Is Nevada Still a Tax Haven? Part 1 of 2.
Many business owners are aware of Nevada’s advantages such as no business income tax. There are other advantages for businesses and individuals too.
Here are some its less well known advantages:
- The states of California, Oregon, Utah, and Arizona all have income taxes- business and personal taxes. Of the surrounding states, most have a business tax starting at 5% and a personal income tax at or above 4%. In Nevada, has no business or personal income tax. Unfortunately though, the 2015 Nevada Legislature passed a commerce tax on annual gross receipts for companies with customer revenues based in Nevada. The tax applies to companies with over $4 Million in gross receipts for revenue in Nevada. The tax rate depends on the industry category. For example, professional service corporations are charged the rate of 0.25%. There are rumors that the floor of $4 Million in receipts may be lowered though. There is concern that the state’s budget projections on the commerce tax fell way below its forecasts. Even with this change in the business environment, there are other, major benefits to doing business in Nevada…
- Nevada has no unitary tax. Many states apportion tax on companies headquartered outside their states with a factor based on sales receipts, personal property, and/ or labor to determine a tax for activity conducted in the state. California Proposition 39 passed in November 2012 required a single factor computation based on sales receipts. The rate effectively increased the tax rate by disallowing the averaging of sales, personal property, and labor expenses spent in the state.
- Nevada is the Number One ranked U.S. state for Domestic Asset Protection Trust Laws. The asset protection laws also include income tax benefit for all Nevada based trusts – they are not subject to the Nevada Commerce Tax as noted in item 1 discussed earlier or any income taxes.
- There are no Foreign Trust taxes to the state. As was noted in a recent Bloomberg article shown here, https://www.bloomberg.com/news/articles/2016-01-27/the-world-s-favorite-new-tax-haven-is-the-united-states. The U.S. is a very popular tax haven for foreign investors because of the favorable trust tax laws. Nevada is a favorite place for these trusts for west coast based investors.
For example, a UK investor who lives less than half time in the UK are not considered a tax resident to the UK tax authorities and do not have to pay worldwide income to the UK, thus any income earned in their Nevada trust will not be subject to UK income tax and none to the state of Nevada or U.S. tax systems. This is a major benefit for people with these facts and circumstances.
- Foreign Trade Zone, Northern Nevada– FTZ 126. This is an important savings for import-export companies. Examples include –
- Inverted Tariff relief to U.S. Companies who may be subject to a Tariff
- Duty (tax) exemption from re-exports import duty
- Duty elimination on waste, scrap, and yield loss- exempts customs duty on material (raw material) brought the U.S.
With these noted advantages, Nevada is still a haven for many citizens in the U.S. and worldwide.
We welcome your comments or questions regarding this topic.