THE OFFSHORE FOR US CITIZENS
U.S. TAX & FOREIGN INVESTORS
ASSET PLANNING SOLUTIONS
From an organization who has great info and they recommended a Tax Attorney whom we know and have used and agree with…….: “Nothing is certain in this life except death and taxes,” according to Benjamin Franklin.
Of course, you now know these immortal words are just as true offshore as they are in your native country – especially if you live in the United States which is one of the few industrialized nations around the world that taxes all citizens and residents on their worldwide income! You simply can’t escape Uncle Sam’s clutches by housing your wealth offshore.
When reviewing your offshore goals, remember that you must comply with all reporting requirements once you take your assets offshore.
QUICK REFRESHER ON THE
TYPES OF OFFSHORE ACTIVITIES
Here’s a quick refresher on the types of offshore activities you must report to the IRS…
• All foreign accounts including savings demand, checking deposit, deposit, time deposit, or any account with any other financial institution that exceeds US$10,000.
• All financial instrument accounts including bank, security, security derivatives etc.
• Any accounts with assets held in a co-mingled fund, and you as the account holder have equity interest in the co-mingled fund
• Trusts and all other international structures
• Joint accounts, including ones you have a partial interest in
• Agent, nominee, attorney, or in some other capacity holder of legal title on behalf of a U.S. person
• A corporation in which you own an interest that equals more than 50% of the total value of the shares in the stock
• A partnership in which you own more than 50% of the profits
• A trust in which you have a present beneficial interest in more than 50% of the assets or from which you receive more than 50% of the current income
• An account you have signature or other authority over
• Offshore cash in the excess of US$10,000
• Certificates of deposit offshore in the excess of US$10,000
• Any negotiable securities you hold in your name in your offshore bank accounts
• Investments in most mutual funds
CUTTING BACK YOUR TAX BILLS
If tax-minimization is one of your offshore goals, please be extremely cautious to keep yourself from accidentally qualifying as a “tax evader.” As you learned in Puerto Vallarta, there’s a significant difference between legal tax avoidance and tax evasion. You NEVER want to qualify as the latter. This could result in harsh fines, even harsher tax penalties, or even prison.
However, qualified tax professionals, attorneys, and accountants make it their business to help individuals just like you legally cut back their tax bills. There’s nothing wrong with legally minimizing your taxes. You’ll never know if a certain tax minimization strategy could work for you unless you consult a professional.
And if you’re interested in pursuing ways to cut back your taxes, here are a few ideas:
• Use an annuity or offshore retirement plan to legally avoid taxes.
• Use tax treaties, so you can avoid paying taxes in two countries.
• Take advantage of “treaty shopping.”
And remember, if you ever have any questions about any tax issue, please negotiate a qualified tax attorney in your home country
ASSET PLANNING STRATEGIES
Structure solutions for US and Canadian persons Keeping Offshore Incorporation Legal Even though taxes are to be paid on worldwide income generated in a controlled foreign corporation, one’s privacy can still be protected. To maintain one’s privacy, the stock in the offshore corporation can be owned by a private Nevada “C” Corporation (or for a Canadian an Alberta Corporation). This way, the income produced in the foreign corporation is reported on the tax returns of the corporation and not the individual. Therefore, if one’s personal tax returns are summonsed, the income generated offshore does not have to appear. This can also be a tremendous tax-saving strategy, because the “C” corporation pays lower income taxes in most brackets than does an individual.
Offshore Asset Protection Trusts for US Citizens. When it comes to discussing offshore anything and US citizens – from offshore trusts to investments, from offshore banking to company incorporation – it’s important to note the following facts:
(a) US citizens are taxed on their worldwide income. This includes income from interest, dividends and gains whether onshore or offshore.
(b) The US government allows money and assets to be moved offshore freely; however it requires full disclosure relating to the amount of money or assets moved and when they are moved.
(c) The US government has task forces committed to the prevention of money laundering and tax evasion.
(d) The US government makes it clear that US citizens must comply with all reporting and taxation demands.
So, does this effectively render the offshore world inaccessible or at least useless for US citizens?
No, far from it in fact!
The utilization of offshore trusts and bank accounts can be an excellent way for US citizens to legally and securely protect their assets and themselves from litigation for example.
Offshore trusts offer an individual a fair degree of personal confidentiality, privacy and asset protection from claimants such as an ex-spouse or business client for example; and if properly structured, offshore bank accounts can offer degrees of financial protection from potential future claims as well.
There are many companies and individuals who claim to be able to offer US citizens offshore solutions for taxation reduction or negation purposes. The bottom line is – as stated previously – US citizens are taxed on worldwide income. Therefore it is at best unlikely that the services being advertised will apply to a US citizen and at worst the opportunity will require the US citizen in question to break the law.
So how can offshore asset protection trusts potentially benefit US Citizens?
Any form of asset protection trust – whether onshore or offshore – can be used to protect assets from personal or professional litigation or creditor attack.
Whether established in an offshore jurisdiction or not, most assets protected by the given trust for a US citizen can remain in America. The assets usually remain under the indirect control of the Settlor (the person establishing the trust) as well.
Such a trust will usually be ‘irrevocable’ for a set term, and during that period the Settlor will not be a direct beneficiary of the trust.
Depending on circumstances and best advice, many US asset protection specialists favour structuring offshore or foreign trusts in such a way so that they are taxed as domestic grantor trusts.
