How To Hide Cash In An Offshore Tax Haven

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Funnelling money through an offshore tax haven is not illegal – providing the idea is not to hide the true extent of your wealth from the tax man so you pay less tax than you should.

How international corporations and wealthy individuals keep their wealth offshore is exposed in the Paradise Papers, which are millions of confidential documents between law firm Appleby and their clients disclosed online.

Pulling down the veil of secrecy is easy, if you are extremely rich and have the cash to pay the fees of the companies eager to help you.

Here are the five easy steps explained:

Form a shell company

A shell company is one that only exists to receive and manage money from elsewhere and which carries on no real business.

Keep the company offshore

Look for a financial centre where the authorities demand a zero or low rate of tax on any income while keeping the accounts and other business activities secret.

Favoured locations are Bermuda, the Cayman Islands and British Virgin Islands in the Caribbean or the Isle of Man, Jersey or Guernsey closer to home.

Stay in the shadows

Do not put your name on the paperwork – pay shadow or nominee directors to do the job for you to make identifying who really owns the cash more difficult

Bank on secrecy

Open a bank account in a different offshore centre than the one where your shell company is based just to muddy the waters and make tracing the money even harder.

The money trail stops at the door of the shell company, which receives your money into a local bank.

The cash is then loaned to you with the expectation it will never be repaid. As a loan, the income goes unreported on a tax return, so no tax is due.

This is only one way of washing cash through a tax haven.

Around £10 trillion is estimated to rest in shell companies and other tax avoidance structures – which is about the same amount as the wealth generated by the economies of Britain, France and Japan each year.

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