and showed them everything they did, if the auditor was honest, he would say everything is perfectly fine. That should also be your test. Ask yourself, if you brought an auditor in and showed them everything you did you reduce your tax load, would the auditor have to agree everything you did was legal and above board?
The best tax plans are created by restructuring your business affairs legally in such a way that the new structure is better from a business perspective. In other words, the new structure should give you business advantages as well as reduced taxes.
Doug writes for Offshore Legal covering information on offshore banking and offshore asset protection. Visit Offshore Legal to learn more about avoiding offshore tax evasion.
Source: www.articlesphere.com
