Offshore Schemes

There are many offshore centres (bank accounts, corporations, trusts) where people do not pay tax. Some tax havens offer low or tax free regulations to both their citizens and those of other countries who use their services. The major advantage of possessing an offshore account is obviously for the purpose of tax minimisation (i.e. doing business where tax is legally not payable), and financial privacy.

In Europe, trusts are often not recognised and the individual will be taxable and liable for social security contributions on all income paid into the trust by the employer. Income put into a trust is treated in the same way as if it were put into a bank account, and will therefore be liable to the same taxes.

If a contractor chooses a non-compliant solution (i.e. declaring only part of his income or not declaring the offshore income in order to minimise the tax liability),this is often unlawful. Tax evasion is a crime in almost all countries and subjects the guilty party to fines and/or imprisonment.

When self-employed, declaring income to the appropriate tax authorities is the contractor's responsibility and he/she will thus be liable if tax authorities find incorrect procedures in the declaration of tax. Although offshore banks may decide not to report income to other tax authorities, and have no legal obligation to do so as they are protected by bank secrecy, this does not make the non-declaration of the income by the tax-payer or the evasion of the tax on that income legal.