Category Archives: Company- Management

I’m often asked can I transfer ownership of my home or investment property/s to my tax free Offshore Company (“IBC”)?

It can be done legally but you need to assume the worst case scenario (ie that that the local tax authorities or a litigation lawyer will investigate and possibly try and overturn the sale or transfer) and plan accordingly.

The key is commercial reality. The sale or transfer must be, and appear to be, “above board”.

Tips:

1. The inquisitor might ask Where did the buyer come from? How did you meet the buyer? So the smart thing to do would be to (ie assuming you wish to sell the property to your Offshore Company or Foundation – see below) is list the property for sale with an agent that has international reach (ie one which regularly attracts non local real estate investors) and have the Tax Haven Company (or Private Foundation – see below) make a bid for it after a few others have made an offer.

2. The sale will need to be seen to be at fair market value – you can’t just sell a house to a nil tax IBC for one Dollar (unless it is gifted – see below). Similarly the contract of sale will need to be seen to be on normal or reasonable commercial terms. That said the sale contract could be an instalment or vendor finance contract ie where a deposit is paid and ownership is transferred but the seller retains a mortgage until such time as all the instalments have been paid.

3. Depending on where you live you may be able to “gift” the property to a tax free Offshore Company (or tax free Offshore Private Foundation). It might be difficult to explain why you’re gifting a piece of property to a zero tax IBC hence the smarter thing to do might be to set up (and transfer ownership of the property to) a tax free PIF ie Private Interest Foundation (eg one characterized as a Charitable Purpose Foundation). This one might survive the “sniff test”. Why? Because all day, every day, well intentioned wealthy persons gift money or assets to Charitable causes.

4. You will not want to be seen to be doing or managing anything for the IBC/PIF. Hence the communications will need to be seen to be coming from the IBC Director (or Private Foundation Councillor as applicable)

5. Check local tax laws first. Often when a piece of real estate is sold the seller has to pay capital gains tax. Likewise if/when property is gifted a gift tax may apply.

6. Check local investment laws next. There may be prohibitions or restrictions on the ability of non-local persons or companies to buy and/or hold real estate in the country where the property is located.

7. If you intend to keep living in the property – and you want to fly under the radar – it might not be wise to pay rent to the Offshore IBC (or Offshore Foundation as the case may be) directly; It would probably be more prudent to have a property manager appointed by the Offshore Company (or Foundation) to collect the rent and manage the residential tenancy.

Local conditions can have an impact. Hence before committing to transfer property to an Offshore entity you should seek local legal/tax/financial advice.

The Cook Islands an English speaking sovereign state in the south pacific comprising some 15 islands and is a world leader in the field of Asset Protection Trusts. A self-governing state with a British based legal system in the mid1980′s the Cook Islands became the first ”Offshore”  jurisdiction to create comprehensive asset protection trust legislation. Its asset protection trust law has now been implemented in one form or another in thirteen countries and eight U.S. states (and is famous for having resisted attempts by US Authorities/Courts to tap into assets held by a US resident settled Cook Islands Trust see FTC  vs. Affordable Media, LLC, 179 F. 3rd 1228, U.S. Ct. of Appeals, 9th Cir. 1999).

Features & Benefits of the Cook Islands Trust

Registration of a Cook Islands International Trust affords a number of benefits including that a trust will not have any taxation liability in the Cook Islands.   It is a relatively simple procedure for a trust to be registered in the Cook Islands eg it is not necessary for a copy of the trust deed to be filed with the Registrar of International Trusts.

The Register of Trusts which is administered by the Financial Supervisory Commission is not open to public inspection, where any such inspection or release of information can only be achieved with a court order and subject to the International Trusts Act 1984.

The Cook Islands is still considered the leading Asset Protection jurisdiction in the world, and can boast a long line of judicial precedent which upholds the integrity of the International Trusts Act 1984 (“ITA”).   The Cook Islands can distinguish itself as one of the few jurisdictions where US Government Authorities have failed in their attempts to upset a Cook Islands International Trust.

Exemption from Taxation

An international trust has no taxation liability in theCook Islandsand no requirement to file any returns, reports, or records.

Modification of Common Law Rules

The ITA alters the common law rules relating to:

• the rule against accumulations

• the rule against perpetuities, removing the perpetuity period.

