Criteria of tax havens by the OCDE

Criteria of tax havens by the OCDE

How to determine whether a jurisdiction is a tax haven?

The OCDE recognizes that every court has the right to decide whether to apply direct tax and, if so, determine the appropriate tax rate. An analysis of other key factors that a court is required to be considered a tax haven.

Four main factors:

• The first is that this court applying no or only nominal taxes.
This criteria is not sufficient by itself to qualify a tax haven jurisdiction.

• Is there a lack of transparency?
The condition of transparency is to ensure that tax laws are applied in an open and consistent between taxpayers in similar situations and that the information which the tax authorities need to determine the exact amount of tax owed by a taxpayer are available (eg in the accounting records and supporting documentation).

• Are there laws or administrative practices that hinder the effective exchange of information for tax matters with other jurisdictions in respect of taxpayers who receive tax non-existent or insignificant.
Regarding the exchange of information in tax matters, the OCDE encourages countries to adopt a system of information exchange "on demand". This is the case where the competent authorities of those countries require a different country specific information regarding a specific tax audit, usually under a bilateral agreement on exchange of information between the two countries. One of the essential elements of information exchange is the implementation of appropriate safeguards to ensure adequate protection of taxpayer rights and privacy of their tax situation.

• The lack of substantial activities is admitted?
The test of "no substantial activities has been included in the 1998 Report to identify tax havens, to the extent that the absence of these activities suggests that a court could seek to attract investments and transactions that are solely motivated by tax considerations. In 2001, the Committee on Fiscal Affairs of the OCDE has requested that this criterion is not used to decide whether a tax haven or uncooperative.