The process of avoiding tax payment is formally referred to as tax avoidance. Generally speaking, it is the legal manipulation of the tax regime to one's own advantage. The manipulation serves either to reduce the amount of tax that is payable by means that are within the law or it serves to provide a means for an individual, without the bounds of certain laws, to avoid having to pay.

The United States Supreme Court has declared, however, that it is The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted."

Legal Means to Avoid Taxes

These are the legal means of tax avoidance that people can apply:
1. Changing One’s Country of Residence
A popular means for lowering taxes due is to change one’s tax residence. The way to use a country of residence to avoid tax payment involves changing one’s tax residence to a tax haven. Popular tax havens include countries such as Monaco. People who travel a ll the time can also avoid taxation on the basis pf tax residence.

2. Creating A Legal Entity

Citizenship and Personal Taxation

If an individual does not want to change their country of residence or if a U.S. citizen does not want to give up their citizenship, they may be able to avoid personal taxation by creating a separate legal entity to which one's property is donated.

The separate legal entity may be a company, trust, or foundation and various assets can be transferred to the new company or trust to ensure that gains may be realized, or income earned.

Offshore Business Taxes and Trusts

A legal entity may also avoid corporate taxation if the incorporation takes place in an offshore jurisdiction. Income tax may still be due on any salary or dividend drawn from the legal entity. For a individual creating a trust, however, to avoid tax there can be restrictions on the type, purpose, and beneficiaries of the trust. Settlers of trusts may not be allowed to act as trustees or even a beneficiary and so can lose control of the assets transferred. They may otherwise be unable to benefit from them, which is the drawback of avoiding taxation in this manner.

This article does not imply any legal advice.

If you need legal assistance, contact the international tax dispute lawyers Thorn Law Group about offshore income taxes and filing. Serving businesses in the state of Virginia.