asset protection trust
Christian Reeves

Maximum Security with a Cook Islands Asset Protection Trust

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The Cook Islands asset protection trust is the Fort Knox of asset protection. An offshore trust from the Cook Islands is the ultimate in personal privacy and protection – often imitated but never duplicated. If you want to build an impregnable fortress offshore, you want a Cook Island asset protection trust.

The Cook Islands asset protection trust is the best available because it works. Every time a well designed Cook Islands trust has been tested in court by a civil creditor, it has protected our clients assets.

Note that I said civil creditors. The Cook Island trust is not intended to keep out the US government. If you’re a US citizen, you must report your offshore trust and offshore bank account to the IRS. Also, you must usually pay taxes on the gains within the trust.

Another reason a Cook Islands trust is the best available is because it’s flexible. You, the settlor, can manage the assets of the trust until a “bad thing” happens. If you come under attack by a creditor, you will turn over this responsibility to your offshore trustee.

When you come under duress, your licensed, bonded and insured trustee in the Cook Islands will step in and assume the management of your trust. They will captain the ship until you have dispatched your foe in the courts. If you need cash, the trustee will send it to you. If you want to buy a property overseas or invest in gold, your trustee can facilitate that on your behalf.

This is why the Cook Islands asset protection trust is the best of both worlds – you have 100% control of the assets unless and until you come under attack. If that occurs, a trusted and professional trustee steps in to your shoes and manages the trust per your prior instructions.

Note that this max protect offshore trust is meant to secure your assets from future civil creditors. If someone sues you after you funded your offshore trust, there is nothing he or she can do to reach your assets. If they sue you before you fund your trust, they can probably knock down your walls and breach the castle.

The Cook Islands is located due south, near Australia and New Zealand in the same time zone as Hawaii. The trustees and other professionals, with whom we’ve worked for over 10 years, are lawyers, CPAs and other licensed professionals from New Zealand.

With the Cook Islands, you’ll be working with top veteran attorneys from reputable jurisdictions. These are high level professionals and not the typical paper pushers you meet in the banana republics around the Caribbean.

Another benefit of the Cook Islands is that, should a creditor bring suit against the trust, they’ll need to do it in New Zealand. Legal cases are heard in New Zealand courts who apply Cook Islands law. You know that the process will be fair and that the laws will be administered properly… another feature often missing in less reputable Caribbean jurisdictions.

The next feature of the Cook Island offshore asset protection trust is “portability.” You can move the trust and its assets out of the Cook Islands at any time. That’s right, a Cook Islands Trust can be moved to another jurisdiction if you come under attack.

Let’s say a creditor has won their case in US and is attempting to enforce their judgement in Cook Island. Assuming the statute of limitations hasn’t run out, and it appears the creditor is making headway, you can pick up the assets of the trust and move them to another country such as Belize or Cayman Islands. The creditor might spend many thousands of dollars bringing an action in Cook Islands to find an empty treasure trove when he finally makes it past the gates.

Remember, when the statute of limitations clock runs out, New Zealand will refuse to hear any cases against your Cook Island trust.

Beating that statute of limitations is a very difficult thing to do for a civil creditor, especially one from the United States. Thus, it’s rare for a creditor to even get the right to have their case against a Cook Islands offshore asset protection trust heard.

This is because the Cooks Islands statute of limitations is one year from the date the trust is funded or two years from the cause of action (the date the harm occurred).

Because US litigation usually takes years, by the time the case is complete in the US, and the creditor has a civil judgment they want to enforce in Cook Islands, the clock has run out. That is to say, by the time the creditor gets a judgement in the US, they will be barred by the statute of limitations in the Cook Islands from collecting on that judgement.

Of course, we hope you never need to use your Cook Island asset protection trust. Maybe trouble never finds you and your structure sits unused as an insurance policy. Maybe creditors decide not to sue because your assets are out of their reach. Often the case is never brought because the US lawyer refuses to take the case on contingency because the probability of collection is low.

If you do need your asset protection trust, and it’s within the 1 or 2 year window, the Cook Island law is still there to support you. The only way the creditor can enforce a judgement against you in Cook Islands is to prove beyond a reasonable doubt (a very high legal standard) that the sole reason you setup the offshore trust was to transfer assets away from that particular creditor.

Of course, there are many reasons to set up an offshore asset protection trust. For example, to facilitate your international investments, international estate planning, general protection (not related to one particular creditor), etc. Each of these reasons should be documented during the formation phase to support your use of a Cook Island trust.

So long as the trust is used to protect against future civil creditors, and not the US government, your offshore structure will provide an impenetrable barrier through which no creditor may pass.

I hope you have found this post on offshore asset protection trusts in the Cook Islands helpful. Please contact me at info@premieroffshore.com or call (619) 483-1708 for a confidential consultation.

resident of puerto rico
Christian Reeves

Who is a Resident of Puerto Rico for US Tax Purposes

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If you are considering moving you and a business to Puerto Rico for the tax benefits, be aware that the definition of “resident of Puerto Rico” is a complex one.  The US IRS has created special forms and definitions as to who is and who is not a resident of Puerto Rico for US tax purposes.

If you’re reading this and saying to yourself, “what tax benefits is he talking about?” Let me begin by outlining them here.

First, you can move a business, or part of a business, from the United States to the US territory of Puerto Rico. So long as that business employees at least 5 residents of Puerto Rico, it will pay only 4% in corporate income tax. For more on how to get this 4% rate on Puerto Rico sourced income guaranteed for 20 years, see: Blood in the Streets Offshore Tax Planning.

Second, you can move yourself out of the United States and into Puerto Rico. By doing this you will be exempt from US and Puerto Rico tax on capital gains. You will also pay zero tax on dividends from your Puerto Rico corporation. This zero percent tax rate on capital gains applies to assets acquired after you move to Puerto Rico. For more, please read my article titled How to Maximize the Tax Benefits of Puerto Rico.

Puerto Rico is the only country or territory that can cut your capital gains and dividends tax. When you move offshore, you still pay US tax on capital gains and dividends. The only tax savings for expat Americans is the Foreign Tax Credit. For more on this see: Puerto Rico Tax Deal vs Foreign Earned Income Exclusion.

Third, foreign persons can immigrate to the United States by starting businesses in Puerto Rico and get these same tax benefits. Both the EB-5 business investor visa and the E-2 treaty investor visa are available from Puerto Rico. For more, see: Coming to America Tax Free with the EB-5 Visa and Puerto Rico.

Now that you’re caught up, let’s talk about who is a resident of Puerto Rico for US tax purposes.

IRS Publications 1321 and 570 define a resident of Puerto Rico as someone who:

  1. Meets the presence test by spending at least 183 days a year in Puerto Rico or qualifying under one of the other tests,
  2. Does not have a tax home outside of Puerto Rico, and
  3. Does not have a closer connection to the United States or to a foreign country than to Puerto Rico.

The first of these criteria for being considered a resident of Puerto Rico for US tax purposes is known as the physical presence test. The easiest way to satisfy this test by spending at least 183 days a calendar year on the island.

If you can’t hit 183 days (for example, you are starting your residency in November), then you need to qualify for Puerto Rico residency using the 3 year test. You are a tax resident of Puerto Rico if you spend a minimum of 60 days in Puerto Rico during each tax year and at least 549 days over 3 consecutive years.

Once you establish residency in Puerto Rico, and break ties with the United States, there are other tests you can use to ensure you are classified as a tax resident of Puerto Rico in future years.  

You can qualify as a resident of Puerto Rico if any of the following is true:

  1. You were present in the United States for no more than 90 days during the tax year.
  2. You had earned income in the United States of less than $3,000 and spent more days in Puerto Rico than you did in the United States during the tax year.
    1. Earned income is pay for personal services performed such as wages, salaries, or professional Fees. This amount does not include capital gains.
  3. You had no significant connection to the United States during the tax year.

Important Note: If you are moving to Puerto Rico from the United States, you must first qualify under the 183 day test or the 3 year test described above. Then, once residency is established, you can use these less restrictive tests.

Foreign Persons: If you are not a US resident or citizen, and are applying for an E-2 or EB-5 visa from Puerto Rico, you can use any of these tests to prove you are a tax resident of Puerto Rico. For example, so long as you are in the US less than 90 days of the year, it doesn’t matter how much time you spend in Puerto Rico.

The key to the Puerto Rico tax deal is to understand who is a tax resident of Puerto Rico. To determine who is a resident of Puerto Rico, we must consider what it means to be “present” in Puerto Rico and the United States.

You are considered to be present in the United States on any day that you are physically
in the US at any time during the day. So, if you make a quick trip to Miami to buy a new laptop, that is a day in the United States.

Connecting through a United States airport to a foreign country is usually not a day in the US. If you don’t leave the airport, you are not in the United States. If your flight is delayed, and you are in the airport for more than 24 hours, it will be counted as a day in America.

And, beginning this year (with tax year 2016), some days spent in a foreign country will be considered days in Puerto Rico for tax purposes. Under this new rule, you can count up to 30 days abroad as days in Puerto Rico. For more information, see IRS publication 570, page 4. Note that this 30 day bonus does not count for the 60 day rule when you are using the 3 year calculation described above.

You must also have more connections to Puerto Rico than the United States to qualify as a tax resident of Puerto Rico.You will be considered to have a closer connection to Puerto Rico than the United States if you have developed more contacts with the Puerto Rico and broken your ties to America.

The facts and circumstances around your move to Puerto Rico will be reviewed carefully if you’re spending a lot of time in the US, your wife and children are living in the US, etc. If you have significant tax free income in Puerto Rico, you should consider your US connections carefully. I expect audits on this issue to increase significantly in the coming years.

Ties to the US vs Puerto Rico for residency purposes include, but are not limited to:

  • Where is your permanent residence – note that Puerto Rico’s Act 22 requires you to buy a home on the island and that this must become your permanent home.
  • Where your spouse and children are living.
    • Note that US states will also try to tax your Puerto Rico income if your spouse is living outside of Puerto Rico. For example, if your wife is living in California, that state will consider half of your income CA source income to him or her under its community property rules.
  • The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family.
  • The social, political, cultural, professional, or religious organizations that you belong. You should be cutting relationships with the US and joining clubs in Puerto Rico.
  • Where most of your banking activities take place. I suggest banking for a Puerto Rico company should be in Puerto Rico or offshore. We can open accounts in Switzerland elsewhere for Puerto Rico companies.
  • Where you have a driver’s license and where you vote. Both of these should be in Puerto Rico.
  • The location of charitable organizations to which you contribute.
  • Where you list as your residency in official government and legal documents. For example, the address you list on contracts, loan applications, and government documents such as Form W­8BEN or Form W­9, Request for Taxpayer Identification Number and Certification.

In an audit, your connections to Puerto Rico will be compared to your connections with the United States and foreign countries. They will also review your bank statements, airline history, and credit / debit cards to determine how many days you spent in the United States vs Puerto Rico.

When structured carefully, incorporating and operating from Puerto Rico will cut your US tax rate from 40% to 4% overnight and eliminate tax on capital gains for assets purchased after you move to the island. The key to this tax plan is proving you are a resident of Puerto Rico. Remember that the burden of proof is on you.

EDITORS NOTE: On July 11, 2017, the government of Puerto Rico did away with the requirement to hire 5 employees to qualify for Act 20. You can now set up an Act 20 company with only 1 employee (you, the business owner). For more information, see: Puerto Rico Eliminates 5 Employee Requirement

I hope you have found this article on who is a resident of Puerto Rico for US tax purposes to be helpful. Please contact me at info@premieroffshore.com or call (619) 483-1708 for more information on how to qualify for the tax benefits offered by Puerto Rico.

Take Your IRA Offshore
Christian Reeves

Take Your IRA Offshore Before it’s too Late

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If you want to diversify your IRA offshore or out of the US dollar, time is running out. From what I hear, Obama is looking to renew his push for myRA and forcing even more Americans to invest their IRAs in treasuries.

If you’ve forgotten the Obama myRA, here’s the new site they rolled out. The Obama retirement account plan is all about “helping” Americans save more and save more securely.

myRA is founded on two principles: 1) we sheep are incapable of selecting our own investments, and 2) we should be forced to invest in the most secure investment available – US treasuries. Fortunately, the government is here to watch over us.

The myRA program is for young Americans who don’t have a company sponsored plan. It will indoctrinate them into a government managed retirement account and is the test case for a nationalized retirement account system. Once they work out the bugs in the system, myRA will be rolled out to employer sponsored plans.

Most expect the process to go as follows:

  1. myRA program acceptance,
  2. Employer plans requiring an ever increasing percentage of treasuries,
  3. Eventually the majority of retirement accounts are in US government securities, and
  4. Prohibiting the placement of retirement account assets in “unsafe” investments like stocks, bonds, real estate, etc.

Somewhere in between steps 1 and 2 above, the government will prohibit the movement of retirement assets offshore. The program will begin with a media blitz on how risky foreign investments are for America’s seniors and will focus on 1 or 2 pensioners lost their shirts offshore.

Then the government will step in to protect us from ourselves by preventing the formation of LLCs owned by retirement accounts. The coupe de gras on offshore IRAs will come as a prohibition of the transfers of retirement money and assets out of the United States.

Note that nowhere in this series of events is the forced repatriation of existing retirement accounts. That’s because I, and most others who study this situation, believe those who are offshore now will be grandfathered in. We have a few reasons for this belief:

First, vast quantities of generational wealth are stored in offshore IRA LLCs. America’s wealthiest families are fine with a program that protects us sheep, but not when it impacts them.

The most well documented of these accounts was back in the 2012 presidential election. Offshore IRA LLCs were in the press that year because Mitt Romney held his IRA investments abroad. Click here for a 2012 article from the Wall Street Journal.

Second, these offshore structures have specific tax usages / benefits for offshore IRAs. Forcing existing IRA LLCs back to the USA  would cause havoc with the Unrelated Business Income Tax section of the US code. I won’t bore you with the details, but suffice it to say, this would force hundreds of millions of active investments to be unwound.

If you want to read on how to use an offshore IRA LLC structure to minimize Unrelated Business Income Tax from leverage, here are two thrilling articles on this topic:

Third, many offshore IRA LLCs are invested in real estate and other assets which can’t be seized or easily liquidated to comply with a demand to repatriate. Attempting to bring back offshore IRAs would create an administrative and media nightmare that the government is likely to look to avoid.

For these reasons, I expect existing offshore IRA LLCs to be granted an exception to the new legislation. You might not be able to add to them, but whatever is offshore when the hammer comes down will be allowed to remain there.

Note that this opinion is not based on politics, but on experience backed by research. It won’t matter who our next president is, the demands of our deficit and our currency bubble must be served. The easiest way to shore up the damn is to force retirement accounts to invest in US treasuries and begin again with the unfettered printing of money.

If Obama doesn’t nationalize your IRA through executive order, either Trump or Hillary will be forced to keep the engine running. Expect both to expand on myRA and then require you to invest your retirement account in US Treasuries.

