As the final days for filing income tax returns dawn in the US and other countries, we wanted to reflect on some of the most unique global tax laws we’ve come across worldwide. From corporate tax breaks to confectionary tax legislations, the world of tax has undergone many facelifts throughout history to adapt to (or bypass) economic or political realities. Here are some laws from around the world that have directly or indirectly affected the way businesses and people operate.
1. Tax Havens
A tax haven acts as a provider for offshore banking services for individuals or companies to deposit large sums of money without incurring higher levels of tax that would be imposed in their home nation. Many countries are deemed tax havens because of their very lenient or even non-existent tax laws; among the best-known are among the best-known are Switzerland, the British Virgin Islands and Bermuda. While the specific laws surrounding tax vary by country, most are considered tax havens due their unusually low rates – some as low as 2% – while others have practically no rate of taxation. For example, The British Virgin Islands have an income tax rate of 0%, as well as no corporate tax, estate tax, inheritance tax, gift tax or sales tax.
In the Cayman Islands, a popular destination for high-net-worth individuals as well as large multinational corporations, there is no income or corporate tax on finances accumulated outside of the territory; this also includes dividends and interest on investments, making it especially appealing to hedge funds.
2. Free Ports
Free ports, while being geographically located within a country, operate and exist outside of the country’s borders for tax purposes. They act as designated areas with very little, or no, tax, as a means to encourage economic activity within these free ports. Companies choosing to operate in these areas are able to avoid paying, or deferring, tax while products or supplies are moved elsewhere.
Free ports have existed for centuries, dating back to the medieval Cinque Ports of southern England. Today’s free ports have grown to become full-fledged zones designed to attract business and investment. For example, the Jebel Ali Free Zone in Dubai, the world’s biggest free zone, encompasses the Jebel Ali Port, the largest of its kind in the Middle East. It offers companies a 0% corporate tax for 50 years, no restrictions on repatriation of capital, no restrictions on employment, 0% import and re-export duties, 0% personal income tax, zero currency restrictions and no restrictions on hiring foreign employees.
3. Cultural Tax Breaks
While the idea of tax and film are hardly synonymous with one another, the UK has adopted a unique approach to keeping British film culturally rich by means of tax breaks. Although the incentive is an unusual one, it could mean a total tax deduction of 25% for filmmakers and is therefore not to be dismissed. To qualify for this deduction, however, is not as simple as flying a Union Jack at the back of an establishing shot, or simply filming in London. Rather, filmmakers must adhere to a set of criteria based on a points system that rewards the use of factors such as cultural content, contribution, hubs and practitioners. Films must score a minimum of 16 points out of a possible 31 to obtain the maximum 25% tax cut.
4. Cow Tax?
Although the rise in carbon dioxide emissions and greenhouse gasses can be attributed to many causes, throughout Europe, a slightly bizarre culprit is also being closely examined for being far from climate-friendly: cow manure.
Studies have suggested that livestock farming alone could account for up to 18% of Europe’s greenhouse gasses, and many nations have sought to tax farmers as a result. The levels of taxation vary from country to country but, in Denmark for example, farmers could find themselves being taxed as much as $110 per cow, in an attempt to lower greenhouse gas emissions.
5. Tax Breaks
The rise of the electric and hybrid vehicle has been nothing short of meteoric. Driven by the public’s appetite for clean energy, advancements in battery capacity and range and an increase in available models, sales of plug-in electric vehicles (EVs) worldwide rose by 435% between 2015 and 2020. The fact is that favorable tax legislation has been one of the key factors contributing to their rise in popularity, as governments have tried to increase the appeal of these more environmentally friendly machines to align with their climate agendas. For example, Norway has one of the highest rates of EV adoption globally, making up 54% of cars on the road today. That was facilitated through major tax cuts for buyers, including no import taxes, exemption from the 25% VAT on purchase and the waiving of annual road taxes. It’s a fascinating look at how tax law can influence the way society functions.
Tax Compliance Made Easy
Taxes are inescapable. And like society and the environment we live in, tax laws are always changing. For businesses – especially those looking to expand globally – it’s important to make sure that they and their employees are compliant with all the various tax laws they might encounter around the world, whether corporate or individual. However, staying abreast of ever-changing tax laws is exhausting and time-consuming. An Employer of Record (EOR), such as Elements Global Services, allows companies to focus on their core business, while we handle the complex task of ensuring tax and legal compliance in over 135 countries.
About Elements Global Services:
Elements Global Services is an award-winning HR technology and services company. We provide employment solutions in over 135 countries – covering everything from payroll, benefits, legal & compliance to visa & mobility. Headquartered in Chicago, IL, we have a global network of offices and employees delivering innovative solutions to our growing customer base. With our Direct Employer of Record model, we help companies expand, onboard, manage & pay employees worldwide.