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In practice, international tax avoidance takes various forms and covers an extremely wide range. To sum up, there are mainly the following ways
Avoidance can be achieved by avoiding personal residence, company residence, etc.
This method essentially uses the movement of people (including natural persons and legal persons), or the international migration of people, to change the direction of their resident status (from residents to non-residents) or to avoid becoming residents, thereby getting rid of Restraint of resident tax jurisdiction, thereby eliminating tax liability. For example: ① By traveling between countries to reduce the time of residence in a certain country to avoid resident status, or by applying the provisions on temporary taxpayer status to reduce or eliminate tax obligations. This is what is internationally referred to as a tax refugee. ②Residence transfer. Shift your company's domicile to a lower-tax jurisdiction to avoid paying income tax in a high-tax country. Because most countries determine whether a company is a resident company or a non-resident company, mainly based on whether it has a residence in the country. Anyone who has his or her domicile is taxed on income from worldwide sources. ①Avoid becoming a permanent establishment. Many countries around the world use the concept of a permanent establishment to determine taxation on the profits of non-resident companies. Therefore, avoiding a permanent establishment means eliminating tax liability. So, how to avoid a permanent establishment? The key is to avoid the related factors that make it a permanent establishment.
Achieving stamp duty avoidance through the transfer of income or costs. The transfer of income or costs can be regarded as a common prop used by companies when performing tax avoidance magic. Through the transfer of income and costs, companies can remove artificially low income from their books, thus reducing their tax burden. Common ways to achieve tax avoidance by transferring income and costs are
① The purpose of tax avoidance is achieved through the transfer of income and costs between the head office and the permanent establishment, as well as the transfer of income and costs between permanent establishments. That is, income or costs from countries with high tax rates are transferred to countries with low tax rates, thereby reducing taxes.
① Avoid tax through transfer pricing. Transfer pricing is different from the price determined by independent parties in a fair market according to the principle of arm's-length transactions, but refers to the price artificially determined in transactions between relevant parties. That is, tax avoidance is achieved through artificially demanding high prices or setting lower prices among affiliated enterprises. Transfer pricing can be described as the hub of international tax avoidance. Here are some examples: Tax avoidance is achieved through the flow of funds to tax havens. Stamp duty tax havens are centers of international tax avoidance activity. The so-called tax haven refers to a special area that provides a far lower level of international tax burden. It can be a country or a certain region of a country. Since tax havens provide preferential tax incentives to foreign investors, investing in tax havens can yield more returns than investing in other areas, with lighter tax burdens or exemptions. Therefore, the flow of international funds to tax havens can achieve the purpose of tax avoidance.
Tax havens in various countries around the world are mostly represented by free trade zones or free ports. The free trade zone is also called the Free Port City. It is the expansion and development of the free port, including the entire port and the cities connected to the seaport designated by the government authorities. For example, Hong Kong and Singapore are free port cities. A free port is a seaport or a seaport that demarcates a certain area as a tax exemption area and enjoys preferential tax policies. At present, there are nearly a variety of free ports around the world, covering many countries and regions. The four special economic zones in my country, Shenzhen, Zhuhai, Shantou and Xiamen, are economic zones that implement special tax preferential policies. Therefore, they have the nature of tax havens to a certain extent.