Internet: The biggest tax haven

Internet has become the largest tax haven in the world and a space where major number of electronic transactions takes place.

Through the Internet, capital can be moved within just seconds and real-time commercial, monetary and stock transactions can be carried out from one part of the world to another. Today Internet counts with almost 4 billion of users from all over the world becoming one of the biggest tax havens created. In June 2001 there were 123 million Internet users in Europe, of which more than seven million resided in Spain. In December 2012 there were already thirty-three million Spanish Internet users. In developed countries the use of the Internet has grown annually around 50% since the late 1990s. 

The Internet is formed as a territory with very few rules and endowed with great freedom in all senses being possibly the clearest example of the globalization of finance. The network has revolutionized traditional aspects of the offshore business, such as the transfer of funds, on-line banking, e-commerce and formation of offshore companies. With the use of information and communication technologies, physical proximity to the offshore center has lost its relevance. To some extent, there was an offshore era before the Internet and a different one after the Internet was launched. There are also hundreds of banks on the Internet, whose headquarters are located in tax havens, in which from the computer and by mail, it is possible to open accounts and carry out all types of banking transactions, including the application of a credit card.

Regarding the taxation, it is difficult to know the physical location from where a trading company operates in the network and, therefore, technically almost impossible to establish where the beneficial owners of this company should pay taxes. It is also to determine which jurisdiction has to monitor the network or establish fiscal residence and collect taxes. This last aspect of how to rate transactions on the Internet, is one of the greatest problems of the tax authorities of developed countries.

The growth of e-commerce and the saving of taxes on the transactions that it generates, have led some tax havens to promote the formation under favorable conditions, legal and fiscal, of commercial companies based in Internet. This allows providing better services to clients around the world.

Many large companies offer a wide range of Internet services, which are parallel to the distribution and sale of products in the usual commercial circuits. Some of these services are provided from offshore jurisdictions with a notable tax savings. These companies sell part of their products, software for example, through the Internet using the companies established in tax havens, which pay royalties to the parent company located in the country of high jurisdiction. It is a complex procedure, but it is totally legal to save taxes whenever the actions are commercially justified and all doubts related to operations with linked companies are cleared.

Internet also facilitates many companies to move their center of activities that do not have anything to do with direct contact of their clients, so-called "back office", to other jurisdictions or tax havens. It also allows the storage of data for security purposes in distant locations of the headquarters of the company.