As the saying goes, one thing in life we can all be sure of is death and taxes. While there’s not much we can do to avoid D-day; there are a few things we can do to avoid high tax rates. Unfortunately, we’ll never be able to completely avoid the tax man – but there are corners of the globe where he seems to be a little more lenient. These areas are called ‘tax havens’, and even those who aren’t citizens of the nation, but who are willing to hold some of their money offshore, can take advantage of the low tax rates.
While there are many tax havens throughout the world, such as Isle of Man, Netherlands, Bermuda and Singapore, to name a few; there are also many hidden in and around Africa. So yes, there may just be a tax haven right on your doorstep! If you’re eager to find out more about the nations of Africa which may just save you from paying high tax rates, take a look at our useful list.
Mauritius is the most well known tax haven in Africa. Here, foreign individuals and businesses can take advantage of the corporate services in Mauritius. This nation has low tax rates which are around 15% for income tax on a corporation’s net income. Tax credits for global business companies are around 3%; with no capital gains tax and no withholding tax on dividends. This island isn’t just a fantastic place for a relaxing beach getaway, it’s also the ideal place to legally hold finances offshore.
The Seychelles is yet another great option for those looking to avoid high taxes. The Seychelles, situated off the east coast of Africa may not have as low taxes as Mauritius; and with zero withholding tax, but it is still a great option for certain entities such as sole traders and partnerships who pay 0% tax on the first Seychellois Rupee (SR) 150,000; 15% up to SR1m, and 30% on income above SR1m. Companies and Trusts pay 25% on the first SR1m of income, and 30% tax above SR1m. Withholding tax, however can affect certain categories of payments and non-residents, with dividends and royalties both taxed at 15%.
Djibouti is a small country situated between three continents: Africa, Europe and Asia. For this reason, Djibouti, known as an East African nation, is a great place to hold finances offshore as it is one of the most central tax havens in the world, thanks to its convenient location. Since 1949, Djibouti has operated a ‘Free-Zone’, also referred to as a free-port. This allows tax breaks, company tax exemptions of up to ten years, and many other incentives for foreign companies. Foreign companies are also legally allowed to make the country their home/place of business.
In 2009, the government introduced VAT at a flat rate of 7% imposed on companies with an annual turnover exceeding 80 million Djiboutian Francs (approximately USD 450,000). However, since January 2010, the country has lowered the annual taxable earning amount to 50 million Djiboutian Francs (approximately USD 282,000).
Tangier, Morocco’s free economic zone, is the North African nation’s oldest city. Foreign and multinational companies can avoid paying corporate tax in Tangiers exportation free zone; only paying tax on activities that generate an income within Morocco itself. It is a great place for international banks and financial institutions and has been described as an ‘offshore center’ for these entities. As it stands, tax in Tangier is half that of the rest of Morocco, at 8.75% for the first five years and 17% thereafter. Even though the nation offers favorable tax benefits, their tax system is known to be one of the most complex in the world; therefore, if you’re considering using this nation as a tax haven, you may want to first consult a professional advisor.
Botswana is known for their incredibly stable economy thanks to their politically stable democracy. Due to this Southern African nation’s laws and regulations which are less stringent; it has been seen – and accused of being – a tax haven. Botswana’s International Financial Service Centre (IFSC), which was established in 1999 has kept company taxes to a minimum, averaging 20%.