If you want Uncle Sam to manage your investments for you, then do nothing. If you want to take control of your retirement account and diversify out of the US, then you need to act quickly. The window of opportunity on taking your IRA offshore is closing fast.

I hope you have found this article on the future of our retirement accounts helpful… or, at least, food for thought. If you would like more information on how to take your retirement account offshore, see my Self Directed IRA page.

You can also reach me directly at info@premieroffshore.com or (619) 483-1708 to discuss moving your retirement account offshore.

residency and second passport
Christian Reeves

What’s the Difference Between Residency and a Second Passport?

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I’m asked just about every day to compare Panama residency with a second passport program from somewhere in the world.  The caller usually has $200,000 to $500,000 to spend or invest and wants to know whether they should go for residency or a second passport. Here’s what you need to know about residency and second passport.

As for residency, I suggest Panama is the best available. If you’re from a “friendly nation,” then you can get residency for about $8,750, or even for free. If you’re not blessed with a good passport, then you need to deposit $300,000 into a Panama bank account and pay about $30,000 in fees.

Residency allows you to live in that country. It usually permits you to operate a business there but not be employed by someone else. There are many different visas available in Panama, in addition to the Friendly Nations visa, and some do include a work permit.

Once you’ve had residency in Panama for 5 years, you may apply for citizenship. This doesn’t mean you will get a second passport, it means only that you may apply for one. The decision to grant citizenship lies solely with the president – whomever that may be 5 years from now.

Some presidents, such as Martinelli, gave out Panama passports to anyone who made sizable donation to his campaign. On the other hand, the current president, Juan Carlos Varela, is all about fighting corruption. I don’t think he’s granted even one Panama passport in his 3 years in office.

My point here is that residency means you can live in a particular country. It does not give you a travel document nor any of the benefits of citizenship. If you want to live in Panama and/or maximize the benefits of the Foreign Earned Income Exclusion, then you need residency in Panama. If you want a low cost exit plan, consider residency from Panama.

If you want a passport, then you can wait and hope that a “friendly” president comes to power… and with a “donation” amount you can afford… or you can buy a second passport from a country that offers economic citizenship.

A second passport is a whole different level of global access above residency… and at a completely different price point.

Someone from the US can get residency in Panama for $8,750. Someone from India can get residency for $30,000 + a deposit of $300,000 in a bank in Panama. This $300,000 is not a cost. The money belongs to you and can be taken out any time.

On the other hand, the minimum price for a second passport is $150,000, and can go as high as $8 million. Most second passports are sold for $240,000 or can be acquired with an investment of $550,000 + fees of $40,000.

Economic citizenship gives you all of the rights and privileges of a citizen from whichever country you buy in to. This means the right to live, work, vote, etc. It also gives you a passport from that country.

Second passports are valued based on 1) the number of visa free travel options they include and 2) where they allow you to live and work.

For example, a second passport from St. Lucia gives you visa free travel to 125 countries, which is very good. The cost is about $240,000 for St. Lucia.

For comparison, a second passport from Malta gives you visa free travel to 168 countries, including Canada and the United States, the two countries most difficult to access. A passport from Malta will cost about $1.2 million plus legal and other fees.

A passport from Matla also allows you to live and work anywhere in the Schengen Region of the European Union. Schengen encompases 26 countries including Austria, Germany, France, etc. For a complete list, click here.

So, St. Lucia is a valuable passport because it gives you access to 125 countries, plus an exit plan, the ability to give up your US citizenship and escape the IRS, etc.

A passport from Malta is valuable for all of these reason, plus several more visa free countries and the ability to live anywhere in the European Union.

Fore more, see Top 10 Second Passports, which includes a variety of economic citizenship options at different price points.

Here’s the bottom line on residency and second passports:

If you want to live in a country like Panama, then you need residency there. If you’re an American operating a business abroad, then you need residency to maximize the value of the Foreign Earned Income Exclusion. If you want a low cost exit plan, then you can start with foreign residency.

If you want a second passport, then you need to buy a second passport. This is the only guaranteed route to acquiring economic citizenship and a quality travel document.

I hope you have found this article helpful. Please contact me at info@premieroffshore.com or call (619) 483-1708 with any questions on second passports or residency programs. If you are from a friendly nation, can even help you get Panama residency for free.

panama residency
Christian Reeves

Best Panama Residency by Investment Program

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If you want to plant a major flag offshore, think about residency in Panama. For those who qualify, the best residency in Panama is the Friendly Nations Visa . Of the 8 or 9 visa programs Panama is running at any given time, the best Panama residency program is the Friendly Nations Visa.

Here’s why you want residency in Panama and how to get it.

Why You Want a Foreign Residency

If you’re an American, you have many reasons to want a second residency. Getting that residency in a tax friendly jurisdiction such as Panama is a no brainer.

First, Panama residency will allow you to maximize the benefits of the Foreign Earned Income Exclusion. If you’re living AND working abroad, you can exclude up to $101,300 of salary from your US taxes. A husband and wife operating a business from Panama could earn $200,000+ per year tax free.

I won’t bore you with a dissertation on the FEIE, as I’ve been known to do. Suffice it to say that, if you qualify for the Exclusion using the Residency Test, you can spend 4 months a year in the US. If you don’t have residency, then you must use the Physical Presence test and be out of the US for 330 out of 365 days.

Second, Panama allows you to plant a major flag offshore. Once you have your international bank account and your offshore structure, the next flag to plant is residency. Residency in Panama demonstrates that you are an international citizen – someone who is experienced at living, working and investing abroad.

Third, Panama residency gets you access to all of the international banks in Panama. About 90% of Panamanian banks prohibit US persons unless you have a residency permit. Big banks, such as Banco General, CrediCorp, Global Bank and Scotia Bank (the Canadian Bank with offices in Panama) all restrict access to US persons with residency in Panama.

Fourth, Panama residency gives you a place to “land” should you decide to leave the United States. Maybe you’re retired and don’t care about the tax benefits (the FEIE doesn’t apply to passive income or capital gains). If you’re planning an exit strategy, foreign residency is a must.

If you are concerned with the direction of our country, finding a safe haven, then residency is one of the most important flags to plant. First is an offshore structure, then offshore bank account, and finally residency for the trifecta.

Why Panama has the Best Residency Program

Panama has the best residency program because:

  1. If you are from a friendly nation, a residency visa is very easy to get.
  2. Panama is a place you can live and work tax free (if you have a portable / internet business).
  3. Panama is a place many people would like to live. It’s one of the top business and retirement options for those seeking a higher quality and lower cost quality of life.

Considering Panama is where you want to be for lifestyle as well as business reasons, and because their residency permit is easy to get, Panama is my number one recommendation.

Let me be clear, I’m not here to analyze a bunch of jurisdictions and hedge my bets. I’m here to tell you what I think. Yes, I’m a big fan of Panama… a cheerleader if you will. Bullshite like the Panama Papers have reinvigorated that feeling.

Premier is incorporated in Panama, it’s the home base of this business, it’s where I have lived for years at a time, it’s where I travel to often these days, and Panama City one of the best places in the world to live and work. Likewise, Boquete is one of the best places to retire on a budget.

Updated List of 50 Friendly Nations for the Panama Residency Program

In order to qualify for the Friendly Nation visa, you must hold a passport from an approved country. One that is “friendly” with Panama.

Here is the current list of friendly nations for the Panama residency by investment program. This list has been updated through May 24, 2016.

If your country is listed here, you may apply for residency in Panama under the friendly nations Panama residency program.

If your country is not listed, then you may apply for residency in Panama under one of their other programs. In most cases, you will need to enter under the Person of Means visa by making a substantial investment or a deposit of $200,000+ into a local bank.

For example, if you hold a passport from India, then you do not qualify for the Friendly Nations Panama Residency visa. The only way to get a visa from a non-friendly nation is to make an investment or deposit in a local bank.

For more information on countries NOT listed below, please see: Residency in Panama from Restricted Countries

Andorra Czech Republic Israel Netherlands South Korea
Argentina Denmark Japan New Zealand Sweden
Australia Estonia Latvia Norway Switzerland
Austria Finland Liechtenstein Poland Taiwan
Belgium France Lithuania Portugal USA
Brazil Germany Luxembourg Serbia Uruguay
Canada Greece Malta Singapore United Kingdom
Chile Hong Kong Monaco Slovakia Costa Rica *
Croatia Hungry Marino Spain Mexico *
Cyprus Ireland Montenegro South Africa Paraguay *

* Most recent friendly nations visa additions.

Italy: You might notice that Italy is the only Western European country not on the list. There are other EU countries missing (such as my favorite second passport option, Bulgaria), but Italy is the only major nation not on the list. This is because Italy and Panama have an unique immigration agreement that allows Italians to move to Panama without the Friendly Nations visa.

How to Get Panama Residency for Free

The typical cost for Panama residency under the Friendly Nations Visa is $8,750 for the first applicant. As I’ve said, it’s one of the easiest and least expensive foreign residency visas to get. It’s also one of the best because it’s Panama is a great place to live, work, and do business.

Now, here’s how to get residency in Panama for free…

Option 1: You can pay a fee, form a corporation and get Panama residency for $8,750 as I said above.

Option 2: You can make an investment in an approved project in Panama and get residency. Most projects are condos or other real estate costing hundreds of thousands of dollars. That’s not what I’m talking about.

There is one and only one investment you can make with a guaranteed return. One that costs only $20,000, including residency in Panama. One that doesn’t come with any carrying costs or tax obligations.

That’s an investment in teak wood….

Teak has always been a prized material. The tree that teak comes from, Tectona grandis, is native to the tropics. Since around the 7th century, it has been used to outfit and adorn the residences of the wealthy and powerful In addition to the most beautiful furniture, Teak is used in shipbuilding. It makes for an excellent ship wood due to its ability to ward off dry rot

Since the best wood furniture made from teak comes from mature trees, it can take around 25 years before a teak tree planted today is harvested for wood.

Here’s why I recommend only one teak program and why that investment is guaranteed.

The teak wood plantation I recommend has been established for years. The trees have been in the ground for 17 year already. The trees and the quality of the teak are  verifiable and proven.

This is not one of those mango or coffee “opportunities” you read about on the web. Some deal that you invest in now and hope your crop gets planted. This is teak that’s been in the ground for many years. Teak that is verifiable and guaranteed. Teak that comes with Panama residency.

As I said above, I’m a big supporter of Panama. I believe it’s where you want to have a second residency. Where you want to plan your exit strategy. Where you want to have your home base.

Combine this with the fact that you can get your Panama residency for free through an investment in teak, and I’m all in. This is truly a unique opportunity.  

I will close by telling you that I am writing about teak in this post on residency solely because I believe in it. No one has paid me to do this and I don’t make any money if you buy teak.

In fact, the opposite is true. If you hire me to negotiate your residency in Panama for $8,750, I make money. If you buy teak and get residency for free, I make nada. That should tell you how much I believe in this program. I am writing on this residency and teak program because I believe in it. Because I want to support the Panama I love and to let my readers know what’s available.

I hope you have found this post helpful. If you would like to learn more about the Panama residency program, or how to invest in teak to get your residency visa for free, please contact me at info@premieroffshore.com. I will connect you with experts on the ground who can help.

eb-5 visa
Christian Reeves

Coming to America Tax Free with the EB-5 Visa and Puerto Rico

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If you are thinking about coming to America, get ready for high taxes on your worldwide income. In this article, I will explain how to become a US citizen using the EB-5 Visa and Puerto Rico to pay near zero US taxes.

The US taxes its citizens, as well as green card holders and residents, on 100% of the money they make from all sources around the world. If you are living in the United States, America wants her share… and that share is often over 40% of your total earnings.

If you are operating a successful business from Hong Kong, and you move to the US, all profits of that Hong Kong business become taxable. If you move to America and then sell your home in Singapore, you will pay US tax on the capital gains realized.

There is one, and only one, way to get US citizenship without paying these taxes. That is to come to America tax free with the EB-5 Visa from Puerto Rico.

Because Puerto Rico is a US territory, US Federal immigration laws apply but US tax laws do not. The tax laws of Puerto Rico supersede the US tax rules for residents of the island. Because of this hybrid legal system, you can immigrate to the United States through Puerto Rico using the EB-5 visa and qualify to live tax free under Puerto Rico’s tax laws.

  • Resident: A “resident” of Puerto Rico is someone who spends at least 183 days a year on the island. Travel between Puerto Rico and the US is a domestic flight with no immigration checkpoint.  As an EB-5 visa holder, you may spend the rest of your time (180 days a year) in any part of the US you choose.

Once the EB-5 visa process is complete, you will be a US citizen with all of the rights and privileges of someone born in the US and who pays 40%+ in taxes. You will have a US passport and the right to live and work anywhere in the country.

The same is true of children born in Puerto Rico. Anyone born in Puerto Rico is a US citizen at birth, just as they are if born in a State. The only difference between Puerto Rico and the US in this case are its tax laws.

Here is a description of the EB-5 Investor Visa, a summary Puerto Rico’s tax laws, and how to maximize the benefits of both to become a US citizen tax free.

What is the EB-5 Investor Visa

The EB-5 investor visa is a path to US citizenship. Unlike many other US immigration programs, the EB-5 visa has no waiting lists, quotas, or lottery. The terms are simple – make the investment, wait five years, and become a US citizen by going through the naturalization process. If you follow the steps, citizenship and a US passport are guaranteed.

The investment required for the EB-5 investor visa is far higher than any other program. You must invest in a business that creates at least 10 new jobs and maintains those jobs for about 6 years (the total time to complete your citizenship process).

The amount of money you are required to invest will depend on where the business is located. Most cities in the US require an investment of $1 million. If you set up the business in a distressed region of the country, the investment is reduced to $500,000.

Basically, all of Puerto Rico is designated as a distressed region for the EB-5 investor visa. Any business created on the island will qualify for the discounted investment amount of $500,000.

Of course, you will need to keep the business operating and profitable for at least 6 years with 10 employees. If you can do that with $500,000 in capital, great. If it requires more, then you will need to invest more.

What is Puerto Rico Act 20 and 22

When the EB-5 investor visa is combined with the tax benefits of Puerto Rico, you may be able to immigrate to the United States, obtain a green card, and finally citizenship with a US passport, all without paying a dollar in tax.

In order to accomplish this feat, we combine the EB-5 Investor Visa with Act 20 and Act 22 in Puerto Rico. I will briefly summarize them here.

Act 20 is the business tax holiday that gets you a 4% corporate tax rate on any profits earned by your Puerto Rico company. The requirements are simple:

  1. The minimum number of employees required for Act 20 business is 5. However, to qualify for EB-5, you need 10. So, we setup an Act 20 company with 10 employees.
  2. The company must be providing a service from Puerto Rico to persons or companies outside of Puerto Rico. Internet marketing, call centers, import / export, sales teams, and any online business are good candidates for Act 20. Retail businesses, franchises and restaurants do not qualify for Act 20. They do qualify for the EB-5 visa, but not for the tax deal.

