With the US having recently taken steps to restrict the ability of its citizens to trade forex we have noticed more and more US residents looking to incorporate Offshore.
If you fall into that category you may be interested to know that a combination of a tax free Offshore Company and a tax free Offshore Foundation can gift you the ability to trade more freely.
In terms of how that can work structurally and practically:
• The shares of the Company would be held by the Foundation; and
• The beneficiaries of the Foundation would be whoever you nominate.
And if you choose a Seychelles Foundation when the bank or brokers asks who is the beneficial owner of the company/account you can lawfully answer “the Foundation” as section 71 of the Seychelles Foundation Law clearly states that the legal AND beneficial owner of any asset transferred to a Seychelles Foundation is the Foundation itself. That can get you access to brokerages/trading platforms that won’t accept US residents as customers.
How does it work from a practical perspective?
In terms of structure the Offshore Company would be set up with a Nominee Director and with the Private Foundation as shareholder. Commercially, the company would do the buying and selling, ie it would generate the income. Ideally, you would be appointed as Consultant or as an arms’ length adviser to the Director of the Company with certain areas of responsibility (eg you could be an authorized Trader or Trading Manager) for which you would be paid a commission (eg a percentage of profits) or Consulting fees.
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 i.e. US company which, I imagine, would then pay a dividend to you, which would be assessable income at home for you.
And as a Foundation arguably is not caught by Controlled Foreign Corporation (or Controlled Foreign Trust) Rules the remainder of the profit could be held (and/or reinvested) offshore potentially tax free. (Though that’s something you should speak to your tax adviser about).
What is clear however is that a combination of a Tax Haven Company and an Offshore Foundation can gift you more freedom to trade (and give you a wider choice of brokers).