The dynamic growth of companies on the international stage, the penetration of foreign markets by Polish entrepreneurs and cross-border activity of investors from other countries, as well as the progressive globalisation processes, make the fiscal burden of a given business model generally not optimal. However, the appropriate structure of the business structure allows for the optimisation of the fiscal burden arising from the laws of the individual countries in which the activity of the unit is carried out.
The savings that can be generated in this way for Polish companies sometimes reach several percent of the economic costs of their operations. Moreover, taking advantage of the opportunities offered by international tax optimization allows savings to take a better competitive position than other companies, thus not without affecting the ultimate success of the business.
International tax optimization
International tax optimization is a legal reduction in the level of taxation of companies or wealthy individuals with significant income. This process, in principle, takes place through the proper use of companies in countries with friendly tax regimes, referred to as "tax havens", and sometimes through tax migration. It needs to be stressed that the tax structure should be adapted to a specific business model, its objectives, the regulation of local legislation and international law.
Tax havens
The application by a given State or the tax autonomous territory of ‘only’ a much more favourable tax legislation that shapes the absolute level of fiscal burden at a significantly lower level is sufficient to make such a country (territory) a purely tax haven.
No less important is the lack of cooperation between the State (territory) and the authorities of the other countries concerned in tax and tax matters. These factors are essential, but a number of other characteristics can be identified that can be attributed to most tax havens.
They can essentially be divided into two categories: legal and geographical infrastructure.
To first groups of legal factors should include any provisions of tax havens that may be attractive to foreign entities. These are in particular:
- • liberal foreign exchange law,
- • restrictive regulations on banking secrecy,
- • the absence or small number of tax agreements with other countries,
- • the stability of the legal and political system and the associated predictability of public authorities' activities;
- • the existence of an expropriation or nationalisation guarantee,
- • relatively low business costs,
- • acceptance of foreign status and
- • no legal restrictions on access to capital and the possibility to purchase real estate.
Liberal foreign exchange law is essential for a cross-border transfer of capital, which is the essence of the different methods of using tax haven legal systems. This is particularly the case where the transferor is keenly interested in concealing its actual source.
Free import and export of foreign currency from a given country (territory) is a factor affecting the security of the trading of funds with tax havens.
The liberal foreign exchange law is closely linked to the call for absolute banking secrecy, which is part of the fundamental requirement of non-international tax cooperation from tax havens with the relevant authorities of other countries.
Banking secrecy is a guarantee of the anonymity of both those who place funds in bank accounts in those countries (territory) and the investments themselves.
In the interests of entities located in the foreign banking system transferred from the country of their home tax residence, the capital is that the authorities of that country cannot determine the size of those measures, their origin and the identity of their owner.
The lack of or a small number of tax agreements guaranteeing international tax cooperation is a demand arising from the non-cooperation requirement for tax havens with other countries' tax services.
The stability of the legal and political system is also an additional incentive for potential investors who value rare and predictable changes in legislation as well as the predictability of policy changes. The certainty of the law is a good in itself, in this sense it can be concluded that a good law is an old law.
This statement should be addressed in particular to tax havens which are not, in a significant part, developed countries and are characterised by relatively low predictability of legal and political developments, which may pose a potential threat to the security of their capital.
Legal guarantees in the event of expropriation or nationalisation are particularly important in this context, which may concern the assets of subsidiaries established in tax havens and other assets located in those territories.
Guarantees of compensation according to the market value of the subject matter of nationalisation or expropriation, together with the possibility of exercising their rights by judicial procedure, are particularly relevant in the case of legal regimes that provide for the possibility of nationalising private property or expropriation for any reason.
Another point prejudging the attractiveness of a given legal regime in the process of exploiting harmful tax competition is the relatively low cost of doing business in a given territory.
These costs must be low compared to their level in the country from which the capital was transferred and therefore need not be low in an objective sense.
The recognition by the legal regime of foreign status should be added to the above factors, which entails the possibility of different treatment of foreign natural persons than national entities.
The legal systems of tax havens usually provide special legal facilities for residents of other countries, which also further affects the safety of these entities and their capital.
The possibility of a foreigner to purchase real estate in a tax paradise is most often due to the existence of a legal requirement in this respect, which depends on foreign entities exercising the benefits of this legislation.
The last request for countries and territories applying harmful tax competition is the absence of legal restrictions on access to capital, which is all the more important because the free and uncontrolled transfer of capital by national authorities is the basis for the use of these legislation.
To second the categories of geographically-infrastructured factors must be classified in particular:
- • convenient geographical location near large markets and global finance centres,
- • developed infrastructure, in particular the banking sector,
- • good communication, especially in the field of air services, and
- • the availability of qualified personnel and advisory services.
A convenient geographical location near large markets and centres of global finance is an obvious factor facilitating contacts, including personal ones, between entities established in developed countries and entities located in tax havens. Most countries and territories applying harmful tax competition meet this requirement (e.g.
Singapore and Malaysia vis-à-vis south-east Asia, the Jersey Islands, Sark, Alderney and Guernsey vis-à-vis Western Europe, and the Caribbean against the United States). The developed infrastructure undoubtedly facilitates the use of a given country (territory) as a place of tax savings.
Infrastructure issues need to be addressed in a number of aspects of life, and in particular road and air transport, which implies access to a given territory, a high-tech state that streamlines and accelerates a number of economic processes, as well as the developed banking sector, which is particularly important for the real possibility of using tax haven legislation.
The existence of many banks in a relatively small territory is a kind of "exploratory mark" of tax havens. The tax haven banking system is also a guarantee of the ‘legalisation’ of capital crime in those countries (territory).
The funds that have been paid from or transferred from a foreign bank account shall be treated as legal in the vast majority of the legislation of developed countries. Further examination of the actual source of the defined income usually ends with the finding that they come from a foreign bank.
There is a real presumption of the legality of funds paid from a bank or transferred from a foreign bank account, while the provisions of the tax haven banking law do not interfere with the origin of capital transferred from abroad, while ensuring its legal protection.
Most countries and territories widely regarded as tax havens are characterised by an exceptionally well-developed banking sector. The availability of skilled workers and advisory services improves all operations related to the use of tax havens.