• the rule against double possibilities

• the rules restricting the extent of charitable purposes

• the rules against purpose trusts

Revocation

The trust can provide for an express power of revocation otherwise it will be deemed to be irrevocable.

Retention of Control and Benefits by Settlor

An international trust shall not be declared invalid or a disposition declared void or affected in any way if the Settlor retains or acquires:

• a power of revocation of the Trust;

• a power of disposition over Trust property;

• a power to amend the Trust Deed;

• any interest in the Trust property.

Heirship Rights

A disinherited heir cannot challenge an international trust on the basis that it interferes with his or her right to succeed to assets or property.

Spendthrift Beneficiary

An international trust can provide that an interest in property given to a beneficiary for life or a lesser period shall not be alienated or pass from the trust by bankruptcy or be taken in execution by process of law.

Bankruptcy

An international trust is not void or voidable in the event of the Settlor’s bankruptcy, notwithstanding any law of the Settlor’s domicile or place of residence and notwithstanding that the Trust is voluntary, without valuable consideration and made for the benefit of the Settlor, the Settlor’s spouse or children.

Fraud

Comprehensive rules provide when an international trust may be challenged on the grounds of fraud.

• Where a creditor proves that an international trust was settled:

-                      with the principal intent of defrauding a creditor, and

-                      the settlement rendered the Settlor insolvent or without property by which the creditor’s claim could have been satisfied;

the settlement is not void or voidable but the trust is liable to satisfy the claim of the creditor out of property, which, but for the settlement, would have been available to the creditor.

• An international trust and a disposition to a trust is not deemed to be fraudulent against a creditor of a Settlor:

-                      if the settlement or disposition takes place after the expiry of 2 years from the time the creditor’s cause of action arose;  or

-                      the creditor fails to bring his action before the expiry of 1 year from the date of such settlement or disposition;  or

-                      the settlement or disposition takes place before the creditor’s cause of action arose.

Governing Law

A term of an international trust expressly selecting the laws of theCook Islandsto govern the trust is valid, effective and conclusive regardless of any other circumstances.

Foreign Judgments

Foreign judgments are not enforceable against an international trust.  Any claimant must commence new proceedings in theCook Islands, subject toCook Islandslaw.

Exclusion of Foreign Law

An international trust governed by the laws of theCook Islandsor disposition of property held by the trust will not be void, voidable, liable to be set aside or defective by reason that the laws of any foreign jurisdiction prohibit or do not recognise the concept of a trust, or that the laws of theCook Islandsare inconsistent with any foreign law.

Commencement of Proceedings

Any proceedings to be commenced in the High Court of theCook Islandsto set aside the settlement of any international trust or disposition to such trust must be brought within 2 years of the settlement of disposition.

Statutory Rights of Delegation

A trustee has a statutory right to delegate its powers and functions, such as management of trust property, including investment management, and to employ professionals to act in relation to the affairs of the trust.

Custodian and Advisory Trustees

A Custodian trustee may be appointed to hold trust property and an Advisory trustee to advise the trustee in relation to the trust property.

Guarantee against Expropriation

TheCook Islandsgovernment guarantees that there will be no compulsory acquisition or expropriation of trust property except in accordance with due process of law.

For more information on Cook Islands Trusts please contact me:

Recently I was approached by a prospective client looking to reduce additional (prohibitive) expenses over and above wages that usually apply “onshore” when one hires workers.

Via strategic deployment of an Offshore Corporate Structure there is the potential to save money here and in two ways.

What you could do here if you are/were in such a position is:

1. Incorporate a tax free Offshore Company (“IBC “ie International Business Company)
2. You/your firm would secretly be the owners of the IBC
3. You/we would set up a bank account and an email address for the IBC Offshore
4. You would have the user name/passwords for the IBC’s bank account and email account (and would have 100% control of both)
5. Your workers/contractors would invoice and or get paid by the IBC
6. The IBC would invoice your local/onshore business each pay period for the cost of providing/managing your labour force.