For more detailed information on Puerto Rico’s Act 20, see: How to Maximize the Benefits of Puerto Rico Act 20

Act 22 is the personal tax holiday. A legal resident of Puerto Rico, who purchases a home, spends at least 183 days a year on the island, and signs up for Act 22, will pay zero capital gains tax and zero tax on dividends from his or her Puerto Rico company.

When you combine Act 20 with 22, you get a corporate tax rate on profits of 4% and zero tax on distributions of dividends from those profits. The only tax paid is the 4% corporate rate.

I also note that salaries in Puerto Rico are lower than anywhere in the US and that they might be going lower. Minimum wage is $7.25 and a recent House bill exempts Puerto Rico from increases in the Federal minimum wage for the next 5 years.

For more information on recent legislation, see: Good News from Congress for Act 20 Business in Puerto Rico

How to Combine the EB-5 Investor Visa with Puerto Rico Act 20 and 22

In order to combine the immigration benefits of the EB-5 investor visa with the tax benefits of Puerto Rico, we can setup an internet business or other service based company for you on the island.  That company will have 10 employees and qualify under Act 20 and EB-5.

For example, the business might provide content, design, advertising, and SEO services to persons and companies outside of Puerto Rico. Alternatively, the business might import goods from China and sell them to a distributor in the US (may operate as a wholesaler but not a retailer).

For a complete list of services that qualify for Act 20, please send an email to info@premieroffshore.com.

You may fund the business with $500,000 to $1 million in capital. Remember that the business must be self sufficient for at least 6 years and that your investment should cover costs until break-even. Your business plan must show a stable and profitable business will be operating from the United States with at least 10 employees.  

As I said above, profits of this business will be taxed at 4%. Dividends to you, a resident of Puerto Rico, will be tax free.

What if you Don’t Want to Live in Puerto Rico?

You are not required to live in Puerto Rico to qualify for Act 20 or for the EB-5. Only Act 22, the personal tax holiday, requires you be a resident of the island.

If you immigrated to the US with an EB-5 investor visa, and setup an Act 20 company, but did not live in Puerto Rico, you would pay 4% in tax on Puerto Rico sourced income. You could then hold net profits from Puerto Rico sourced income in the corporation tax deferred.

If you are living in the US, you would pay US tax on any dividends or distributions from that Puerto Rico company. You would also pay US tax on income from your investments outside of the US.

So, Act 20 will get you tax deferral in your EB-5 business. Act 22 gets you tax free distributions from that EB-5 business. Act 22 also cuts your US tax rate to zero on capital gains on assets acquired after your move to Puerto Rico.

How to Use an E-2 Visa to Expedite an EB-5 Visa Application

The EB-5 visa process is a long one. Remember that it comes with guaranteed US citizenship and green card.  As such, the process is demanding.

It will take well over a year to have your EB-5 visa approved. If getting into the United States as quickly as possible is important to you, then you might apply under the E-2 visa program first.

We can setup an Act 20 business with an E-2 and get your temporary visa in 30 to 90 days. This gets you and your family into the country.

You then operate the business with 5 employees under E-2 until your EB-5 is approved. When you get your green card under the EB-5, you hire 5 more employees for a total of 10. This is because the E-2 and Act 20 require 5 employees. When you are ready to upgrade to the EB-5, you can add 5 more for a total of ten employees in Puerto Rico.

Note that the E-2 visa is only available to those from treaty countries and has different requirements from the EB-5. For more information, see E-2 Treaty Investor Visa

How I can Help

We can assist you from start to finish in setting up an EB-5 and Act 20 compliant business in Puerto Rico. This includes writing the business plan, financial analysis, and everything related to applying for the EB-5.

Next we will incorporate your business, lease office space, hire and train employees, and get the business operating. This will include an Act 20 contract with Puerto Rico that will guarantee your tax holiday for 20 years.

We provide a turnkey solution in Puerto Rico that will maximize the benefits of the EB-5 and tax benefits of Puerto Rico. For more information, you can reach me directly at info@premieroffshore.com or by calling (619) 483-1708.

protect your IRA
Christian Reeves

Protect Your IRA by Converting it into an Offshore Trust

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You know that offshore asset protection trusts offer the best security available. They’re an excellent way to protect your after tax savings. But, what of your retirement account? In this post I’ll show you how to protect your IRA by converting it into an offshore trust.

Let me start by talking about where to build your fortress, then we’ll review the safety features of an offshore trust. Finally, we will get to how to protect your IRA by adding those features to an offshore IRA LLC structure.

Here are the pillars to solid offshore asset protection:

Jurisdiction: Where you incorporate your offshore trust or LLC is just as important as how you build it out.

History: Select a country with a long history of standing up for plaintiffs rights. One that has been offering international trust services for decades without being broken and at a high / professional level.

Case Law: Select a country where offshore asset protection statutes have been tested in many court battles. If those cases have been heard in both the US and in the foreign jurisdiction, all the better.

Quality Local Representatives: Hire a trust company and protector service staffed by quality attorneys with licenses from major jurisdictions.

For all of the above reasons, Cook Islands is the best country in which to build an offshore asset protection structure. The best jurisdiction in which to make your stand.

A Cook Islands Trust is the strongest form of asset protection worldwide.  It has the most proven asset protection case law history in the world. Representatives in Cook Islands are New Zealand or Australian attorneys with decades of experience defending client’s assets. The Cook Islands ticks every box.

Next, let’s talk about the structure of an offshore trust for asset protection. What we call the “trust” is comprised of several components.

Settlor: The settlor of the trust is the owner of the assets going and the person creating the trust. The person funding the trust / transferring their assets to the trust.

Trustee: The person or firm outside of the United States that will manage your trust and handle local filing and compliance. Should you pass away, the trustee will distribute your assets per your letter of wishes (see below).

Protector: The protector, also based outside of the United States, steps in to manage your assets within the Trust if you come under duress. If someone sues you, then you transfer management responsibilities to the protector.

Offshore LLC Management Company: Most clients want to maintain control of their assets until and unless they come under duress. For this reason, we form an offshore LLC to manage the trust. The trust transfers its cash to this asset management firm, which happens to be owned and controlled by the settlor. If the settlor comes under duress or attack, he returns this responsibility to the trust and then the protector.

Trust Document: The trust document is the very long and detailed contract between the settlor, trustee and protector. It’s the heart of your asset protection plan and what must stand up to US, IRS, and creditor scrutiny.

Beneficiaries: Those who will receive the assets of the trust should something happen to the settlor(s).

Letter of Wishes: A letter sent by the settlor to the trustee telling him or her how to disburse the trust assets at your passing. This letter can be as simple or complex as you like.

That’s a very brief summary of how to structure an offshore trust. Now we are ready to apply those tools to protect your IRA. For more information on trusts, see my International Trust page for more detailed information.

Remember there are a bunch of IRA rules to follow to ensure your account remains tax deferred in the United States. So, this is not as simple as forming a trust and putting your IRA money in that trust. That would be an improper distribution resulting in taxes and penalties on your retirement money.

  • See my Offshore IRA page for the basics of moving your retirement account offshore.

When we take an IRA offshore we form an LLC in a foreign country that won’t tax your investments. When we want to maximize the protection for your IRA, we form that LLC in the Cook Islands.

In this way, the same history, law and professional services will apply to your Limited Liability Company as give the offshore asset protection trust it’s standing.

The offshore IRA LLC has a Member (like a Settlor) and a Manager (like a Protector). By using a Cook Islands protector as the Manager, we maximize protection. The LLC will also have a detailed Operating Agreement which uses many of the same asset protection tools as is found in an international trust agreement.

Before I get to that, let’s talk about the Member. This is a rather strange concept when we have an IRA and an LLC.

In most situations, the Member of an LLC is the person or persons who will control the company. Not in the case of an offshore IRA LLC.

IRA rules dictate that the Member must be the IRA account… not a person, nor you the beneficial owner of the account. The account itself owns the LLC. That is to say, the Member is the owner of the underlying assets of the company, and that owner is the account, not you.

The ownership statement of your offshore IRA LLC will look something like this: IRA Custodian Company, Inc. FBO Bob Smith IRA Account #55-55555555

  • Remember that all offshore IRA LLCs must have a US custodian. For more on that, see my Offshore IRA page.
  • FBO = For the Benefit of

It’s the Manager and the Operating Agreement where we have room to maneuver. We’ve spent many weeks working with experts around the world to convert our strongest offshore trust document into an offshore IRA LLC Operating Agreement.

We’ve also contracted with the very best protectors in the business, who are based in the Cook Islands, to act as the Manager of your offshore IRA LLC. They will manage your IRA investments to your specifications and create a solid barrier between your account and any civil creditors.

By combining the benefits of an offshore trust with the IRA rules, we have developed a custom max protect solution you will not find anywhere else. If you have a high risk of litigation, or otherwise believe your retirement assets will be at risk if under your direct control, we can help you protect your IRA by going offshore through a Cook Islands LLC and adding on a Cook Islands protector as your Manager.

I hope you’ve found this post on how to convert your IRA into an offshore trust to be helpful. Please contact me at info@premieroffshore.com or call (619) 483-1708 for a confidential consultation on how to max protect your IRA when going offshore.

These services are meant to protect your IRA from future civil creditors. We will not build a structure to hide assets from the IRS or the US Government. Also, offshore asset protection is only available if you are not currently in litigation. Going offshore after the harm is done could be a fraudulent conveyance and thus illegal.

Second Passport from Bulgaria
Christian Reeves

The Cost for a Second Passport from Bulgaria will Double Next Year

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The cost for a second passport from Bulgaria will double in the next year, guaranteed. In this article I will tell you why Bulgaria is the best value in second passports and why it’s set to double or even triple in cost and value in the next year.  

Let me start by giving you  a bit of background on how we value a second passport. It’s quite simple – the more countries you can enter visa free, the more valuable the travel document. Next, we consider where you want to live. Does the passport allow you to live and do business in a place you want to be? Even better, does it allow you to live and work in a number of different countries? If it ticks all of these boxes for you, it’s a world class second passport.

For these reasons, the most valuable second passport available is Austria. For 2016, Austrian citizens had visa-free or visa on arrival access to 173 countries and territories, ranking the Austrian passport 5th in the world (tied with Japan and Singapore).

You can acquire Austrian citizenship in 12 to 18 months by investing EUR 3 to 10 million in a qualified business. This is the largest minimum investment required and commensurate with Austria being the gold standard of second passports.

Another very valuable passport within the European Union is from the country of Malta. Maltese citizens have visa-free or visa on arrival access to 168 countries and territories, ranking their passport 9th in the world overall. For comparison,  a United States passport provides visa-free or visa on arrival to 174 countries and territories. Our passport is ranked 4th (tied with Belgium, Denmark, and The Netherlands).

Malta offers two second passport acquisition options – investment and purchase / donation. The purchase option will cost you about $1 million including fees and the investment in real estate is likely to run $1.5 million (including the property).

While Austria is the best passport, and Malta is incredibly valuable, Bulgaria is the best value within the European Union. Bulgaria currently has the lowest cost passport in the region at is a fraction of its competitors.

As of 2016, Bulgarian citizens have visa-free or visa on arrival access to 153 countries and territories, ranking the Bulgarian passport 21st in the world (tied with Brazil and Romania) and the second lowest ranking of all EU member states (tied with Romania).

In order to get a second passport from Bulgaria, you invest about $1.2 million (2 million BGN) in government bonds for a period of 5 years. These bonds are guaranteed by the government and are relatively low risk. Certainly lower risk than investing a business you don’t control and hoping for the best.

  • For a lower cost options, checkout my article 10 Best Second Passports. St. Lucia has the same government bond offering as Bulgaria at half the investment.

Unlike Austria, where the return of your capital depends on the success of the business, Bulgaria is a simple investment in guaranteed bonds. No employee, tax, or business issues to deal with. Lend money to the government for 5 years interest free and get a passport.

Your investment in Bulgaria is made in 2 stages: 1) invest $600,000 in government bonds and receive residency. This allows you to live and work in Bulgaria, but it doesn’t provide you a passport. 2) Wait one year and then invest a second $600,000 in government bonds to receive citizenship and a second passport from Bulgaria.

You earn no interest on these bonds, but you get your principal back in 5 years. So, the true cost is your opportunity cost / lost interest over this period. Legal and government fees are additional.

Here’s why the cost and value of a second passport from Bulgaria will double or triple in the next year…

Bulgaria is part of the European Union, but not a member of the Schengen Area. The most valuable second passports are all members of the Schengen Area.

The Schengen Area has 26 member states, covers an area of 4,312,099 million km2, and includes hundreds of airports and maritime ports, many land crossing points, and a population of 419,400,000 million citizens.

If you have a passport from a Schengen country, you may live, work and travel freely within the Area. This is to say, with a Schengen Area passport you can live and work in ANY of the following countries:

  • Austria
  • Belgium
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Iceland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Norway
  • Poland
  • Portugal
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Liechtenstein

The fact that Austria and Malta are both in the Schengen Area is part of the reason their passport is so valuable (especially in Malta’s case). While being a part of the Area doesn’t affect the number of countries you can enter without a visa, it does greatly increase the other component of value – where the second passport allows you to live and work.

Bulgaria qualified to join the Schengen Area on April 11, 2016. As of this date, the European Commission has agreed that Bulgaria has met all conditions to allow it to join the Area.

It appears it will take about 1 year for Bulgaria to be fully admitted into the Schengen region. Once that happens, the value of their passport will increase significantly, as will the cost. This is why I believe that a second passport from Bulgaria will double or triple in cost and value in the next year.

I’ll conclude with one last benefit of a second passport from Bulgaria. A little something to sweeten the pot  if you will.

Let’s say three generations of your family want to apply for citizenship and a second passport in the European Union. Each family unit will need to apply separately in Malta and Austria. That means three investments and triple the fees.

When a family applies for a second passport from most countries, a husband, wife and their dependent unmarried children under the age of 18 become citizens. Adult children must apply separately.

In Bulgaria, the family patriarch (grandparent) would apply for citizenship first. Once that’s granted, his direct dependents (children) may apply for citizenship through family relation. No investment is required. Then, once that’s granted, their children (the grandchildren of the primary applicant) may apply, again without an investment being required.

The only caveat is that residency by family relations does not apply to spouses of these dependents. It only applies to direct descendants and does not include their spouses.

I hope you have found this article interesting. Please contact me to obtain a second passport from Bulgaria or from any of the other countries I recommend. You can reach me any time at info@premieroffshore.com or calling (619) 483-1708.

act 20 business in puerto rico
Christian Reeves

Good News from Congress for Act 20 Business in Puerto Rico

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Good news out of Washington for Act 20 businesses in Puerto Rico. It appears that the US has decided to allow Puerto Rico to reorganize its debts in some manner… not formal bankruptcy, but a restructuring with court oversight.