If the trust is created properly, any creditor or anyone suing the Settlor will be unable to reach or claim the assets within the trust.
If the offshore asset protection trust has been structured as an irrevocable trust for a set term, at the end of the term provided there is no current or ongoing threat, the assets can be returned to the control and direct ‘ownership’ of the Settlor.
JURISDICTIONS HAVING DECREASED
THEIR PRIVACY LAWS
Because of the recent Organization for Economic Cooperation and Development (OECD) and European Union regulations, many jurisdictions that have a dependence on Great Britain have decreased or eliminated their privacy laws.
The offshore tax havens that have independence from Great Britain have retained their strong privacy laws. Many of these countries receive a majority of their income from offshore services so they have a financial incentive to keep the privacy laws in place on a long-term basis.
We do not recommend the traditional British Dependant Territories such as Anguilla, Bermuda, Cayman Islands, Montserrat and Turks & Caicos. We also do not recommend the Isle of Man and the British Channel Islands (Jersey, Guernsey, Alderney). In addition to removing their privacy laws, these British Dependencies are implementing a withholding tax on bank account interest. If you already have a corporation or account in one of these jurisdictions, we recommend that you contact us and quickly switch to a country such as one of our company’s recommended locations.
WHY DOES BELIZE STILL REMAIN
AN ATTRACTIVE OFFSHORE TAX HAVEN
EVEN FOR US CITIZENS?
Following the various terrorist atrocities across the world in recent years, and partially as a result the on-going global battle against money laundering and drug trafficking, many of the higher taxation countries – such as the US and UK – have begun restricting and eliminating the attractions of tax havens for their citizens
The ideas behind this move are simple to understand.
Removing terrorism and drug trafficking from the agenda momentarily, the higher taxation countries want to stop any potentially taxable money from leaving their shores and they want to retain closer control over their citizens.
They want to build greater stability through control.
As a result of the targeted crack down on tax havens and the benefits and attractions they can offer the citizens of various high taxation countries, many former colonies and countries closely affiliated with the UK and US for example, are being forced to refuse entry and even to eliminate tax haven benefits altogether.
Particularly affected are citizens of the United States. Why?
Because the US is the world’s superpower and exacts such strong power and control over much of the world today and can inflict trade embargos, certain boycotts and the restriction of any international aid to countries it feels are illegally offering tax haven benefits to its citizens.
Other high tax jurisdictions, such as the major countries of the EU, are also being excluded from the tax haven benefits available in certain offshore jurisdictions as they have close ties to the US and UK and could also bring about trade isolation etc.
But Belize is Different.
In 1991 Belize began establishing itself as an offshore centre of note and introduced a series of offshore legislation designed to establish itself as one of the most attractive tax havens globally.
It learned from the successes and mistakes of other tax havens around the world and designed its legislation carefully so that it would become the most attractive tax haven globally.
It began by allowing the creation of offshore corporations and it progressed to passing attractive trust law legislation which was developed upon and expanded throughout the 1990s.
At this point (in 1996 to be precise) America began to pressurize Belize into joining a Mutual Assistance Treaty.
Such a treaty requires information exchange to exist between the countries involved in it…information including the fiscal and banking records of residents and non-residents.
Belize agreed to sign an agreement but only agreed to cooperate with the information exchange policy where it would combat the likes of drug trafficking and international terrorism.
Belize was not willing to disclose its banking information, nor was it willing to accept the need for disclosure of fiscal information where tax evasion was suspected for example.
This lack of complete cooperation was met with anger and hostility by the US and they punished Belize by placing it alongside the likes of Columbia on a list of countries unwilling to assist in the global battle against international drug trade and money laundering.
The seriousness of America’s action must be stressed – Belize simply had to take positive action to remove itself from this list otherwise it would face the restriction of foreign aid, world political isolation etc and it would be crippled economically.
However Belize remained calm in the face of adversity!
And it remained true to its original convictions and continued to refuse to give in to the information exchanged demands of the US.
Belize instead brought in further highly attractive offshore legislation to attract international banks to relocate to Belize!
At the same time it also introduced new privacy laws for the banks and it also included certain anti money laundering provisions such as America’s very own “know your client” rule.
This meant that Belize fell in step with US home banking policies!
Therefore America was no longer able to say that Belize was refusing to assist with the international prevention of money laundering and it had to remove Belize from its hit list!
By refusing to bow to world superpower pressure and by developing and improving offshore legislation Belize went from strength to strength as one of the most a credible and safe offshore havens.
Today, banks and international companies who base themselves in Belize find they benefit from a government committed to a no tax system and they work protected by laws and with infrastructure designed to ensure total privacy and provide complete asset protection.
Add to these benefits the fact that Belize’s primary language is English, the laws of the country are based on the British legal system and property prices and the cost of living in Belize are very low and you can see now why Belize remains one of the most popular, successful and safe tax havens of the world…even for US citizens!
When it comes to the utilization of offshore solutions there are circumstances in which US citizens can benefit from properly structured offshore solutions.
At all times US citizens must be aware that it is their legal duty to comply with American taxation and reporting requirements.
The purpose of effective offshore asset protection planning is the negation of any economic incentive to sue.
Should you be interested in further information relating a specific and tailored made asset protection solution, please do not hesitate to contact us.