You would probably want to characterize the IBC as a Labour Hire Company. For more information on what a Labour Hire Company is and how it can save you money check here: https://en.wikipedia.org/wiki/Labour_hire

If you set this up (a) you should be able to avoid having to pay high taxes, worker’s compensation insurance, superannuation, and social security contributions etc above payroll for your workers and (b) you should be able to avoid having to pay an independent firm a commission for invoicing.

Local laws can have an impact. Hence it would be wise to seek local legal, tax and financial advice before committing to create such a vehicle.

Irish Companies investing in research and development will be able to avail of a new 6.25 per cent corporation tax rate under a new “knowledge development box” (KDB) announced in the Irish budget on October 12. 

Such an announcement could herald a boon for persons looking for low tax Offshore IP Company options – Ireland’s Minister for Finance Michael Noonan is boasting that said the KDB will be the first such measure in the world that is compliant with the new recommendations of the OECD (Organisation for Economic Co-operation and Development). 

“This puts Ireland in a unique position to offer long-term certainty to innovative industries planning their research and development investments,” he said. 

Mr Noonan said fostering innovation would be critical to Ireland’s new economic model and the KDB was designed to incentivise this. 

Income that qualifies for the KDB will be subject to a reduced rate of corporation tax of 6.25 per cent. Ireland’s corporation tax rate is 12.5 per cent. 

The KDB adds a further dimension to our ‘best in class’ competitive corporation tax offering, which includes the 12.5 per cent headline rate; the R&D tax credit; and the intangible asset regime, Mr Noonan said. 

Joe Bollard, a tax partner with global “Big 4” Accounting Firm Ernst & Young, said the report on redrafting the global tax regime, released recently by the OECD as part of its Base Erosion and Profit-Shifting (BEPS) programme, had changed what Ireland had been intending to do with its knowledge box. 

New recommendations as part of BEPS are behind a move from the ownership of an IP asset, to the expenditure of money on research. Activity in relation to scientific and technical work, as against brand development, is also being targeted under the new regimes. 

The new Irish knowledge box, he said, is not likely in itself to “turn the dial” in relation to attracting new talent to Ireland so that companies can avail of the lower tax rate. He said Ireland’s relatively high income tax rate was an issue in this regard. 

What remains to be seen however is what income will attract the 6.5% tax regime. Early indications are that to qualify for the 6.5% rate the innovation/IP in question will need to have been developed in Ireland. If not (and or if the IP/Technology is on paper seen to have been incubated in Ireland) then an Irish Company could be formed to hold any form of IP (regardless of where it was developed) in which case nett income received by way of royalties/license fees would be taxed at just 6.25%.

For clients looking for a transparent controversial low tax “Offshore” IP Company solution such an offering could prove extremely popular.

Watch this space for developments!

A Purpose Trust is a particular type of trust which, unlike a conventional trust, can be formed to hold assets for a purpose without conferring a benefit on any specific person. An example of such a purpose is to hold shares in a company.

Purpose Trusts are currently used, among other things, in conjunction with asset financing transactions and securitisations.

They are also used to hold the shares in a Private Trust company (PTC) structure, where confidentiality and control issues are important. The advantage of using a Purpose Trust in such a scenario is that there are no registration or disclosure requirements of such trusts at law generally speaking. Therefore the ownership of the PTC will be confidential, and the shares in the PTC will be immune from an attack on the Settlor (ie the person who sets up the Trust).

A PTC is a privately owned company that acts as trustee, usually exclusively for a wealthy family trust or group of trusts. The board of the PTC can be populated with a mixture of professional advisers and a client’s family members. Often PTCs are at the heart of The Family Office. They have a number of popular advantages including:

• They provide a means by which a Settlor, or his family, can retain a greater degree of control over their trust affairs without compromising the validity of the trust(s).
• The Board of the PTC will have a heightened knowledge of the family’s business and financial affairs and be sensitive to the range of those interests, whilst also being empathetic to the needs of the beneficiaries, and having an intimate knowledge of the Settlor’s wishes. All of this should allow them to deal with sensitive family issues more freely and often with greater speed and flexibility;
• Having a PTC as trustee of family trusts will also avoid the need for future changes in the trusteeship;
• Professional trustees are often reluctant to take ownership of assets or participate in ventures where substantial risks may be present, and a PTC (due to the composition of the Board) can enable riskier investments to be included in the trust fund, (although the PTC will still have the usual trustee obligations).