The rules would be similar to Chapter 9 for municipal bankruptcies, with a few sections more favorable to creditors. The House was careful to avoid the term “bankruptcy,” and to avoid the stigma of a bailout. No cash is being sent to help Puerto Rico, only new rules.

The bill has two main provisions:

  • It creates a seven-member fiscal oversight board with members appointed by the president and congressional leaders that will have to approve Puerto Rico’s future fiscal plans.
  • It allows the island to legally pay less than 100 percent of what is owed on old debts.

This appears to be a one time deal. Had Puerto Rico been granted bankruptcy protection, they could have used it for future debt. Puerto Rico gets special consideration one time and then returns to its status as a Territory, along with the US Virgin Islands and Guam.

This is big because it means that Puerto Rico won’t lose its special tax status. It also means that the island won’t be torn asunder by its $70 billion debt, an amount approximately equal to 68% of Puerto Rico’s gross domestic product. The island defaulted on $2 billion of these obligations May 1, 2016 and says it’s unable to pay upcoming installments.

The reason Congress must act is that Puerto Rico is barred from the US bankruptcy courts. Because it’s not a State, Puerto Rico can’t declare bankruptcy like so many US cities and municipalities have done. Without intervention from Washington, the only option would have been years of court battles and uncertainty.

For an example of what could have been, consider Argentina. They defaulted in 2001 and 2010 on their bond obligations. The case was fought in the US courts for over a decade, finally being resolved in 2015. For many of those years Argentina was unable to borrow from the world markets, which put its economy in turmoil.

We were beginning to see signs of this in Puerto Rico. On May 4, 2016, Puerto Rico bondholders sued the Development Bank to stop payments of salaries and other distributions. They sought to freeze all transactions on the Island until they got paid… essentially holding the Puerto Rico economy hostage until their demands were met.  Exactly what the vulture funds did to Argentina.

With decisive action from the US Congress, these issues will be resolved in an orderly manner. Bondholders will take a haircut – and probably a substantial one to the tune of 70% – but business will go on  and money will flow.

This offers stability to Act 20 companies who hold bank accounts on the island. When you have a disorderly, hostile, and litigious situation, you are concerned about the reliability of local banks. Will the government seize funds in those accounts as they did in Cyprus? You never know  and don’t want to put your money at risk by keeping substantial sums in Puerto Rico banks.

Fortunately for Americans operating in Puerto Rico, your Puerto Rico company can open a bank account anywhere in the United States. You can take your PR company documents to your local Wells Fargo or Bank of America and open an account in a few minutes – something that is not possible with an offshore corporation.

But, now that the banking risk has passed, I suggest clients hold their operating capital and retained earnings in Puerto Rico. This minimizes your contact with the United States and can be a positive factor in an audit.  I am now recommended Scotiabank in Puerto Rico as the best business bank available to Act 20 companies.

This is all good news for Act 20 companies. As is the fact that Act 20 and 22 were not mentioned in the House bill. There is no attempt to put an end to these tax holidays. In fact, the US Treasury suggested that Puerto Rico should be required to do more to increase investment in the region, a suggestion that the House failed to include.

EDITORS NOTE: On July 11, 2017, the government of Puerto Rico did away with the requirement to hire 5 employees to qualify for Act 20. You can now set up an Act 20 company with only 1 employee (you, the business owner). For more information, see: Puerto Rico Eliminates 5 Employee Requirement

Even better news is the minimum wage moratorium included in the House bill. While US tax laws don’t apply to Puerto Rico, Federal minimum wage does. This is why the minimum salary in Puerto Rico is currently $7.25.

While Federal minimum wage is, by definition, the lowest wage allowed in the nation, it appears to be going up under Mr. Obama.  Any increase of the Federal wage is sure to be far lower than the 13 states and cities, including California, New York and Washington, D.C., who have passed $15 per hour minimum wage laws to be phased in over the next few years.

The moratorium contained in the House bill exempts Puerto Rico from increases in the Federal minimum wage for the next 5 years. So, no matter what the US does with salaries, they will be locked in at $7.25 for the next 5 years in Puerto Rico.

  • Technically, the oversight board (not the government of Puerto Rico) has the ability to lower its wage below the Federal minimum wage. Don’t expect it to drop below $7.25 without riots in the streets.

The bill also exempts Puerto Rico from Obama’s overtime rules. Combine this with a fixed minimum way, and you, the Act 20 business owner, see some cost savings and permanence in the House bill.

Add to this the fact that Act 20 comes with a 20 year guarantee on its 4% tax rate, and you have a uniquely low cost and stable situation in Puerto Rico.

If you’ve read this far in the article and have no idea what Act 20 is, I think you for your perseverance. Allow me to briefly summarize the offer here.

Act 20 is a statute in Puerto Rico that allows you to operate a business on the island with a minimum of 5 employees and pay only 4% in tax on corporate profits on Puerto Rico sourced income.

That business should be providing a service from Puerto Rico to persons and/or companies outside of Puerto Rico. Good candidates are internet marketing, loan servicing, import of goods for sale in the US, sales, website design, and just about any other portable service business.

Net profits of the business can be held in the corporation tax deferred. If the owner of the company moves to the island and qualifies under Act 22, he or she may withdraw profits as tax free dividends.

If your net profits are $500,000 or more, and you need 5 employees, you will find that the tax deal offered in Puerto Rico is far superior to anything available offshore. If your profit is less than $500,000, then you might get a better deal in a zero tax offshore jurisdiction like Cayman. For an article on this topic see Puerto Rico Tax Deal vs Foreign Earned Income Exclusion.

If you can’t use 5 employees in Puerto Rico, then stick with Panama, Cayman Islands and other jurisdictions. The purpose of Act 20 is to increase employment on the Island, so the minimum number is non-negotiable. For more information on Cayman, see Move Your Internet Business to Cayman Islands Tax Free.

I hope you have found this article helpful. For more information on moving your business to Puerto Rico, please contact me at info@premieroffshore.com or call (619) 483-1708. I will be happy to structure your business and negotiate an Act 20 license with the government of Puerto Rico on your behalf.

tax benefits of puerto rico
Christian Reeves

How to Maximize the Tax Benefits of Puerto Rico

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The tax benefits of Puerto Rico for Americans are incredible. Puerto Rico is by far the best deal available if you’re willing to move you and your business to the island for a few years. Even if you move only the business, while you remain in the United States, the offer is hard to pass up. Here’s how to maximize the tax benefits of Puerto Rico.

First, here’s a summary of the tax benefits  of Puerto Rico.

Act 20 is the business tax holiday offered by cash strapped Puerto Rico. Under Act 20, a service business with 5 employees on the island will pay only 4% tax on Puerto Rico sourced income. Good candidates include businesses (or divisions of a business) which provide sales and support, internet marketing, graphics design, product research, financial advisory, loan servicing, website and network design and support, call centers, and almost any other “portable” business.

The catch is that you must have 5 full time employees in Puerto Rico. These workers can be at any salary or skill level, but they must be working full time and creating Puerto Rico sourced income. The purpose of Act 20 from the government’s perspective is to offer training and jobs to its people.

It’s possible for the owner of the Puerto Rico business to live in the United States and operate the business remotely. In that case, you (that owner) will draw a salary at fair market value from the Puerto Rico corporation and pay tax in the US on your income.  Only profits attributable to the workers in Puerto Rico is Puerto Rico sourced income.

If the owner of the business is living in the US, you get to defer US tax on the profits of your Puerto Rico company (less the 4% tax paid to Puerto Rico). When you take the money out of the company you will pay US tax on the dividend. If you are a resident of Puerto Rico, you won’t pay tax on that dividend.

Act 22 is the personal tax holiday. If you move to Puerto Rico, become a legal resident, buy a home there, and sign up for Act 22, all dividends from a Puerto Rico corporation to a resident of Puerto Rico are tax free. In addition, you will pay zero tax on capital gains. That’s right, the tax rate on assets acquired after you move to Puerto Rico will be zero.

Those are the basics and there are a number of additional Puerto Rico tax holiday programs that are beyond the scope of this article. For example, Act 73 covers IP development and holding companies. Using this statute, you can get to a tax rate of 4 to 8% on income from IP. Also, a number of tax credits are available.

For an article on this, which briefly compares Act 73 to Act 20, see PWC Summary of Puerto Rico Tax Credits and Incentives. Also, here’s an article about Microsoft using Puerto Rico for IP  (from 2013) and another on Puerto Rico and the Pharmaceutical Industry.

Then there’s Act 273 that allows you to setup an “offshore” bank in Puerto Rico and pay only 4% in tax on profits. This is by far the lowest cost offshore banking license available. For more information, see Puerto Rico Offshore Banking License.

This is all to say that Puerto Rico is working hard to become the offshore center for American entrepreneurs. If your business provides a service or is portable, you should give Puerto Rico a look.  

Here’s how to maximize the tax benefits of Puerto Rico.

To truly maximize the tax benefits of Puerto Rico, you need to move you and your business to the island. If you can combine Act 20 with Act 22, you will have a tax deal unmatched by any other jurisdiction.

You will pay only 4% on your business profits (Puerto Rico sourced active business income) under Act 20. Then you will then withdraw those profits as a tax free dividend at the end of the year under Act 22.

So, Act 20 gets you tax deferred profits held in a Puerto Rico corporation. Act 22 allows you to take those profits out of the corporation tax free.

EDITORS NOTE: On July 11, 2017, the government of Puerto Rico did away with the requirement to hire 5 employees to qualify for Act 20. You can now set up an Act 20 company with only 1 employee (you, the business owner). For more information, see: Puerto Rico Eliminates 5 Employee Requirement

Above I said that the tax benefits of Puerto Rico are unmatched by any other jurisdiction. The reason for this is simple: even fiscal paradises like Cayman and Panama with zero tax rates can’t come close to duplicating the benefits for Americans available in Puerto Rico.

Yes, I know that a 0% tax rate in Panama and Cayman Island is less than 4%. But, because Puerto Rico is a US territory, it can offer a deal on dividend distributions that foreign countries can can’t match.

So long as you are a US citizen you will pay US taxes… unless you live in Puerto Rico.

An American living in Cayman or Panama will pay US taxes on all capital gains and dividends received. They will also pay US tax on any salary earned over the Foreign Earned Income Exclusion Amount of $101,300. They won’t pay tax to Panama or Cayman, but they will owe the IRS big time if they make more than $100,000 a year.

That same person living in Puerto Rico will pay tax on any salary earned, 4% on business profits, and then be eligible to withdraw those retained earnings from the corporation as a tax free dividend.

Let’s say you have a business with net profits of $2 million. You can set up in Cayman or Panama and take out a salary of $100,000 per year tax free. The rest of the money will stay in the corporation tax deferred. When you withdraw the $1.9 million, you will pay US tax at about 40% (Fed and State), or $760,000. You get tax deferral by operating offshore, but, one of these days, you must pay the piper.

If that same business were operated from Puerto Rico under Act 20 and Act 22, you would pay PR tax on your salary of $100,000 at about 30%. Then 4% corporate tax on $1.9 million for a total of $106,000. Your net effective rate is 5.6% and goes down towards 4% as income increases.

To sweeten the pot further, Puerto Rico’s Act 20 comes with a 20 year guarantee. Considering how the political winds are blowing against offshore tax structures, a guarantee from a US territory is very valuable.

As I said above, Puerto Rico requires 5 full time employees. If you don’t need that many people, or your profits are closer to $100,000 than $1 million, then a tax free jurisdiction offshore might be more efficient. Here’s an article on Moving Your Internet Business to Cayman Islands Tax Free.

I’ll close by considering how you might carry the tax benefits of Puerto Rico forward once you leave the island.

Ok, you’ve setup your business with 5 employees in Puerto Rico under Act 20. You also took the plunge and moved to Puerto Rico under Act 22. A few years have passed and corporation has $5 million dollars in retained earnings.

You’ve had enough of island life and this business venture has run its course. It’s time to stop the carnival, take your winnings, and return to the US of A.

As I said above, you can take out that $5 million in retained earnings tax free. This is because you are living in Puerto Rico, qualify under Act 22, and the dividends are coming from a Puerto Rico company. The only tax paid was 4% to Puerto Rico for the right to operate your business from their jurisdiction.

You can now return to the US with your $5 million in hand with no taxes due to the IRS. The money is free and clear.

Of course, once you move back to America, giving up your Act 22 status, any interest or capital gains you earn from this $5 million in savings will be taxable by the Feds and your State.

There is one way to carry forward the benefits of Puerto Rico…

Invest some of that $5 million in to a single pay premium offshore life policy before you abandon Puerto Rico.

By moving your savings earned under Act 22 in Puerto Rico in to a tax deferred single pay premium life insurance policy you can continue to defer US tax on any capital gains generated by that money. Basically, you can create a multi-million dollar tax deferred savings account or a massive defined benefit plan without any of the retirement account rules.

Your cash will grow tax deferred inside the life insurance policy, just as it did in Puerto Rico. If you need to use some of that money you can borrow against the policy. Of course, your focus should be on building a tax preferred investment portfolio.

Should something happen to you, this life insurance policy will pass on to your heirs tax free (with a step-up in basis). In this way, it’s possible for you to provide a family legacy without ever paying more than 4% in US taxes.

I hope you have found this article on maximizing the tax benefits of Puerto Rico helpful. Please note that we at PremierOffshore.com are not investment advisers nor do we sell insurance products. I will be happy to introduce you to an expert in this area.

For more information on moving you and/or your business to Puerto Rico, please contact me at info@premieroffshore.com or call (619) 483-1708. I will be happy to work with you to build a tax efficient operation in Puerto Rico.

Cayman Islands Internet Business
Christian Reeves

Move Your Internet Business to Cayman Islands Tax Free

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Are you looking for a high quality of life, no taxes, and a cool offshore jurisdiction from which to operate your internet business? Ready to move you and your team to paradise for a few years to rake in the cash tax free? Then consider moving your internet business to Cayman Islands.

Cayman Islands had a tax deal you can’t refuse. Move to this business-friendly group of islands with its first-world infrastructure and amazing climate, and pay no taxes. You will also get a 5 year renewable work / residency visa for you, your staff, and their families. There are no restrictions on the number of workers you can bring with you and no requirement to hire locals.

Historically, visas and work permits were extremely difficult to obtain in Cayman. Securing residency previously required you to buy real estate of $500,000 to $1 million dollars and navigate  river of red tape.

Because a residency permit and work visa are essential for the American to qualify for the Foreign Earned Income Exclusion, very few small businesses set up in Cayman.

Suffice it to say, those days are gone and now Cayman Islands is open for business. Today, you can relocate your internet business to Cayman Islands efficiently and without (most) of the impediments.  

