Difference Between Tax Evasion and Tax Avoidance

The difference between tax evasion and tax avoidance can be somewhat tricky to understand. So, we’ve decided to break it down for you in a straightforward manner that will hopefully clarify whether you can legally reduce taxes when banking offshore.

That said, the treatment of tax evasion and tax avoidance may differ depending on your country of citizenship and residency. So, whether you are a resident of India, the United States, France, Canada, or elsewhere, it’s important to engage a qualified professional who understands your situation when navigating tax-related matters.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Difference Between Tax Evasion and Tax Avoidance
  2. Frequently Asked Questions
  3. Ready to Explore Your Options?

Difference Between Tax Evasion and Tax Avoidance

The main difference between tax evasion and tax avoidance is that tax evasion is a failure to pay or deliberately underpaying taxes while tax avoidance is taking action to reduce the amount of taxes owed. In other words, tax evasion is illegal and tax avoidance is (when done correctly) legal.Β 

With this in mind, if you are considering methods to legally reduce your taxes, you should consult with a tax professional who fully understands the intricacies of your situation. This is true whether you are a resident of India, the United States, Singapore, or elsewhere.

In fact, while all countries do offer legitimate ways to reduce the overall tax burden that an individual and entity owe (e.g. legal tax avoidance), they often have strict rules that govern the implementation of these methods and to whom they apply. So, before deciding which methods are best for you, you should always consult with a professional.

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Frequently Asked Questions

Below are three of the most common questions that we receive from people looking into who can certify documents. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.

What Is Tax Avoidance?

Tax avoidance refers to the legal reduction of a person’s tax liability. This can be achieved by implementing specific strategies, using permitted tax shelters and structures, and obtaining various tax incentives through government initiatives.

What Is the Example of Tax Evasion?

Examples of tax evasion include not reporting or deliberately underreporting income to tax authorities in your country of residence. That said, tax evasion may also include conducting transactions in cash or other bearer instruments and not reporting or underreporting those transactions.

Lastly, tax evasion used to be synonymous with not reporting offshore accounts and transactions. However, the implementation of Common Reporting Standards (CRS) and the Automatic Exchange of Information (AEOI) by the Organization for Economic Co-operation and Development (OECD) has effectively eliminated the use of offshore accounts for these purposes.

Ready to Explore Your Options?

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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