Not all Trust jurisdictions enable the registration of Purpose Trusts. We can assist to register a Purpose Trust in Seychelles, Belize and the Cook Islands.

Though not as widely known a Purpose Foundation could also be used in lieu of a Purpose Trust. But more on that another time.

For more information on PTCs check my Blog Article of 25 October (scroll down to below my last published article)

Eccentric entrepreneur and privacy advocate Kim Dotcom is building his own private internet, allegedly safe from the prying eyes of surveillance authorities.

Via video link at Sydney (Australia)’s SydStart conference this week, the web mogul explained that “MegaNet” will work on a non-IP-based internet “that uses the beauty of blockchain [Bitcoin's public ledger] and new protocols to communicate and exchange data”, while still using the internet’s existing physical infrastructure.

“If you don’t have IP addresses you can’t hack the server, you can’t execute denial of service attacks on gaming services or websites,” Dotcom said from New Zealand, where he is currently awaiting the result of an extradition trial.

“Most importantly it will make it difficult for governments to invade our privacy. This entire network I’m working on is fully encrypted. It literally works from the people for the people.”

How will it work?

MegaNet will rely on people’s unused processing power on their phones and laptops, and allow them to donate bandwidth to the service.

“The more people that install the MegaNet app on their devices, the more powerful it will become,” Dotcom said.

If 100 million smartphones joined up, the network would have more online storage capacity, bandwidth and calculating power than the top 10 largest websites in the world combined, he said.

It will rely on existing physical internet infrastructure people use today – so-called “dumb pipes” – but will add a new layer of encryption running through all communications.

Dotcom claimed the encryption technology he’ll use is so powerful no super computer will be able to crack it.

In order to function, MegaNet is literally going to be using up your device’s battery power, storage capacity and web bandwidth to power its so-called private network.

If you consent, it will draw from your smartphone’s processing power and bandwidth while it’s idle – for instance, when you’re asleep – if it’s plugged in and connected to Wi-Fi.

However, Dotcom told media that default settings would use only processing power, and users would opt in to donate bandwidth.

“In the beginning you set your restrictions,” he said.

“The default is no use of bandwidth, and only storage on your phone. But if you want to, it enables us to utilise some of your bandwidth. Users are fully in control. It’s not costing them anything.”

As for the blockchain, MegaNet will borrow from Bitcoin’s lauded method of recording transactions (even the Australian Securities Exchange is considering it), but instead of users storing transaction records, they will store some of the files that make up this new “alternative private internet”. Presumably these will be encrypted too, otherwise everyone who connects to MegaNet will have some record of who is using the system and for what purpose, and that would contradict Dotcom’s pitch.

When can we get it?

The millionaire admitted that phone technology, including battery life, will need to improve before MegaNet can really take off.

“We’re looking at a 10-year plan,” he said.

“Over the next decade, current smartphones are going to be replaced by phones 10 times stronger and faster, with massively more computing power, that are as powerful as desktop computers are today.

“Battery tech in the making is going to give you 24 to 48 hours battery time with full usage. There are lots of advancements currently taking place. Today’s bottlenecks might be a challenge, but over the years, with new devices and new capacity with mobile bandwidth, there will be no limitations.”

The mogul is confident that a technology solution will keep people secure and that privacy doesn’t require new infrastructure.

“Right now they’re just my words, but I’ll prove it to you with proof when the service goes live. You watch. The security community will appraise it and validate this service.”

Dotcom expects 100 million users to sign up within the first year of launch (expected sometime in 2016).

A Private Trust Company (PTC) is a Company which is established with the sole purpose of acting as a corporate trustee to a trust or a number of connected/related trusts (eg Trusts with common Settlors or Beneficiaries).

PTCs are commonly used by High Net Worth (HNW) families as a key plank of their wealth management (and succession planning) strategy, for a number of reasons:

1. They deliver confidentiality
2. They provide a comprehensive framework under which family members can be involved in decision making (by being on the board of the PTC)
3. They can avoid the complications of succession law ie when used in conjunction with a tailored Offshore Trust or Offshore Private Foundation
4. They reduce management costs (ie there’s no need to engage or pay a Private/Outside Trustee)
5. They provide protection from fiduciary risk (ie a PTC eliminates the chance of an external Trustee turning rogue and stealing or wasting assets).