Moving a business to Cayman also gets you access to their world-class banks and credit card processing facilities that have been shut to Americans for several years now. Only US persons with a licensed business or a home on Cayman may open a account on the Island.

For example, to further reduce your contacts with the US, you might process credit cards through First Atlantic Commerce, a leading global online payment solutions provider. This enables you to accept payments in up to 145 world currencies in real-time on a 100% PCI-compliant platform. Merchant services include:

  • Multi-currency, multi jurisdictional settlement
  • Real-time processing
  • Virtual Terminal
  • Repeat and Subscription Billing
  • Card Number Tokenization
  • 3-D Secure™ (bank dependent)
  • CVV2/CVC2/CID and AVS checks
  • PCI Compliant gateway

We also highly recommend banking and credit card processing services from Royal Bank of Canada.

Now on to US Taxes.

Here’s how to move your business to Cayman Islands tax free. Do it right and you and your staff can earn up to $101,300 tax free in salary. That’s right, everyone who moves to Cayman with you gets $101,300 tax free. That equates to about a 35% pay increase on your first $100,000 in salary… certainly worth hanging out on a beautiful Caribbean island for a year to earn.

  • You will pay US taxes on salary over $101,300. You might create defined benefit or other retirement structures to further defer tax. A small business might simply hold retained earnings tax deferred.

Even better, you and your team won’t be required to pay self employment tax or any of the US social taxes. No FICA, Medicare, or Obama taxes. That’s a savings of about 15% (7.5% to the employer and 7.5% to the employee).

Of course, you’re in business to make a profit, not just pay your employees. Any income generated by the Cayman Islands corporation can be held offshore tax deferred. If you accrue $5 million in net profits over 3 years on the island, so long as you hold them in your Cayman corporation, you won’t be required to pay US taxes.

The devil is in the details of the US tax code and I’ll get to that.

First, let me point out that I am talking about moving you and your business out of the United States and to the Cayman Islands. This is not some tax dodge using shell companies or hiding from the IRS. This is committing to the business, making the move, and earning the tax benefits.

Shell companies and offshore structures with no substance behind them are so 2000. These days, if you want to cut your US taxes, you must have employees and operations outside of the US. For most businesses, this means moving you and your workers out of the United States for a time.

Then and only then will some of the income generated by this division qualify to be held in the Cayman Islands corporation tax deferred. More on this soon….

In support of this fact, the Cayman Islands Government has granted a number of globally competitive tax holidays / tax free zones throughout the Island. They allow your businesses to establish a physical presence plus offer fast-track business licensing and visa processing. These programs attempt to eliminate the red-tape, excessive costs, and uncertainty that one would normally experience when trying to set up a business in Cayman Islands.

These tax free zones provide the following benefits:

  • No corporate, income, sales or capital gains tax in Cayman Islands – tax payable in the USA is a complex matter summarized below.
  • 100% foreign company ownership permitted
  • A 3-4 week fast-track business licensing regime
  • Renewable 5-year work/residency visas granted in 5 days
  • Cutting-edge IT and business infrastructure
  • Offshore hosting & payment gateway
  • Minimal Government regulation
  • No Government reporting or filing requirements
  • A tech cluster with massive cross-marketing opportunities
  • ’One-stop-shop’ Administration services
  • Work visas for your staff and residency permits for your spouse and children at no additional cost.

Note that you must operate your business in one of the Island’s tax free zones to get these benefits. Also, your business must be in one of the industries to which a tax holiday is available. Qualified businesses include:

  • Internet & Technology
  • Media, Marketing or Film
  • Biotechnology & Life Sciences
  • Commodities & Derivatives
  • Maritime Services

How to Maximize the US Tax Benefits of Moving Your Business to Cayman Islands

Let’s get back to the devil (the IRS) and those details.

The key to the offer in Cayman is the fact that you and your employees will receive work and residency permits on the island. In the past, these have been extremely difficult to get and required that you hire a proportional number of Cayman citizens.

As of 2016, Cayman understands that the days of the shell company are coming to an end. The government is moving to a service based offering that allows you to establish a real business with substance and employees who qualify for the Foreign Earned Income Exclusion. One that will pass muster with the IRS and allow you to minimize your US taxes.

Of course, you need to do your part to make Uncle Sam happy as well. You need to move your business, your workers, and yourself to Cayman Islands. You must reside on the island as a legal resident with a work permit (we have that covered for you), qualify for the Foreign Earned Income Exclusion, and obtain a license from one of their tax free zones.

To qualify for the Foreign Earned Income Exclusion, you need to move to Cayman for the foreseeable future, make the Island your home base, and stay out of the US approximately 8 months of the year.

  • Cayman Islands should be your home base and the jurisdiction from which you operate your business. You don’t need to spend a certain amount of time on Cayman, but you do need to be out of the United States for about 8 months a year.

This allows you to earn up $101,300 in salary from your Cayman corporation tax free in the United States, avoid US social taxes, and retain net profits from your active business in the Cayman corporation tax deferred. The fact that you are structured and licensed in one of the Cayman tax free zones means you operate tax free in Cayman also.

Note that I said net profits / retained earnings in your Cayman Islands corporation will be tax deferred – not tax free – in the United States. When you will decide to take out these retained earnings from your corporation, they will be taxed in the United States. You can decide when that occurs, but you must pay Uncle Sam some day.

The Foreign Earned Income Exclusion is a complex topic, and I have merely skimmed the surface here. For more details, see:

  1. Foreign Earned Income Exclusion 2016
  2. Foreign Earned Income Exclusion Basics
  3. Benefits of an Offshore Company
  4. Eliminate U.S. Tax in 5 Steps with an Offshore Corporation
  5. How to Prorate the FEIE

As you read through these thrilling posts, keep in mind that we are talking about moving you and your business to Cayman. You will qualify for the Foreign Earned Income Exclusion using the residency test and not the physical presence test.

Costs of Setting Up in Cayman Islands

I’ve been working offshore since 2000 and I can tell you that Cayman Islands is without a doubt the most beautiful tax paradise. Add to this  their world class services, IT infrastructure, and top legal and business talent, and it’s an amazing place from which to operate an internet business. Cayman Islands is NOT a low cost option Cayman is the Hyatt or Nieman Marcus of the offshore world, not Wal Mart or Best Western.

Cayman is one of the more expensive jurisdictions from which to run your business. You will need to pay your employees the same as you do in a major US city like Los Angeles or New York to cover the cost of living. Everything you do, from equipment to meals to lodging, will cost about the same as the United States. And everyone will want to travel back and forth to the US to escape that Island Fever.

If you are looking for one of the most beautiful and professional spots on the planet from which to operate your business, Cayman Islands is it.

If you are looking for a place that offers low cost labor and a 4% tax rate, and you have at least 5 employees, consider Puerto Rico.

If you want to maximize the value of the Foreign Earned Income Exclusion in a lower cost city, consider Panama. Yes, Panama regardless of the BS you read about the Panama Papers.

Here is a summary of the costs of setting up your business in Cayman Islands. Note that the minimum number of employees in Cayman is one. The tax benefits described here assume you (the business owner) are the first employee. You might be the only employee or you can bring with you as many support staff as you like. 

The tax free zones have created turn-key offerings that include your residency visa, work permit, and office. The total cost for all of this in a shared / group space is about $1,550 per month. The minimum term of the lease is 3 years and the first year of $18,500 is due at signing. 

  • You can have up to two people working in the group space. If you have 3 or more employees, you will need a private office. See below.

The cost for a private office for one person with 90 to 100 sq ft., again including all permits, is about $3,000 per month on a three year contract. This includes furniture, phone system, etc. Payments are made quarterly at $9,237.50.

A three person office is $53,450 per year and a 2 person office can be either $41,250 or $49,250 per year depending on if a chooses the standard or large 2 person office. Payments are made quarterly and  the minimum term is 3 years.

In addition, each resident will need to have health insurance, which starts at about $200 per person per month. Family plans are available.

And, speaking of families, there is no additional cost to bring your spouse and dependent children under 18 years of age to Cayman in this program. Their residency permits are basically processed for free and included in your office rent.

However, you might consider setting up an office and work permit for your spouse. That will allow him or her to also earn $101,300 per year tax free under the FEIE working in your family business In this way, you can double the value of the Foreign Earned Income Exclusion.

Also, your kids must be enrolled in private school in Cayman. They are not allowed to roam the streets unchecked. Private school costs about $1,300 per month and a wide range of options and price points are available.

Finally, employees are required to have some type of retirement account on Cayman after 9 months of employment. This may provide additional tax planning options.

As I said above, the cost of living in Cayman Islands will be the same or higher than a major US city. Rent in a residential neighborhood for a two bedroom will run you $2,000 to $3,000 per month. The commute would be about 20 minutes to the office. .

If you want to go big, the rent for a two bedroom on Seven Mile Beach will run you $5,000 to $6,000 per month. If you would like to scope out the area, I suggest you stay at one of the many hotels on Seven Mile.

We can have you setup and operating from Cayman Islands in about 40 days. For more information, and a quote on forming your Cayman corporation and US / Cayman tax planning, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Cayman Islands vs Puerto Rico

Allow me to close by comparing Cayman Islands to the US territory of Puerto Rico. Puerto Rico offers a tax holiday at 4%, a tax rate which is guaranteed for 20 years. The catch is that your business must move to Puerto Rico and have at least 5 employees on the island.

  • If you have fewer than 5 employees, Puerto Rico is not an option. Focus on Cayman Islands or Panama.

The tax deal in Puerto Rico is very different from that of Cayman Islands. In fact, it’s the reverse of the Foreign Earned Income Exclusion described above.

In Cayman, you earn $101,300 tax free and leave the balance of the profits in the offshore corporation tax deferred.

In Puerto Rico, you draw a reasonable salary and pay tax at ordinary income rates on that money. The remaining net profits of the business are then taxed in the corporation at 4%. If you are living in Puerto Rico, you can pull these profits (less the 4%) as tax free dividends.

So, if your salary is $100,000, and your remaining profit is $2 million, you will pay about $110,000 in Puerto Rico tax (($100,000 x 30%) + ($2 million x 4%) = $110,000). This is all of the tax you will ever pay on this income.

In Cayman, the $100,000 salary is tax free. At some point, you will pay US tax at 35% on the $2 million, or $700,000.  This might be years or decades in the future, but the bill will come due.

For more on this topic, take a read through Puerto Rico’s Tax Deal vs the Foreign Earned Income Exclusion.

I also note that you, as a US citizen or resident, do not need an visas or special permission to move to Puerto Rico. It’s a domestic flight and you can relocate as easily as you would from New York to Miami.

Next, your cost of labor in Puerto Rico will be 30% to 40% lower than in Cayman Islands. The same goes for your cost of living and operating the business.

Finally, Puerto Rico allows you to spend more time in the US. You should be on the island for 183 days a year, not 240 as you should with the Foreign Earned Income Exclusion using the residency test.

Conclusion

Whether you want to operate your business from an island paradise like Cayman Islands or a fiscal paradise like Puerto Rico, all tax deals these days require substance. This means a business with employees abroad adding value and working in the business.

You need to move you and your business outside of the US to maximize the benefits of the Foreign Earned Income Exclusion or of the US territorial tax offerings of Puerto Rico.

I hope you’ve found this article helpful. For more information on moving your business to Cayman Islands or Puerto Rico, please contact me at info@premieroffshore.com or (619) 483-1708 for a confidential consultation.

Puerto Rico Bank License
Christian Reeves

Lowest Cost Offshore Bank License is Puerto Rico

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Want to setup an offshore bank? Looking for an international banking license? Obtaining an offshore bank license and negotiating offshore correspondent accounts have become extremely difficult in every jurisdiction except one. The lowest cost offshore bank license is Puerto Rico. Yes, the US territory of Puerto Rico is the best island in the Caribbean to negotiate an offshore bank license.

Puerto Rico is the lowest cost offshore bank license available anywhere in the world. And, it comes with the ability to get US correspondent banking relationships more efficiently than other offshore bank licensing jurisdictions.

Let me first clarify two terms.

When I write about an offshore bank license, I mean a banking license that allows you to do all types of international banking business. The only limitation is that you can’t accept clients from the issuing jurisdiction. So, an offshore bank licensed in Puerto Rico can accept clients from anywhere in the world (including the United States) except Puerto Rico. Likewise, an offshore bank licensed in Panama can accept clients from anywhere but Panama.

And, when I say Puerto Rico is the lowest cost offshore bank license jurisdiction, I mean the lowest set up, capital, and operating cost by a long shot. I mean that an offshore bank license in Puerto Rico can be had for a fraction of the cost and capital of any other jurisdiction.

To give you an idea of the cost difference, it would require 10 times the capital of Puerto Rico to set up in the country of Belize. The cost of operating in Cayman would be 17 times higher than the cost of operating in Puerto Rico.

  • The annual fee for the international banking license in PR is $5,000. This compares to $85,365.85 in Cayman. The cost of labor and all other services are dramatically higher in Cayman than Puerto Rico.

Puerto Rico has been aggressive in courting financial service, hedge fund, and banking companies since 2013. Their Act 20 which any US business to move to Puerto Rico and pay only 4% in tax. They also approved Act 22 which cuts the capital gains rate to zero for any American who moves to Puerto Rico and spends at least 183 days per year on the island (becoming a legal and tax resident of Puerto Rico).

An offshore bank licensed in Puerto Rico under Act 273 receives the same  4% tax rate. This tax holiday is guaranteed for 15 years. Also, full property and municipal license tax exemptions, 6% income tax rate on distributions to PR resident shareholders and a 0% tax rate on distributions to non-PR resident shareholders, are available to offshore banks licensed in Puerto Rico.

  • This article focuses on Act 273 and not Act 20  and 22. When doing your research, note the distinction between 273 for banks and 20 / 22. For example, Act 273 guarantees you a 4% rate for 15 years where Act 20 guarantees you the same for 20 years. Act 273 requires 4 employees where the latest version of Act 20 requires 5 employees.

Here’s a summary of the offshore bank license options in Puerto Rico:

Puerto Rico Full International Banking License – Requires capital of at least $300,000 to held by the central bank or in a bond (as stated in the Act: $300,000 financial guarantees acceptable to OCFI). Authorized shares are to be at least $5 million. Of this, only $250,000 must be paid-in.

Puerto Rico Restricted International Banking License – Capital held by the central bank or in a bond of $300,000 (as stated in the Act: $300,000 financial guarantees acceptable to OCFI). The authorized capital stock or the proposed capital, as the case may be, shall not be less than $500,000, out of which at least $50,000 shall be paid in full at the time the license is issued. This can also be referred to as a captive license.

In most cases, a full international banking license is required. Of the many banks licensed in Puerto Rico, only 1 has a restricted license.

