In the USA, an abusive tax shelter reduces liability to tax using complex transactions often judged to have no legitimate business purpose beyond tax avoidance. The IRS publishes a list of such transactions, making taxpayers liable for back taxes and interest. Similarly, the UK's GAAR aims to outlaw 'artificial and abusive' tax shelters.
A cluster of statutory provisions designed to stop certain arrangements that would otherwise reduce the taxpayer's tax liability. Important areas include dividend stripping, bond washing, manufactured dividends, and transactions in securities.
The 'Assignment of Income' doctrine is a tax principle that prevents taxpayers from avoiding tax by directing income they have earned to another person.
Avoidance of tax refers to legal strategies and methods by which a taxpayer reduces their tax liability, often through investing in tax shelters or utilizing other deduced deductions and credits allowed by tax law.
A Controlled Foreign Company (CFC) is a foreign-based corporation that is controlled by residents of the home country, allowing individuals or companies to potentially shift profits and reduce their tax liabilities.
A flat tax is a simple proportional tax system with a single rate. It has no reliefs or exemptions apart from a standard personal allowance, thereby streamlining tax compliance and administration.
General Anti-Abuse Rule (GAAR) is a set of regulations to prevent tax avoidance by disallowing tax benefits from transactions, arrangements, or practices that have no substantial commercial purpose other than to gain a tax advantage.
A measure designed to counter tax avoidance in the UK by outlawing any arrangement that creates a tax advantage through means judged 'artificial and abusive.' The rule evaluates the reasonableness of the arrangements.
A gift with reservation is a type of gift where the donor retains some benefit from the asset despite having transferred ownership to another party. This concept is pertinent in taxation and estate planning.
A Personal Holding Company is a corporation that derives a substantial portion of its income from passive sources and is closely held by a small number of individuals to avoid personal taxes on investment and personal service income.
Minimizing tax liabilities legally and by means of full disclosure to the tax authorities.
Minimizing tax liabilities illegally, typically by not disclosing taxable income or providing false information to tax authorities. It contrasts with tax avoidance, which is the legal practice of reducing tax liabilities through lawful means.
A tax exile is an individual who relocates to a country with more favorable tax conditions to avoid high taxation in their home country.
Transfer pricing involves setting prices for transactions between affiliated entities under common ownership, often used to allocate revenue and expenses among those entities to benefit from tax advantages.
The Westminster Doctrine refers to the principle in UK tax law that individuals and entities may arrange their financial affairs to minimize tax liability. It originated from the 1936 ruling in Commissioners of Inland Revenue v the Duke of Westminster.