As long as certain criteria are fulfilled the PTC will not have to obtain a licence to carry out trust company business. The speed at which a PTC can be established, and the relatively low cost of operation have made PTCs extremely attractive to HNW families and their advisors.

A PTC’s sole purpose is usually to act as trustee of a trust (or group of trusts) belonging to a family or commercial group; these trusts may be family succession-oriented, commercial or philanthropic in their aims.

A PTC can be particularly useful for wealthy families who either do not wish to relinquish control to professional trustees or where the trust fund is to be invested in assets, which a professional trustee may be reluctant to deal with, such as works of art or family businesses.

For maximum confidentiality it would be preferable to register your Private Trust Company as an IBC in a privacy haven (ie somewhere which does NOT have a publicly accessible Register of Directors or Shareholders or Beneficial Owners – contact me for details of which jurisdictions meet that criteria).

A Private Trust Company is commonly deployed to act as Trustee of a Purpose Trust or as Councillor of a Purpose Foundation (ie a Trust/Foundation which is established purely for the purpose of holding a particular asset).

Given their nature and structure Purpose Trusts and Purpose Foundations (as they do not have to name specific beneficiaries) can deliver cutting edge asset protection and tax minimisation possibilities (more on that next week).

Local laws can have an impact. Hence it would be wise to seek local tax/legal/financial advice before committing to set up a PTC.

Cryptocurrency Trading is an activity which lends itself well to Offshore Corporate Structuring.

To summarise how it would work (assuming you intend to trade your own money or borrowed money) is:

• You set up a zero tax International Business Company
• The IBC opens an account with the Cryptocurrency Exchange/s
• You are appointed as the IBC’s authorised trader (ie you place the buy and sell orders on behalf of the company)
• For all intents and purposes the IBCs trading profits are generated in a nil tax environment tax free/offshore (ie provided the IBC is structured properly)
• When you need some living/spending money the IBC pays you a wage, or consulting fees or a commission (eg a percentage of trading profits generated – see below)
• That living/spending money can be paid to your local bank account (which means it would be assessable income wherever you are tax resident though you should also be able to claim a sizeable amount of allowable deductions eg for home office, car, equipment, insurances, travel, stationary etc etc to reduce the amount of your “taxable” income at home)
• If you don’t want the authorities to know how much money you are earning by way of wages you could use an anonymous ATM or Debit/VISA card to withdraw your wages from an Auto Tele Machine (see below fmi)
• The majority of trading profits could be reinvested Offshore potentially tax free.

Other Ways To Utilize Monies Earned Offshore

There are 5 ways to bring home money from an IBC:

(a)   Set yourself up as an arms’ length consultant and have the IBC pay you consulting fees periodically. This means you should only have to pay tax on what you bring into your home country (and even that tax you should be able to minimise as a lot of what otherwise-might-be personal expenses could be written off as business costs, eg home office, utilities, car, phone, electrical/office equipment, stationery, computers travel etc etc etc). The rest of the IBC’s income can remain offshore and be (re)invested offshore potentially tax free. Say your target capital base is 3 million Euro and every year you leave at least half the IBC’s income offshore. Because you’re not paying tax yearly on all the IBCs income instead of taking 20 years to accumulate 3 million Euro, with the power of compounding, you could accumulate 3 million within 5 to 7 years. This is what my/our smarter clients do ie they pay a little bit of tax at home each year on their overseas earnings but most of their income is kept offshore and reinvested offshore.

(b)   Bring back the money as a loan. Yes this can be done but great attention to detail will be required particularly with respect to lending parties, loan terms and documentation.

(c)    Use an anonymous debit card and withdraw cash from automated teller machines. This can still work in some places though it should be noted that some of the bigger countries now have the ability to trace and connect one to such withdrawals.

(d)   Have your IBC form and fund a subsidiary ie 2^nd tax free Offshore Company and then have that 2^nd Offshore Company buy any substantial assets you’d like to have onshore (eg cars, real estate, shares, general investments etc). Yes in theory you could have your IBC buy these things but, given most likely there will be a Consultancy Agreement in place between you and the IBC (and payments going from the IBC to you which will be visible to your local tax authorities) the smarter thing to do would be to have a 2^nd (seemingly unrelated) IBC buy these items for you.