A full international license in Puerto Rico allows you to provide financial services to other international financial institutions or to persons outside of Puerto Rico.  “Financial services” are any service which is generally accepted in the banking industry of the United States and Puerto Rico including:

  1. Accept deposits and borrow money from non-residents of PR.
  2. Accept deposits and borrow money from certain government institutions
  3. Place deposits in any PR bank and foreign banks organized in PR.
  4. Make loans to non-residents of PR. Issue letters of credit to non-residents or PR.
  5. Issue letters of credit for export activities to both PR resident and non-residents.
  6. Discount money orders and bills of exchange to non-PR residents.
  7. Invest in securities and stocks as well as PR government bonds exempt from tax
  8. Carry transactions in any currency and gold or silver and foreign currency trade.
  9. Underwrite and trade notes and debt instruments issued by a non-PR residents
  10. Engage in trade financing of import  and export of raw materials and finished goods.
  11. Act as a fiduciary, executor, administrator, registrar of stocks and bonds, custodian, trustee, agent and any other fiduciary capacity with non-residents of PR after obtaining a special permit from the government.
  12. Acquire and lease personal property on behalf of non-PR residents.
  13. Buy and sell security outside of PR on behalf of non-PR residents.
  14. Act as a clearinghouse of instruments of foreign persons
  15. Organize and manage international financial entities not related to residents of PR.
  16. Lend or guarantee loans originated in some governmental institutions.
  17. Purchase sub-standards non-performing loans from a PR bank.
  18. Establish branches outside PR in the continental USA or in other foreign country.
  19. Provide the following services:
    • Asset management.
    • Management of alternative investments.
    • Management of private capital.
    • Management of hedge funds
    • Management of pools of capital
    • Administration of trusts
    • Management of escrow  funds for non-residents of PR.

An offshore bank licensed in Puerto Rico gives you access to the US market and a wide range of corresponding banks.  In addition to the usual suspects, corresponding bank options include:

  • Scotiabank *
  • FirstBank Puerto Rico
  • Banco Popular de Puerto Rico
  • Banco Popular North America (US Bank at https://www.popularcommunitybank.com/)
  • Centennial Bank (a US bank in FL https://www.my100bank.com/)

    * Scotia has a partnership deal with Bank of America that can be leveraged.

Puerto Rico is the second largest offshore banking jurisdiction in the Caribbean after Cayman Islands. The Cayman Island has decades more history, 40 of the top 50 banks in the world, and a total of 196 banks licensed as of the end of June 2015.

This compares to about 50 offshore banks operating from Puerto Rico. That’s more than all of the other Caribbean islands combined… not counting Cayman, of course.

So, next time you hear about offshore banking jurisdiction “hotbed” like Belize with 6 banks, all combined holding less capital than one bank in Puerto Rico, you will have some sense of scale.  

Here is a partial list of the active banks in PR.

  • Pfizer International Bank – Int. License
  • Santander Overseas Bank – Int Lic.
  • Bank of Nova Scotia – General
  • Chase Manhattan – Int Lic
  • Citibank – General, but operate as an international bank
  • Popular Bank – General & Int. Lic ( publicly traded, operated in PR for 120 years, 52 yrs in US)
  • Puerto Rico International – Int. Lic
  • Metro America Int – Int Lic
  • Amtrade International Bank of Georgia – General
  • Charles Schwab Bank – General
  • BNC International – Int Lic
  • FirstBank International – Int Lic
  • Santander Overseas – Int Lic
  • WesternBank – Int Lic
  • OBT International – Int Lic
  • SB Pharmco (owned by Glaxo) – Int Lic
  • Bank of Southeast Europe – Int. Lic.
  • First Bankcorp – Int Lic
  • Oriental Bank – This is one of the larger local banks
  • VS International – Int Lic
  • Face Bank – Int Lic
  • BST – Int Lic
  • BBO Private – Int Lic
  • Paramount International – Int Lic
  • Bancredito Int – Int Lic
  • Italbank – Int Lic
  • Activo – Int Lic
  • ARCA – Int Lic
  • Nodus – Int Lic
  • Andcapital – Int Lic
  • Elite International – Inc Lic

For more information, please review my articles on offshore bank licensing and operation. I’ve been working in offshore banking for over a decade, so there are a few older posts floating around the web. My recent articles on the topic are:

I hope you have found this review of offshore bank licenses in Puerto Rico helpful. If you would like to setup a licensed bank in Puerto Rico, please contact me for a confidential consultation at info@premieroffshore.com or call (619) 483-1708.

IRS and panama papers
Christian Reeves

Mossack Fonseca Searchable Database Goes Online – Who Should be Afraid of the IRS and Panama Papers?

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Do you have a company or bank account in Panama? Are you wondering if you should be worried about the IRS and Panama Papers? Do you know that the searchable database of Mossack Fonseca clients came online today? Is the thought of the IRS knocking on your door keeping you up at night?

Let me explain who should be afraid of the IRS and Panama Papers and who has nothing to worry about. Hopefully this will help most of you to rest easy, and those who have issues will take action before it’s too late.

First, a bit of background. A few months back, a hacker stole the records of one of the largest incorporators and law firms in Panama, Mossack Fonseca. The German newspaper Sueddeutsche Zeitung obtained the 11.5 million files and shared them with the Washington D.C.-based group of investigative journalists. This trove of documents became known in the press as the Panama Papers.

The Panama Papers have shone a light on many illegal uses of offshore corporations and offshore bank accounts.  As Vice put bluntly in April, “The politicians who have taken and made bribes, dodged taxes, and amassed fortunes of unimaginable scale are your politicians.”

  • Click here for my interview with Vice on who should be afraid of the IRS and Panama Papers.

Also exposed have been scammers and fraudsters hiding behind shell companies. For example, companies setup by Mossack Fonseca were used to dupe over 1,000 UK residents in a ponzi scheme.

I applaud the person who obtained these documents for shedding light on the dark side of the industry. Cleaning out those who use offshore structures to hide crime – or even hypocrisy – is a worthy goal that helps those of us trying to do things the right way. Those who use offshore companies within the law to minimize taxation and maximize privacy.

But, what about privacy for those who are following the law? What should reporters do with this data? Should they have the right to report on the private dealings of thousands of innocent people with legitimate uses for these companies?

Isn’t this akin to receiving stolen business records and financial data from Apple and putting in on the front page? No newspaper on the planet would do that… it would be immoral.

Does anyone have a right to know that Simon Cowell formed two offshore companies in the British Virgin Islands to buy property in the Caribbean?

What about the fact that Jackie Chan has an offshore company to manage his international projects?

What about Mossack Fonseca drafting the contracts for the sale of David Geffen’s 377-foot-long yacht? The boat was flagged in Panama, which is very common. Do we need to know this?

It appears that these were perfectly legal and compliant entities. Are they newsworthy?

Is there no right to privacy in our business and financial dealings? Do those who write on these topics owe a duty of care when using stolen data?

Job well done by the hacker… now how about some level of responsibility from the reporters?

OK, I’m off my soapbox. Back to who should be afraid of the IRS and Panama Papers.

If you or your representative used Mossack Fonseca to form your offshore structure, you need to be prepared for that information to become public. A searchable database of 200,000 offshore accounts, and thousands of companies went online today.

This online database will list:

  • The name of anyone listed as a director or shareholder of an offshore company formed by Mossack Fonseca.
  • The names and addresses of more than 200,000 offshore companies.
  • The identities of dozens of intermediary agencies that helped set up and run those structures with Mossack Fonseca.

NOTE: If you have a company in Panama, you should ask your incorporator who they used as the resident agent for service of process. If your lawyer or tax planning firm incorporated through Mossack Fonseca, your data is probably in the public domain. Premier Offshore has never worked with Mossack Fonseca.

Most clients list themselves as the director and shareholder of the offshore company. Those who decided to be as transparent as possible in their dealings with Mossack Fonseca will be listed in the database.

In fact, I would never setup a company with a nominee shareholder or officer. To do so would put your corporate assets at risk. Nominee directors in Panama are fine – they have no power.

  • It is possible to keep your identity private in Panama without using a nominee. You can incorporate a Limited Liability Company in another jurisdiction, and use that company as the shareholder. In this way, you keep control of the assets while maximizing privacy. For more on this, checkout The Bearer Share Company Hack.

If you are listed in the Mossack Fonseca database, should you be afraid of the IRS and Panama Papers?

If you’ve been filing your US tax forms and reporting your transactions accurately, you have nothing to worry about. To you, the Panama Papers is a data breach that has compromised your privacy, but nothing more.

I suggest the Panama Papers won’t even increase your risk of an audit. At most, the IRS will compare your filing to the database, find that you are in compliance, and that will be the end of it.

Considering that your offshore bank is reporting your transactions to the IRS under FACTA, the Panama Papers is only giving unto the IRS that which they already receive.

On the other hand, if you have an unreported account or company in Panama, you should be very afraid. You know that the IRS will download the Mossack Fonseca database and use it to find those who are not in compliance.  

If you’ve used nominee shareholders or as singors on your bank account to avoid FATCA, you are now in extreme danger. The IRS will consider this “wilful” and come after you with a vengeance.

But you still have time to take action and save yourself. If you signup for one of the IRS Voluntary Disclosure Initiatives before you become a target, you will pay only interest and penalties.

If you are deemed willful, and the IRS comes looking for you, you are at risk of significant jail time.

The IRS is currently offering five flavors of the Offshore Voluntary Disclosure Initiative.

  • Offshore Voluntary Disclosure Program (“OVDP”),
  • Domestic Streamlined,
  • Foreign Streamlined,
  • Transitional Relief, and
  • Delinquent FBAR.

If the IRS might consider your actions willful or intentional, you need the Offshore Voluntary Disclosure Program. This program one is the most costly and complex, but it will save your bacon if you are nearly in the fire. The OVDP gives you cover for your prior bad acts and a get out of jail card – not for free – but out of jail.

The OVDP requires you file 8 years of amended tax returns and FBARs, plut pay taxes, interest and a 20% penalty on whatever you owe. Now for the kicker, there’s also a 27.5% penalty on your highest offshore account balance. In some cases, that penalty may be 50% depending on the bank and timing.

  • If the bank where your account is located is under investigation when you apply for the OVDP, the government figures they would have caught you eventually and charge a 50% penalty.

If you are living abroad, or you have paid US tax on your income, but forgot to submit a form or two, you might qualify for OVDI Lite. Penalties for these programs range from zero to 5%, and the cost of getting back in the government’s good graces will be much lower than the OVDP.

No matter the cost, I can guarantee you that the risk of doing nothing far outweighs the financial burden of coming forward now.

To repeat, if you have an undeclared an account in Panama, you MUST take action before the IRS finds you. If you or your Panama structure are out of compliance, you should be very afraid of the IRS and the Panama Papers.

I also suggest anyone with unreported accounts or offshore companies in Panama should join the OVDI. Just because you were lucky and did not use Mossack Fonseca to incorporate your corporation, don’t think you are safe. I expect the IRS to pressure Panama to report all foreign structures owned by Americans. I think that this is just the tip of the offshore corporation iceberg in Panama.

I hope you found this article informative. Click here for my interview with Vice on who should be afraid of the IRS and Panama Papers. Please contact me at info@premieroffshore.com or call us at (619) 483-1708 for a confidential consultation on the IRS Offshore Voluntary Disclosure Initiative.

second passport
Christian Reeves

Top 16 Second Passport and Residency Programs

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Summary of Second Passport and Residency Programs of 16 Countries

Below is a summary of the costs and procedures for obtaining residency in the 16 most commonly requested countries. As you know from reading my post on the 10 Best Second Passports, I believe that St. Lucia is the best value for a second passport.

I rank Bulgaria as the best combination of value and quality and Austria is far and away the best passport available at any price.

This article covers the following countries:

  1. St. Lucia
  2. Dominica
  3. St. Kitts
  4. Panama
  5. Austria
  6. Jersey
  7. Monaco
  8. Grenada
  9. Slovakia
  10. Hungary
  11. Bulgaria
  12. Cyprus
  13. Portugal
  14. Malta
  15. Uruguay
  16. Antigua

[sta_anchor id=”St Lucia Second Passport”]

St Lucia

St. Lucia – Summary of process to Citizenship

You can purchase a passport or make an investment in government bonds to gain citizenship in St. Lucia. Most applications are completed within 90 days from submission. As you read the St. Lucia statute, you will find there is a real estate investment option in addition to the purchase and government bond program. There are no approved real estate projects at this time, so I will not discuss that here.

I like St. Lucia because of the option to invest in non-interest bearing government bonds for 5 years. The investment amount is $500,000 to $550,000. Alternatively, you can buy a passport without an investment for $200,000 to $250,000.

When you compare St. Lucia to its neighbors, it costs a fraction because you get your investment capital back in 5 years. No interest is paid. Total cost would be fees plus interest lost / opportunity cost of the capital invested into government bonds.

Investment Options: Cash Purchase / Government Bonds

The cost for one applicant for the purchase option is:

Legal / Background Check / Filing fees: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Processing: $2,000 single

Donation to Economic Fund: $200,000 single person +$25,000 per dependent

Government bond option is:

Legal / Background Check / Filing fees: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Processing: $2,000 single

Investment Required: $500,000 to $550,000 **

* Due diligence fees are fixed by statute. But, in my experience, the statute was written for US, UK, Canada, etc. passport holders. There might be some minor additional costs in your case. We do not mark-up the due diligence fees, so they will be billed by the government. See the attached document for more information.

** Your investment in government bonds is returned at the end of 5 years.

Residency Period: None, it’s a cash for passport program.

[sta_anchor id=”Dominica Second Passport”]Dominica

Dominica – Summary of process to Citizenship

You can purchase a passport or make an investment in real estate to gain citizenship in Dominica. Most applications are completed within 90 days from submission. We recommend the purchase program over the investment program.

Investment Options: Cash Purchase / Real Estate

Cash Option:

Purchase Price: $100,000 for a single applicant, $175,000 for an applicant with spouse, $175,000 for an applicant and up to two children below 18 years, $200,000 for an applicant, spouse and two children under 18

Additional $50,000 for each dependent (children over 18 and parents of the applicant over 65 years of age)

Real Estate Investment Option:

Purchase Price: $100,000 per adult  applicant and $50,000 per dependent 21 years and under. Two or more applicants may apply for Citizenship by Investment together by purchasing one piece of real estate,

Government Fees:

Main Applicant $50,000

Spouse of main applicant $25,000

Children $20,000 for each child of the main applicant under 18 years

Dependents $50,000 for each dependent over 18 years of age

Other Costs:

Typical Legal / Due Diligence / Processing / Registration: Contact us for a quote at info@premieroffshore.com or call  (619) 483-1708

Residency Period: None, it’s a cash for passport program.

You will be able to travel on your Dominica passport without a visa to more than 90 countries, including the United Kingdom, Switzerland and many others.

