by Robert E. Bauman, JD

Little known to the world at large, there are two extraordinary tax havens hidden away in the geographic arc from northern Spain to northern Italy.

Only a handful of privileged investors in the offshore world know about the considerable advantages these two little havens offer. Little only in the size of their land mass, each are massive in their own right because of the amount of wealth hidden within their unusual political borders.

Now you’re about to be let in on the secret. Each jurisdiction offers maximum financial privacy, a possible base for international business operations, strong asset protection and even the possibility you might want to make one of them your home — if you can afford it.

Let’s take the tour, from east to west as you face a map of the Mediterranean Sea area.

Hidden Andorra

Andorra is a tiny, mountainous country of about 70,000 souls…with no taxes, no army and no poverty.

Nestled between Spain and France high in the Pyrenees, this is a residential tax haven for very wealthy foreigners who enjoy winter sports. If you live in this independent nation 20 years you can become a “privileged citizen” and enjoy all rights of citizenship except voting. Citizenship may be somewhat difficult, but you can establish immediate residency fairly easily. Just move in and apply for a resident’s card. But you must rent or own property in order to stay.

Andorra consists of 185 square miles. It’s about one-fifth the size of Rhode Island. Andorra’s rugged terrain consists of gorges and narrow valleys surrounded by mountain peaks that rise higher than 9,500 feet above sea level. It is an independent nation-state governed by 28 elected members of the General Council.

Over the past 50 years, Andorra has evolved. It’s transformed from being a very poor mountain mini-principality, into a sort of duty-free shopping center with ski resorts and banking secrecy. And it’s all thanks to the growth in purchasing power from the middleclass in Cataluñ, the neighboring Spanish province.

There is no income or estate taxes for anyone living in Andorra. Banking privacy is also very strict. So strict that Andorra is one of the few countries still on the blacklist of the Organization for Economic and Community Development (OECD). That’s because it refuses to knuckle under and share tax information with other countries.

The banks now require anyone who wants to open an account to appear in person. Lawyers cannot open accounts for them. U.S. persons who reside here are not allowed to have any U.S. securities in their Andorran bank accounts because they don’t want to be bothered with excessive time and costs for U.S. reporting and SEC visits. Non-U.S. securities and investments are no problem. There are several banks. The three largest are Credit Andorra, Andbank and Banca Mora.

WEALTH PRESERVATION TECHNIQUES

(For map, please see PDF version)

With political and economic stability, no labor problems, virtually no unemployment, and the lowest crime rate in Europe, remote Andorra could be your safe haven away from the modern world’s problems. But bring warm clothes and plan on driving because the only access is three hours by road from the nearest airports in Barcelona, Spain or Toulouse, France.

Best Uses: Quick tax-free residence, duty-free bargains, banking in strict financial privacy, skiing nine months of the year.

The Secret Italian Jewel in Switzerland

Switzerland may be the world’s most famous banking haven. But there’s another smaller, more exotic residential tax haven that’s surrounded by Switzerland. And it’s under Italian jurisdiction!

Commune di Campione, as the Italians call it, is located on the shores of beautiful Lake Lugano. This tiny haven is distinguished by its very uniqueness. There are no border controls and complete freedom of travel. Campione is home to about 3,000 people (including about a thousand foreigners), in the southern Swiss canton of Ticino. It’s about 16 miles north of the Italian border (a few miles more to Milan) and five miles by road from Lugano, Switzerland. It’s a beautiful scenic drive around the lake which you’ll enjoy, as have I.

With no border controls, there is complete freedom of transit. The village uses Swiss banks, currency, postal service and telephone system. Even automobile license plates are Swiss. Strangely enough, because of ancient history and treaties, the enclave legally is considered part of the territory of Italy.

But you have to buy a very expensive home to become a resident. Foreigners who can afford to live here pay no taxes on world income, and can run their foreign-owned businesses tax-free.

The residence permit allows you free movement within Switzerland and Liechtenstein, making Campione a valuable European executive base.

Corporations registered in Campione have some advantages over Swiss companies. They use Swiss banking facilities and have a mailing address that appears to be Swiss, while escaping Switzerland’s income and withholding taxes.

(For map, please see PDF version)

The official currency is the Swiss franc, but the euro is accepted as well. All banking is through Swiss banks, which gives its residents additional financial privacy under Swiss banking secrecy laws.

A famous casino generates substantial revenue, which is among the reasons local residents enjoy some special tax concessions. Campione is exempt from the Italian value added tax (VAT). However, the tax advantages only apply to private persons resident in Campione, and not to companies domiciled or managed from there. As in Italy, there are no inheritance or gift taxes, and income from interest of foreign bonds paid through an Italian bank is taxed at a special, reduced rate of only 12.5%. To say that the Italian authorities are less than zealous in collecting taxes here is an understatement.

Best Uses: Tax-free residence, low-tax corporate base of operations, free access to Switzerland, Liechtenstein and the EU and breathtaking scenery.