(e)   Another option is to take the long hold view. What this entails is letting your capital base build over a period of years; Then, when you get to the stage where you are ready to close down your Offshore business, (or you are ready to retire) you can do one of two things: Either:

(i)     Expatriate your home country and become “non-resident for tax purposes”, shift to a country which has no income tax and/or CGT (eg Panama, Seychelles, Monaco, etc etc etc) and draw down the capital from your offshore entity (and bank the money tax free); or

(ii)   Expatriate your home country, become “non-resident for tax purposes”, and become a PT ie a Perpetual Traveller. How this can work is you spend say 4-5 months a years in one country, 4-5 months a year in another country and the rest of your time travelling. This way, assuming you are not seen to have substantial ties with any one country, you should not be considered as tax resident in any one country. Then you simply draw down the capital from your offshore entity (and bank the money tax free).

Note, provided you have successfully become a non-resident for tax purposes of your home country, there’s nothing stopping you from changing your mind a year or 2 later about the expat life and returning to your home country with a bunch of tax free dollars in your back pocket. 

Note unless you (have expatriated or) live in a country that does not have CFC laws (and/or unless or are structured in a tax effective/compliant manner) you may still be required to declare and pay tax at home on your IBC’s earnings.

Particularly given all such services can be provided online Translation Service Businesses lend themselves well to “Offshore Corporate Structuring.

Here is how such a business could work from an Offshore Perspective:

1. You would set up a nil tax Offshore Company
2. The nil tax company would sign contracts to supply Translation Services and/or receive orders/service requests via email/online
3. The Company would be set up in such a way so that’s it’s seen to be (a) managed/controlled from, and (b) supplying services from, Offshore
4. The Company would appoint you as an authorised representative of the Company (ie empowering you to negotiate such contracts and to bid for such contracts on behalf of the Company).
5. Once the contract has been signed the Company would subcontract the work to you
6. You would be paid a profit share (eg a third of the work you invoice – which is a common practice in professional firms) or a minimal hourly rate.

As part of your brief you might also be given signing power on a bank account reporting/answerable to the Director. However that relationship is structured for legal reasons, it would need to be seen to be commercially realistic. The income you generate from this would be paid to you (or your local company which, I imagine, would then pay a dividend to you) which would be assessable income at home for you.

The remainder of the profit could be held (and/or reinvested) offshore potentially tax free. (See below How to Bring Offshore Money Onshore for more details).

How To Bring Offshore Money Onshore

There are 5 ways to bring home money from a tax-free IBC:

1. Set yourself up as an arms’ length consultant and have the IBC pay you consulting fees periodically. This means you should only have to pay tax on what you bring into your home country (and even that tax you should be able to minimise as a lot of what otherwise-might-be personal expenses could be written off as business costs, eg home office, utilities, car, phone, electrical/office equipment, stationery, computers travel etc etc etc). The rest of the IBC’s income could be held offshore and be (re)invested offshore potentially tax free. Say your target capital base is 3 million Euro and every year you leave at least half the IBC’s income offshore. Because you’re not paying tax yearly on all the IBCs income instead of taking 20 years to accumulate 3 million Euro, with the power of compounding, you could accumulate 3 million within 5 to 7 years. This is what the smarter clients do ie they pay a little bit of tax at home each year on their overseas earnings but most of their income is kept offshore and reinvested offshore;
2. Bring back the money as a loan. Yes this can be done but great attention to detail will be required particularly with respect to lending parties, loan terms and documentation;
3. Use an anonymous debit card and withdraw cash from automated teller machines. This can still work in some places though it should be noted that some of the bigger countries now have the ability to trace and connect one to such withdrawals;
4. Have your IBC form and fund a subsidiary ie 2^nd tax free Offshore Company and then have that 2^nd Offshore Company buy any substantial assets you’d like to have onshore (eg cars, real estate, shares, general investments etc). Yes in theory you could have your IBC buy these things but, given most likely there will be a Consultancy Agreement in place between you and the IBC (and payments going from the IBC to you which will be visible to your local tax authorities) the smarter thing to do would be to have a 2^nd (seemingly unrelated) IBC buy these items for you;
5. Another option is to take the long hold view. What this entails is letting your capital base build over a period of years; Then, when you get to the stage where you are ready to close down your Offshore business, (or you are ready to retire) you can do one of two things, either:

