tax haven


Definition of tax haven 

: a place where people go to live and companies go to operate in order to avoid paying high taxes

Learn More about tax haven

Dictionary Entries near tax haven

tax exile

tax fiddler


tax haven




Statistics for tax haven

Look-up Popularity

Keep scrolling for more

More Definitions for tax haven

tax haven


Financial Definition of tax haven

What It Is

A tax haven is a country or jurisdiction known for generating little or no tax liability.

How It Works

Tax havens exist because countries are usually not obligated to provide customer information to foreign taxing authorities (though investigations of criminal activity, terrorism, or other behavior may require disclosure). Switzerland is the most famous tax haven, followed by a number of Caribbean countries.

Tax havens must have reputable banks in order to attract business, and they must exist in regions with relatively low tax rates. Customers with accounts in tax havens may be required to pay taxes in that region (even if they are not citizens of that country or region), but if those taxes are considerably lower than what the customer would pay on that income in his or her home country, the savings can be considerable, especially over the long term.

[InvestingAnswers Feature: How the IRS Plans to Track Down Secret Offshore Accounts]

Why It Matters

People sometimes use tax havens to hide income-generating investments. The idea is that because the tax haven does not report the customer's income to the IRS, the customer can avoid paying taxes on that income.

It is important to note that the idea of a tax haven -- low taxes and high privacy -- is not illegal. What is illegal, however, is failing to report income from accounts in foreign countries if the taxpayer's taxing authority requires the taxpayer to do so.

It is also important to note that one does not have to move money offshore in order to find a tax haven. Technically, a tax haven is any investment that shelters income from taxes. Thus, an IRA or 401(k) can be considered a tax haven in this sense because the investor is not taxed on the money going into (or sometimes coming out of) the account.

Source: Investing Answers

Comments on tax haven

What made you want to look up tax haven? Please tell us where you read or heard it (including the quote, if possible).


to reject or criticize sharply

Get Word of the Day daily email!

Test Your Vocabulary

Words from Greek and Roman Mythology Quiz

  • the-triumph-of-venus-by-alessandro-magnasco
  • Boreal comes from the name of the ancient Greek god of which wind?
Spell It

Can you spell these 10 commonly misspelled words?

Word Winder's CrossWinder

Test Your Knowledge - and learn some interesting things along the way.


Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!