[sta_anchor id=”St Kitts Second Passport”]

St Kitts

St. Kitts – Summary of process to acquire Citizenship

The St. Kitts and Nevis passport is the most common second passport available. It offers:

  • Visa free travel to European Schengen area including UK, and Ireland along with other 80 countries
  • No prior residence requirements
  • No income or wealth tax.
  • Citizenship for family members (spouse and children)
  • Lifetime citizenship and no restrictions on Dual citizenship

To qualify for citizenship of St. Kitts and Nevis under its Citizenship-by-Investment Program, the Government requires either:-

Purchase Price: A non refundable charity donation of minimum US$ 250,000 to the Sugar Industry Diversification Foundation (SIDF) for single person + payment of processing fees.  For accompanying family members (see below).

(or)

Investment option: Designated recoverable Real Estate Investment with a value of at least US$ 400,000 plus payment of various registration and other fees. For any accompanying family members, additional costs apply (see below).

Typical Legal Fees: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Fees and Costs: Minimum investment: $250,000 (SIDF) or $400,000 (Real Estate) Government Fee: $50,000 per person

Due diligence fee: $7500 per person

Passport fee: $350 per person

The total cost around $292,000 per person. Additional costs apply for dependents and family members.

[sta_anchor id=”Panama Second Passport”]

Panama

Panama – Summary of process to earn citizenship through residency

Panama is the lowest cost and most efficient residency program program for those from a favored nation. The favored nations program is our most popular residency opti0on.

If you do not hold a passport from a partner country, the POM visa below is for you. See also Restricted Country Visas.

Keep in mind that the options above allow you to get a second passport through investment or by making a “donation.” Panama offers a residency program that might turn into a passport 4 years in the future. So, we are not comparing equivalents here.

Purchase price: None

Investment Option: $0 Favored Nations and $250,000 Restricted Countries

Typical Cost: $8,750 Favored Nations and $50,000+ Restricted Countries / Person of Means

Residency period: 4 years

If you’re not from a ‘favored nation’ and you’re not planning to be employed or start a business in Panama, the Person of Means (POM) visa is your best option. In order to qualify, you must make an investment in real estate or deposit USD 250,000 into a Panama Bank.

You have three options available to obtain your POM visa:

  • Purchase real estate property in Panama in your own personal name, for a minimum value of USD 300,000 and you must submit proof of economic solvency to cover your daily living expenses in Panama;
  • Establish a fixed-term deposit in a Panamanian local bank, for a period of at least two years and for a minimum amount of USD 250,000;
  • You can combine the two previous options, provided the total adds up to at least USD 300,000. For example, if you buy real estate in your own name which costs USD 260,000, you may place the remaining USD 40,000 in a fixed two-year deposit to qualify for this permit.

A provisional POM visa is granted for one year and permanent residence is granted from the second year onwards (together with the right to obtain an official Panamanian identification card). Five years after obtaining the permanent visa, holders will also have the option to apply for Panamanian citizenship (read Panamanian nationality).

[sta_anchor id=”Austria Second Passport”]

Austria

Austria – Summary of Process to acquire Citizenship

Purchase Price: EUR 3 million

Investment Option: EUR 10 million

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: None

A passport from Austria is by far the most valuable available. The price is commensurate with the value.

Austria offers business investors citizenship and an EU passport immediately without a residency requirement on the basis of an investment in the country. This requires:

A minimum of at least EUR 3 million in Austria economy (donation to a charity)

(or)

A direct minimum investment of EUR 10 million+ in economy of Austria

makes one eligible for Austrian citizenship. An investment is usually done by starting or moving a sizeable business to Austria.
Austria Charitable Donation Route

This requires donating at least EUR 3 million to a public project or private project of public interest, recognized as providing extraordinary benefits. This might be in the form of an endowment for a scientific research, a contribution to an important museum, university, or similar. The can be spread out over several years.

Austria Direct Investment Route

Under the direct investment route, (§10/6 of the Austrian Citizenship Act), an applicant is required to provide extraordinary benefits to the Austrian State. This is usually in the form of direct investments in local business creating jobs or generating new export sales, etc. For example, manufacturing factories, science and research technology project, normally qualify under direct investment. A minimum equity investment of at least EUR 10 million is expected. the exact amount is negotiated with the government before the investment is made.

Investments in government bonds, real estate, etc. do not qualify under citizenship program.

[sta_anchor id=”Jersey Second Passport”]

Jersey

Jersey – Summary of process to acquire Residency

Purchase Price: None

Investment Option: £125,000 tax payable per year

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: None

Note that this is a residency program only. it does not lead to citizenship. It is set up for EU citizens to minimize tax. It’s not efficient for US citizens looking to maximize the benefits of the Foreign Earned Income Exclusion.

To achieve High Value Residency status and be eligible to purchase property in Jersey the prospective applicant must make a contribution to the Island’s tax revenues; at the present rates of tax, the annual tax contribution would be in the region of £125,000, calculated on a sliding scale based on 20% of the first £625,000 of worldwide income and 1% on all income thereafter. Applicants are required to provide financial and other information in support of their application to take up residence in Jersey, evidencing sufficient capital wealth in order to produce in excess of £125,000 in tax revenues for the Island.

Once High Value Residency status has been granted, the applicant may apply for consent to purchase a property and will be granted the same status as other residentially qualified Islanders. They can be employed and employ and set up their own business in the Island and will be expected to purchase a single residential property worth in excess of £1m.

[sta_anchor id=”Monaco Second Passport”]

Monaco

Monaco – Summary of process to acquire Citizenship

Purchase Price: None

Investment Option: EUR 1 million

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 10 years / present in the country at least 6 months of each year

To become a Monaco permanent resident (and ultimately a citizen), a foreign national must meet several requirements. First, you must invest a minimum of 1,000,000 euros – 500,000 euros of which must be deposited and kept in a Monaco bank. The other 500,000 euros to be invested in real estate. Additionally, you should prove to the Monaco government that you have sufficient bank funds to support yourself in the country.

As a resident, you can open a business in Monaco.

Once approved, you and your family are given permanent resident status. As permanent residents, you are eligible to live, work, and travel in Monaco. After ten years, you  may apply for citizenship as long as the family spent at least 6 months of every year in Monaco.

While the investment amount is relatively low, this program has one of the longest residency periods.

[sta_anchor id=”Grenada Second Passport”]

Granada

Grenada – Summary of process to acquire citizenship

Purchase Price: None

Investment Option: $500,000

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency period: 2 years

Program Details:

Option One: US $350,000 to $500,000 investment required per applicant.

The most common investment in Grenada is to purchase a condominium and shares in a real estate project, such as a hotel. Investments are approved on a case by case basis.

Option Two- Non refundable Donation

A non-refundable donation to the Island Transformation Find of about $220,000 per person. This process involves first obtaining Grenada Permanent Residency and then applying for naturaliza

[sta_anchor id=”Slovakia Second Passport”]Slovakia

Slovakia – Summary of process to acquire Citizenship

Purchase price: None

Investment Option: 3,000,000 EUR

Typical Costs: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 8 Years

Citizenship of the Slovak Republic may be granted to an applicant who is not a citizen of the Slovak Republic and:

  • has a continuous permanent residence in the Slovakia for at least 8 years immediately preceding the application for citizenship,
  • has no criminal record,
  • has a criminal record but:

– wasn’t a sentence of expulsion by a court,

– is not conducted by the prosecution,

– against him/her there is not conducted extradition proceeding or proceedings to execute the European arrest warrant,

– is not held on the deportation proceedings,

Citizenship by Investments: Procedure involves acquiring temporary residence, permanent residency, and then applying for citizenship. Citizenship will require an investment of at least 3,000,000 EUR. The more you invest, the better your chances of being approved. The result (Slovak citizenship and passport) can be obtained in 12-18 months. Your investment must create new jobs for Slovak citizens and/or or bring new technology. Decisions on citizenship applications are taken on case-by-case basis subject to approval of the relevant ministry and then by the Ministry of Interior. This option of citizenship without residence requirement is available not only for investors but also for people of art, science, etc., who contribute significantly to the interests of Slovakia.

[sta_anchor id=”Hungary Second Passport”]

Hungary

Hungary – Summary of process to acquire Permanent Residency (not citizenship)

Purchase Price: None

Investment Option: EUR 300,000

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: Renewal every 5 years

You can receive a permanent residency permit in Hungary by purchasing a specially issued bond with a value of EUR 300,000 with a maturity of minimum 5 years. The applicant may purchase the above bond as an individual or via his/her majority-owned company. No language and physical residency requirement are in the program.

The bond is issued by a finance company which received a permission from the Economics Committee of the Hungarian Parliament. This finance company is legally required to immediately buy a specially-issued government bond from the investment proceeds. Thus, the bonds issued by the finance company are fully backed by the Hungarian Government Bonds. The finance company is also required to file a monthly list of participants in the Residency Bond System to the Immigration and Citizenship Authority.

After investing at least EUR 300,000 under the Investor Residency Bond Program, a residency permit valid for 6 months will be issued to you and your family (wife and kids under 18 years old). Afterwards, this permit can be converted to a permanent residency (card is valid for 5 years and renewed automatically).

Hungarian residency permit enables the applicant to live in Hungary, and visit (to a maximum of 90 days from any 180 days) any Schengen country. At the same time it should be noted that at present the program has no path to citizenship.

[sta_anchor id=”Bulgaria Second Passport”]

Bulgaria

Bulgaria – Summary of process to acquire citizenship

Purchase Price: 305,000 EUR (approximate based on currency fluctuation)

Investment Option: 512,000 to 1,024,000 Euro

Typical Costs: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 2 to 5 Years

Permanent residence is granted upon investment of 512,000 EUR (BGN 1,000,000). This is a conservative investment which is made into government bonds. After 5 years money will be returned without interest. The investment / bond is guaranteed by the government.

You will be eligible for citizenship after 5 years with this program.

Fast track citizenship is available to those that make a second investment of 512,000 EUR into a qualified Bulgarian business or government bonds. This second investment should be made 1 year after you obtain permanent residency and held for at least 2 years.

The Bulgaria program is identical to the St. Lucia program – just double the cost or investment for a more valuable passport.

[sta_anchor id=”Cyprus Second Passport”]

Cyprus

Cyprus – Summary of process to acquire Citizenship

Residency by Investment: 300,000 EUR

Citizenship by Investment: 2,500,000 – 5,000,000 EUR

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 3 Years

Permanent Residency by Investment of 300,000 EUR

Citizenship by Investment 2.5 Million Euros

Permanent residency is granted to those who buy a property valued 300,000 EUR in Cyprus. Only new properties may be purchased under this program. Applications are normally processed in a couple of months (quite fast). In addition, the applicant must have a three years deposit 30,000 EUR with a Cypriot bank and must demonstrate annual income of 30,000 EUR.

Cyprus Citizenship by Investment

The average time-frame for the obtaining of a Cyprus passport is 90 days after the submission of the completed application.

To be granted the Cyprus (European Union) passport, investors and entrepreneurs apply personally or through a corporation.  You should invest €2.5 million to qualify for citizenship.

The investment can be made in:

(a) government bonds;

(b) financial assets of Cypriot companies or organisations;

(c) real estate, development and infrastructure projects; or

(d) purchase, incorporation or participation in Cypriot businesses and companies.

You are  also required to have a residence in Cyprus of at least €500,000 unless you chooses to invest the amount of €2.5 million in the purchase of residential property/properties. The most frequent option is the investment in real estate (residential property).

That is to say, you must invest at least €500,000 in a residential property or properties. You might invest €2 million in government bonds and €500,000 into a residential property.

[sta_anchor id=”Portugal Second Passport”]

Portugal

Portugal – Summary of Process to acquire Citizenship

Purchase Price: None

Investment Option: 500,000 EUR

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 6 years

This is a residency program with a path to citizenship. You will become eligible to apply for citizenship and a passport after 6 years from the date initial residency permit is issued.

Investment amount is 200,000 – 500,000 EUR irrespective of number of applicants in the family (amount depends upon the type of investment and region). In addition to the investment you will be expected to pay taxes in the amount of 8,8 % from the property price: 1) Transfer tax of up to 8%, and 2) Stamp duty of 0.8%. Government processing fee (application and renewal) – 514 EUR (plus 80 EUR per family member). Also, the Government charges 5,148 EUR for every visa. For a family of four, visa fees are over 20,000 EUR.

In order to apply for citizenship in Portugal you will need to show 6 years of legal residence + good command of the Portuguese language. You must live in Portugal full time for these 6 years.

[sta_anchor id=”Malta Second Passport”]

Malta

Malta – Summary of Process to acquire Citizenship

Purchase Price: None

Investment Option: EUR 350,000 + residence or rental + EUR 150,000 bonds

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: No specific years

Maltese Citizenship by Investment:

Contribution to the National Development & Social Fund. To qualify for Maltese citizenship the main applicant is required to contribute at least EUR 650,000. Spouses and children are required to contribute EUR 25,000; unmarried children between 18 and 25 and dependent parents older than 55 years old must contribute EUR 50,000 each. This contribution is to be made after the approval of the applicant’s citizenship application.

You must commit to retain a residence in Malta for a period of at least 5 years, either through the purchase of a property, for which the minimum value must exceed EUR 50,000, or through leasing of a property, for which the minimum annual rent must exceed EUR 16,000.

In addition, an investment of EUR 150,000 in Government approved financial instruments, which must be maintained for a minimum period of 5 years is required.

When you acquire citizenship under the Malta Individual Investor Programme, you and your family enjoy full citizenship for life, which can be passed onto future generations by descent.

Due Diligence Fees

Due diligence fees are as follows: EUR 7,500 for main applicant; EUR 5,000 for spouses, adult children and parents; EUR 3,000 for each child between 13 and 18 years old. Due diligence fees are non-refundable even in the case when citizenship application is not approved.

[sta_anchor id=”Uruguay Second Passport”]Urugua

Uruguay – Summary of process to acquire citizenship

Purchase Price: None

Investment Option: USD 100,000 per applicant

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 3 to 5 Years

Requirements: USD 100,000 investment per applicant for 10 years plus proof of pension earning $1,500 USD per month.

Citizenship: You may apply for citizenship after 3 or 5 years of residency. 3 years for married applicants and 5 years for single applicants. Due to high demand, processing time can reach 24 months.

The Process:  File for residency at the National Migration Office.  Get your first temporary identity card (cédula). Open a bank account, do the health check and Interpol (if applicable). Within 60 days we will file the rest of the documents on your behalf.

Once residency is granted you will be required to live in Uruguay 8 to 10 months in your first year and then at least six months after that. This is not an absentee residency program, it is for those who wish to move to Uruguay and make that country their home.

This is a great passport, but you must be committed to Uruguay to make this work. And citizenship is not guaranteed.

Uruguay passport is an excellent travel document, allowing the visa-free access to all of South America, MERCOSUR, and Europe’s Schengen Area. While a visa is required to visit the United States, approval rates are higher than other South American countries, so Uruguay is seen as a road to America.