(a)   Expatriate your home country and become “non-resident for tax purposes”, shift to a country which has no income tax and/or CGT (eg Panama, Seychelles, Monaco, etc etc etc) and draw down the capital from your offshore entity (and bank the money tax free); or

(b)   Expatriate your home country, become “non-resident for tax purposes”, and become a PT ie a Perpetual Traveller. How this can work is you spend say 4-5 months a years in one country, 4-5 months a year in another country and the rest of your time travelling. This way, assuming you are not seen to have substantial ties with any one country, you should not be considered as tax resident in any one country. Then you simply draw down the capital from your offshore entity (and bank the money tax free).

Note: provided you have successfully become a non-resident for tax purposes of your home country, there’s nothing stopping you from changing your mind a year or 2 later about the expat life and returning to your home country with a bunch of tax free dollars in your back pocket.

Note also unless you (have expatriated or) live in a country that does not have CFC laws (and/or unless or are structured in a tax effective/compliant manner) you may still be required to declare and pay tax at home on your IBC’s earnings.

Local laws can have an impact. Hence it would be wise to seek local tax/legal/financial advice before committing to embark on such an endeavour.

U.S. authorities are reportedly targeting a Belize-based bank in a brazen bid to try and extract names of US citizens with accounts at the Bank.

A federal court in Miami on Wednesday approved a special “John Doe” legal summonses seeking information about U.S. taxpayers who may hold undeclared accounts at Belize Bank International Limited (“BOBI”)

The court order gave federal investigators authorization to seek records of so-called correspondent accounts maintained by BOBI at Bank of America and Citibank. The US IRS is hoping to extract information from those records, (“Correspondent” accounts enable foreign banks without a U.S. presence to handle transactions in U.S. dollars), to help the IRS identify U.S. taxpayers who hold or held accounts at or with BOBI.

Given the nature of a “Correspondent” Bank Account – where the account is held in the name of a Bank and not an individual – the manoeuvre smacks of desperation of the highest order. Why? (a) Because most people bank Offshore in the name of a Company and (b) Even if the correspondent bank hands over details of the BOBI’s account held at the correspondent bank it will not reveal the names of the beneficial owners of the account (eg if the account is held in the name of a Company); the only information on file at the correspondent Bank will be the name of the BOBI account holder (which in 99% of cases will be a Privacy Haven Tax Free Offshore Company).

Moreover such a move is a disincentive to persons and businesses the world over (not just Americans banking offshore) to transact in USD. Like bycatch in an illegal whale hunt the manoeuvre risks the name of non US persons with accounts at BOBI being revealed to the US Courts. Doubtless smart investors will become aware of this and will start transacting in stable non USD currencies.

The court action marks federal investigators’ latest use of the special summonses to try and compel account disclosures by offshore banks suspected of helping American clients evade U.S. taxes. The IRS previously used the tactic to pursue account data from banks elsewhere around the world, including Switzerland’s Zurcher Kantonalbank, Bermuda-based N.T. Butterfield & Son and Swiss banking giant UBS.

This case however seeks to push the envelope in that each of the aforesaid banks either had Banking licenses in or a physical presence in the US such as might afford the US courts some, albeit tenuous, jurisdiction.

Moreover the case smacks of desperation in that it is the first time that the US IRS has attempted to extract bank account holder information from a bank with zero US presence.

It will be interesting to see how BOBI responds. If I were their Lawyer I would either ignore the order or appeal the decision . It’s hard to see how the US Courts can legitimately claim that they have jurisdiction…

Two things that can be said for sure and certain are:

(a) That US residents (and non US Residents) banking Offshore will soon begin to abandon the USD in favour of other currencies; and

(b) More and more Americans will be looking to set up Private Offshore Foundations as a way of shifting “legal and beneficial ownership of their Offshore Companies/Bank Accounts away from any US person/s.

(Even if only as a hedge bet) if I were an American banking Offshore I would (if I could) only be transacting in currencies other than the USD.