Why Offshore?

There was a time when offshore corporations, trusts and foundations were the tools of the rich and famous. Not so today. Modern technology has enabled individuals to implement these strategies quickly and relatively inexpensively.

In the modern age of Big Brother, offshore jurisdictions and structures can provide one with a high degree of privacy, confidentiality. But these same jurisdictions and structures offer unparalleled opportunities for protection of one's assets and estate-planning strategies. That being the case, we have explored these benefits, in some measure, below.

The Word

If you are not familiar with the offshore world, there is much more here than meets the eye. But before we dive in, we should ensure that there is an understanding of the word "offshore". It simply means "off your shores" - another country or jurisdiction. For example, the Caribbean is "offshore" for those in the continental United States, while the United States is "offshore" for investors in many other countries. Few know that the IRS provides tax breaks for foreign investors here which they do not provide for our own citizens.

History

People have been removing their assets and business affairs from the prying eyes of greedy and oppressive governments for thousands of years. The Island of Delos off the Greek coast served this purpose for the Bill Gateses of their day before the time of Christ. As long as there are governments who covet the income and assets of their citizens beyond tolerance, there will be what have come to be called "Offshore Tax Havens".

Almost all jurisdictions that create "tax haven" environments offer complete privacy, virtually impenetrable protection of one's assets, and very favorable tax treatments. These factors will be covered below, but an important point is in order here and I do not provide the following disclaimer with a knowing wink and sly smile. It comes from the knowledge borne of years of business, financial and investment experience:

Every person's affairs are different. Laws are different from country to country. You should always consult your own personal financial, accounting, tax and legal professionals.

In the United States, tax evasion is a crime. Don't do it. And if you are seeking a provider to help you evade the tax laws of your country (the U.S. or otherwise), we are not in that business (and encourage you not to be in it either). There are plenty of legal structures and strategies and we are here to help provide those services to ethical clients who are seeking confidentiality and protection of their assets.

At the same time, be aware that you may need to expand the horizons of your professional advisors regarding what is available offshore. Unfortunately, I have found that most U.S. lawyers and CPAs do not have a solid understanding of the offshore world, and often dismiss it out of hand for lack of knowledge.

Obviously, that won't help you. On the other hand, this article's primary purpose is not to enlighten readers on offshore tax strategies. There are countless books and articles that examine this topic in minute detail. And while there are some legitimate circumstances that provide offshore tax advantages for US citizens, the United States is one of the few countries in the world that taxes its citizens on their worldwide income. So, if you are a US citizen, look closely at your circumstances with an ethical and knowledgeable professional before moving your affairs offshore if your sole purpose is that of income tax reduction. Keep it legal, you'll sleep better.

While citizens of almost all other non-US countries can gain from all three offshore advantages: - privacy, asset protection, and tax savings -, virtually anyone can benefit from the first two: - privacy /confidentiality and the shielding of one's assets. And as will become clear, these are not insignificant benefits, especially in today's world.

Offshore Statistics

Your good friends at the Internal Revenue Service and taxing agencies of all nations would have you believe that moving your money and business affairs offshore is only marginally less vile than being a pedophile. Tax havens, they would have you believe, cater only to drug dealers, gun runners, and money launderers.

There is no question that certain criminal elements take advantage of the privacy and tax advantages offered by offshore financial centers. However, that does not make them illegal any more than it makes a domestic corporation illegal because gangsters have used corporations here in the U.S. to conduct illegal business. The point is, government agencies push this fact on PR lines in an effort to discourage the honest and legitimate use of these offshore structures.

Indeed a recent (January 16, 2009) article at Earthlink revealed that 83 percent of the nation's 100 largest corporations, including Citigroup, Bank of America, New Corp, General Motors, and countless others, had subsidiaries in offshore tax havens in 2007.

In fact, many of the world's most prestigious banks, CPA and law firms proudly have offshore operations. For example, Nassau, capital of the Bahamas, is home to 400 banks from 36 countries. By comparison, there are 154 banks licensed to operate in New York, the world's acknowledged financial center. The Cayman Islands now boast 530 commercial banks with $410 billion in deposits, which exceeds the entire deposit base of all of California's 450 banks.

According to one estimate, approximately one half of the world's daily financial transactions (about $2 trillion) pass through off shore accounts. Not chickenfeed. And obviously not the sole province of bandits and brigands.

There are more than 150,000 offshore corporations are formed every year, if members of the Medellin Drug Cartel have established all of the one million or so existing offshore entities, we've got other problems. The simple truth is that it is perfectly legal to establish offshore bank accounts, corporations, trusts and other vehicles to help you handle your affairs in a confidential, secure manner. As long as you use them for lawful purposes and comply with the reporting and other regulations that your particular country mandates for such entities, they have the potential to provide some truly excellent benefits.

"'The offshore financial market has many advantages for rational economic operations. The reasonable expectation, when one learns that an entity is engaged offshore, is that it is there for honest economic reasons, buttressed by whatever advantages privacy holds. The major categories for offshore use are to profit from higher interest rates when lending, to enjoy lower interest rates when borrowing, to escape taxation, to enjoy greater business flexibility by avoiding regulation in an efficient market, to enjoy the protection of confidentiality when engaged in activities....'"
U.S. Congress Staff Report

So, where does one go and what provider should one use?

The Solution

After hundreds of hours of investigation and interviews, thousands of miles of international travel, we have found Panama to have the most investor friendly legislation and the most confidential and strongest legal structures in the world.