Almost every country in the world including the US, subjects its residents to taxes. The question most taxpayers have on their mind is what tax rates apply in their country of residence. If you've been following the Panama Papers hype, then you probably know that some of the world's wealthiest people are suspected of tax avoidance and of holding hidden assets in fiscal paradises.

Now that isn't a big surprise to most of us. But the fact is, there are some places in the world that have a crushing tax rate, like these 5 countries with the highest personal income tax rates. And luckily for some, there are also a lot of places with very low tax rates, like these 5 countries with the lowest personal income tax rates. The term "tax haven" is commonly used to describe a country with low tax rates in which residents of a country with high tax rates place part of their wealth to enjoy a better deal.

Tax havens are a pretty big topic, but we at GET.com are going to explain a few basics here.

What Is A Tax Haven?

Remember the scene in film 'The Wolf of Wall Street' where they stashed a few hundred million dollars in cash in Switzerland? That was not made up. Nations like Switzerland and Luxembourg were once considered tax havens for wealthy Americans. In 2014, Switzerland cut a bargain with the US government which made it almost impossible for US residents to hold Swiss bank accounts.

The rest of the world is still free to bank there. With income tax rates of between 1% and a maximum of 11.5% depending on the kanton (state) and income bracket, special allowances for low lump-sum tax contributions, and zero poverty, Switzerland continues to attract wealthy residents from around the world.

At the moment, these 10 countries are considered tax havens. If you are tired of seeing your hard-earned money being eaten up by taxes, you may be tempted to hop over to one of these post-card pretty locations. But if you're considering becoming a resident of one of these countries, be sure you understand that it's no easy feat!

1. Brunei Darussalam

One of the tax haven's with the most lenient residency rules is Brunei Darussalam. To be able to become a resident you need to reside there for a minimum of 183 days within the tax year.

2. Anguilla

To become a resident in Anguilla you have to go through a much more lengthy process. To apply for residency you have to have been legally residing in Anguilla for at least 7 years!

3. British Virgin Islands

To enjoy the no-tax regimen on the British Virgin Islands, you have to apply for rights to reside long term because of either local employment, self-employment, or if you are starting a business.

4. Bahamas

There are many criteria which enable you to apply for residency in The Bahamas. One common way is for financially independent individuals or investors to be legitimate owners of a residence in The Bahamas. According to their Ministry of Finance website, those who purchase a residence for BS$1.5 million or more will get speedy consideration!

5. Panama

In Panama there are 3 steps to follow if you want to get citizenship there. First, you have to obtain a Temporary Permit before obtaining a permanent residency permit. Once you have the residency permit, you have to reside in Panama for a minimum of 5 years before you can apply for Panamanian citizenship.

6. United Arab Emirates

To be a resident of the United Arab Emirates, you have to apply for a residency visa, which has a 2 year validity period. During these 2 years, you must enter the country once every 6 months.

7. Cayman Islands

Before you can become a resident of the Cayman Islands, you have to live there legally for at least 8 years.

8. Bermuda

Before applying to be a resident in Bermuda, you have to have been living there for at least 10 years, among other requirements.

9. Island of Sark

To become a resident on the Island of Sark, you must live with a an existing Island of Sark resident.

10. Monaco

In Monaco, you have to go through certain (expensive) processes that will take about 12 years before you can apply for a privileged residence card, which is valid for 10 years. Upon obtaining this privileged card, you have to spend at least 6 months and one day in Monaco every year.

Who Goes To Tax Havens?

Most of the time, those who are interested in low-tax countries are businesses, but tax havens also appeal to individuals who have obtained decent amounts of money (through an inheritance or hard work over a lifetime, for example) and want to keep a larger share of their money for their own enjoyment. Because of the relatively high cost-of-living in these countries and the fact financial institutions in many of these countries aren't interested in managing small amounts of money, most of those who place assets in these countries are wealthy.

For example, British Formula One drivers, Jenson Button and Lewis Hamilton both reside in Monaco. Instead of having to pay the usual United Kingdom income tax rate of 45%, they don't have to pay taxes at all because they are domiciled in Monaco. That means they can keep a lot more of the money they earn.

However, to move your money to these tax havens is no simple feat. You have to be able to legally set up a corporate structure within the tax haven country, or be domiciled in that particular country. These processes are not that simple and there are a lot of rules and regulations that you have to follow if you want to legally move your assets to one of these countries.

In this day and age, when many of us work remotely via the internet or other means of communication, the option of upping and moving to a country with more affordable taxes can seem tempting. But it isn't as easy as that.

Unlike citizens of most countries, which only pay taxes in their place of residence, the incomes of US citizens and resident foreigners are subject to US income tax regardless of where they reside. So while you may save on some taxes by living abroad, you will still have to pay income tax to the IRS, in addition to any income taxes you pay in your country of residence. You can find out more in this IRS explanation.

Is The US A Tax Haven?

The US is one of the top 5 countries with the highest personal income tax rate in the world! The personal income tax rate is currently as high as 55.9%, which is higher than that of many other developed countries like the United Kingdom (income tax rate of 45%) or Australia (income tax rate of 49%).

Since the UBS tax evasion case that occurred last month, the US has been paying close attention to Singapore's bank secrecy laws. It's safe to say that in the not-too-distant future the same rules that now apply to US citizens banking in Switzerland will apply to those banking in Singapore.

But while the IRS is clamping down on countries that remotely resemble a tax haven, they seem to be forgetting a haven of our own - the state of Delaware, which is home to no less than 285,000 businesses that are looking for a place to hide from tax rates.

In fact, many citizens of other countries stash their money away in the United States, far from the prying eyes of their tax authorities.

Besides Delaware, a number of other states including Nevada, Wyoming, and South Dakota are prime destinations for the world's hidden wealth.

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