Now for the bad news: About 50% of citizenship applications that meet the requirements are refused by judges for a myriad of reasons. If you want to turn your residency card into a passport, you must be committed to Uruguay, be well connected, and make the right donations and contributions to local elections.

[sta_anchor id=”Antigua Second Passport”]

Antigua

Antigua – Summary of process to acquire citizenship

Purchase Price:

Investment Option: $292,000

Typical Cost: Contact us for a quote at info@premieroffshore.com or call (619) 483-1708

Residency Period: 5 years

Antigua and Barbuda has a new economic citizenship by investment program for investors who can directly acquire citizenship and passport by donation to a charity or buying a real estate.   Antigua & Barbuda is one of the most beautiful island nation in Caribbean with excellent beaches and posh climate to enjoy your winter vacation.

Antigua Barbuda passport is a great second passport for investors who want visa free travel.

Under the Citizenship program, there are following investment options (limited time offer) :

  • USD 200,000 donation to National Development fund (NDF)  (or)
  • USD 400,000 investment in real estate (or)
  • USD 1.5 million business investment (or)

Additional costs for family and children apply.

For example: The cost for single person is about $310,000 plus legal and processing.

The passport is granted for 5 year validity period after it is renewed.

Benefits of the passport include visa free travel to EU countries, Canada and UK.

Christian Reeves

10 Best Second Passports and Citizenship by Investment Programs For 2016

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Here are the 10 best second passports for 2016. The citizenship by investment industry has undergone a lot of changes in the last year, including a major change to the St. Kitts passport offering. It’s has been kept quiet by those hyping this passport, but I’ll give you the full story here.

Here’s everything you need to know to buy the best second passport in 2016.

How to Value a Second Passport

First, let’s talk about how to value a second passport. The best second passport is a) the one you can afford b) that gives you visa-free travel to the most countries. The smaller the number and the less desirable the countries, the less you should pay.

For example, a second passport from Austria is the 4th most valuable travel document in the world and the most valuable second passport you can buy. This is because it gives you visa-free access to 171 countries.

That is to say, a second passport from Austria is a group 4 travel document. A group 1 passport gives you visa-free travel to 174 countries. Group 1 passports are those issued by the US, UK and Germany. Group 2 offers travel to 173 nations including Canada. Group 3 gets you access to 172 countries and is a passport from Belgium and Netherlands.

Because an Austrian passport gives you visa-free access to 171 countries, it’s a 4th tier passport and the best second passport you can buy… if money is no object. By comparison, Dominica gives you visa-free travel to 91 countries and is thus in the 41st tier.

A second passport from an EU country (Bulgaria, Hungary, Malta, Cyprus or Austria) also gives you the right to live and work anywhere in the European Union.

Finally, the number of visa-free travel countries gives you an indication of how your new passport will be received by world banks. An EU passport will allow you to open an account anywhere in the world. A passport from St. Kitts will have fewer options, but generally accepted. I expect it to be nearly impossible to open an account abroad with a passport from Comoros (last on my list of 10 best second passports).

Don’t Fall for a Second Passport Scam

There are a lot of online charlatans promising cheap passports, diplomatic passports, or banking passports. All of these are scams…. plain and simple, nothing to debate, they are scams.  

There is no easy or cheap way to get an authentic second passport.

Think of it this way: governments around the world need to raise hundreds of millions of dollars to fill up their coffers. And second passports are are a multi billion dollar business. There is is not lack of customers… in fact, demand often outstrips supply.

In such a market, countries are not interested in diminishing their brand by selling you a passport for $50,000. If anyone tells you different, or they claim to have a guy who can “hook you up,” run the other way. 

A Word of Advice to US Citizens on Second Passports

If you’re a US citizen, note that owning a second passport doesn’t change your US tax filing or paying obligations. So long as you’re an American citizen, you must pay tax on your worldwide income. Also, offshore banks will continue to report to the IRS under FATCA.

A second passport  will allow you to travel and invest with more privacy. It is also the first step in renouncing your US citizenship. You must have a new passport in hand before you dump your blue travel document.

You might be thinking to yourself, how will the bank know I’m an American? What if I have all of my documents from, for example, St. Kitts? What will tie me back to the US of A? What if I change my name to further frustrate the records search?

Uncle Sam and the IRS are way ahead of you. All second passports now list your country of birth. If you were born in the US, the bank will see this on your second passport and list you as an American until you provide them proof you’ve renounced your citizenship.

This was a big issue back in 2014. Countries began blocking St. Kitts citizens from entry on grounds that the passport could be used to facilitate terrorism. Of course, this was at the behest of the United States who was looking to enforce it’s FATCA system.

As a result, St. Kitts was forced to recall all passports issued from January 2012 to July of 2014… possibly as many as 16,000 documents. It reissued them with the holder’s place of birth and any other names by which he or she had been known.

A second passport has many benefits, but it doesn’t allow you to cut out Uncle Sam.

Best Second Passports for Sale

Here’s my list of the 10 best second passports for sale. I’ve compared the price to the number of visa-free countries, as well as access to the EU and United States. For this reason, my top 3 passports are all from the EU.

Russia, in 4th position, is a unique opportunity. Citizenship requires you to set up or invest in to an active business in the country. Because of the weakness of the ruble vs the dollar, Russia is currently a value proposition.

Bulgaria

I rate Bulgaria #1 as the best second passport available because it’s one of the two programs where the investor is likely to see her investment again. This offering allows you to invest €512,000 in government bonds in exchange for residency. Then, after a year, invest another €512,000 to gain citizenship. There are also business investment options.  That’s about $1.2 million.

The Bulgaria program ties up your cash for 5 years interest free. That’s right, the government bonds do not pay interest. It will take two years to get your passport and requires you to visit Bulgaria twice. Residence is granted with acceptance and processing of your clean background check.

Most of the programs listed in this best second passport post charge you a fee for the passport. Bulgaria and Cyprus (below) are the only ones where you can expect your principal returned.

  • St. Kitts and other offer real estate investment options, but those come at significant additional cost and your prospects for selling for the purchase price are limited.

A passport from Bulgaria is rated 18th in the world and gives the holder visa-free travel to 153 countries, including Switzerland the United Kingdom. It doesn’t get you visa free in to the US… only Malta and Austria do that. It also allows you to live and work anywhere in the EU.

A passport from Bulgaria may allow you to work in the UK. There has been some political maneuvering on this point and the results are not yet known.

As a partial member of the Schengen region, Bulgaria gets you access to all of Western Europe. Things are changing quickly in this regard as Bulgaria works to become a full member. For more information, see: The Cost for a Second Passport from Bulgaria will Double Next Year

St. Lucia – Best value in 2016

The St. Lucia second passport program is new for 2016 and modeled after the Bulgaria citizenship program. With St. Lucia, you have the option of buying the passport for $200,000 to $250,000 or investing $500,000 to $550,000 in government bonds for five years.

Because this is a new program, very few second passports have been granted. In my opinion, this makes citizenship from St. Lucia a more private and “below the radar” purchase or investment. I prefer these smaller programs to the big names like St. Kitts which has received a lot of attention in the last few years.

St. Lucia provides visa free travel to 121 countries as well as visa free travel to Switzerland or 180-days in the Schengen area of the European Union. Click here are all the visa free countries. At half the cost of Bulgaria, St. Lucia is the best value in 2016.

You could say that the St. Lucia second passport program allows you to double your money in 5 years. Rather than paying $250,000, you invest $550,000, get a passport immediately, and your capital is returned in 5 years.

When you compare St. Lucia to its Caribbean neighbors, it costs a fraction because you get your investment capital back. Total cost would be fees plus interest lost / opportunity cost of the capital invested into government bonds.

Malta

Like Bulgaria, Maltese citizenship gives you the right to live and work anywhere in the European Union. It also allows you to travel visa-free to the United States. Malta and the US have a Visa Waiver program, which operates a bit differently from other systems. 

A Malta passport also gives you access to Switzerland and visa-free travel to 166 countries. A passport from Malta is the 8th most valuable travel document.

The cost of a Maltese passport is $1.57 million dollars plus fees. Expect it to cost around $1.85 million “all in.”

This program is capped at 1,800 passports and there’s a requirement to “reside” in Malta. The number of days you are to be present on the island are not stated and it’s understood you won’t be a full time resident (someone who spends more than 6 months in country). But you should plan to spend “a reasonable amount of time” in Malta, whatever that means.

Cyprus

Cyprus is the third smallest nation in the European Union and made it on to the world stage by seizing wealthy foreigners cash to bail out their banks during their 2013 recession. Surprisingly, from this mess came their current citizenship offer.

In order to bring back international deposits, and ensure these investors wouldn’t face a similar fate, Cyprus began offering passports and citizenship with investments of €2.5 million. As a second passport holder you will receive the same rights and protections of any Cyprus citizen.

Another use of the citizenship program was to compensate the mostly Russian foreign depositors whose cash they’d “borrowed” and converted into equity. Many of these high net worth Russian investors were given special deals in appreciation for their mandatory contribution.

Austria

Austria is the gold standard of the second passport and citizenship by investment programs. If money is no object, this is the passport to buy.

It’s the most valuable passport available for purchase, the best EA passport, and offers visa-free travel to 171 countries. A second passport from Austria is the 4th most valuable passport in the world.

And it’s the most expensive second passport. You can qualify by making a donation of €2 to €4 million or by investing about €10 million in an approved business. Such a business is expected to employ a significant number of people and generate taxable income. The amount of investment and business type are negotiable.

Expect fees and other charges to exceed $500,000 in this program.

Russia

Like the Austrian business program, this citizenship by investment option was approved and signed in to law in late 2014. It’s just getting started and no second passports have been issued as of this writing.

Russia requires you to invest in to a business or setup your own venture that will employ a number of people and generate tax revenues to the country.

Because of the value of the ruble to the US dollar, the Russian offer is one of the most cost effective… and the only from a world power. You might qualify with an investment $165,000.

In 2014, Russian citizens had visa-free or visa on arrival access to 100 countries and territories. This will change in 2015. For example, Ukraine will probably be removed from the list. A Russian passport currently ranks 38th in the world.

Please see my post Russian Second Passport Program for more information. Remember that this opportunity is focused on bringing business and jobs into Russia rather than cash from the sale of passports, so it functions differently from the others described here.

Dominica

Dominica is the least expensive of the Caribbean passports. A second passport from Dominica will cost a family of four (applicant, spouse and two children under 18-years-old) about $250,000, plus $25,000 for each additional child under age 25. With filing, registration and professional fees, applicants can anticipate a total cost of $350,000.

To put it another way, a family of four can obtain economic citizenship and second passports from Dominica for less than the cost of a single passport from St. Kitts.

The discount is necessary based on how we value second passports. A travel document from Dominica gets you visa-free travel to only 91 countries, making it the 41st most valuable travel document.

Please see my Second Passports article for fees and other information on Dominica (near the bottom of the page).

Antigua and Barbuda

Like St. Kitts (below), you can buy an Antiguan passport for a $275,000 donation or a $500,000 investment in real estate, plus about $60,000 in fees. Also like St. Kitts, the passport gives you visa-free travel to 132 countries and is ranked 24th.

The St. Kitts and Antigua programs are mirror images of each other. If you’re going to buy the passport by making a donation to the government, you might as well save yourself $50,00 and go with Antigua. If you choose real estate, then St. Kitts might be the better choice.

As of April 14, 2015, a second passport from Antigua gives you visa-free travel to Canada, where a passport from St. Kitts does not.

St. Kitts and Nevis

St. Kitts has become the #1 seller of second passports in the world. You can buy a passport with a $295,000 “donation” to their sugar fund or by investing at least $500,000 in real estate. You never need visit St. Kitts nor take a citizenship test… simply pay the money or buy the property and you’re good to go.

Unless you plan to live in St. Kitts, I recommend the “donation” option. Real estate in St. Kitts is overvalued. When you add in taxes and maintenance costs, you’re better off paying the fee. And you’ll be lucky to find a single family home for around $500,000… more likely $800,000 to $1 million.

If you insist on the real estate tract, consider a condo timeshare. But, be warned, the island is filled with mostly empty timeshares and you’ll have a tough time recouping your “investment.”

The St. Kitts passport will get you visa-free travel to 132 countries, with Brazil being recently added to the list. Unfortunately, in November of 2014, Canada announced it would no longer allow St. Kitts citizens to enter without a visa.

The St. Kitts passport is ranked 24th in the world in 2016. Expect it to drop a few notches in 2015. Please see my Second Passports page for details.

Grenada

Grenada reopened its citizenship by investment in 2014 (having closed it from 2001 through 2013). The current version requires an investment of $250,000 in an approved real estate project.

A second passport from Grenada lets you access 110 countries, including the United Kingdom, Hong Kong, South Korea, Singapore, Panama, and most British Commonwealth nations. It does not give you visa-free travel to Canada or the US.

As far as I can determine, only one real estate development has been approved, the Mount Cinnamon Resort and Beach Club. Had there been more investment options, I may have ranked Grenada above St. Kitts. It’s a second passport which is not on anyone’s radar and a transaction which can be completed in private.

 

Residency / Long Term Options

If you’re willing to wait a few years, and to live in the country to prove your commitment, you can earn citizenship after a period of residency. The best options are:

  • Argentina (2 years),
  • Belgium (5 years),
  • Singapore (3 years),
  • Uruguay (3 years if married 5 if single),
  • Paraguay (3+ years),
  • Australia (4 years),
  • Chile (5 years), and
  • Panama (5 years),

Of these, my favorite is Panama. Panama offers the best tax deal and residency can be obtained for as little as $8,500 (single applicant) through their “favored nations visa” program.  It’s also possible to get residency in Panama for free if you combine it with an investment in teak. For more on  this, see: Best Panama Residency Program by Investment.

I hope you’ve found this post helpful. For more information on second passports and economic citizenship programs, please contact me at christian@premieroffshore.com.

IRS Can Revoke Passport
Christian Reeves

Warning: The IRS Can Now Revoke Your Passport

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This is an urgent warning for Americans living, working, investing, or doing business abroad. The IRS now has the authority to revoke your passport. If you have unfiled tax returns or you owe more than $50,000, the government can take away your US passport. Also, the Service can now refuse to issue a passport to anyone owing more than $50,000.

On December 4, 2015, President Obama signed into law H.R. 22, a 5-year, $305 billion infrastructure spending bill to address the nation’s aging and congested transportation systems. Buried on page 1,113 of this massive bill was a chapter titled Revocation or Denial of Passport in Case of Certain Tax Delinquencies. This section gives the IRS control over your person and your right to travel, live, work, bank, invest, protect your assets, and conduct business outside of the land of the free.

The government tried this same back in 2012, but it was met with resistance from all sides. In fact, the suggestion never made it out of committee. This time around, things were different. The change to our tax code was tagged onto a bill that either no one read or no one had the guts to stand up to. Apparently the need for infrastructure improvement and the amount of pork it would bring to so many States, not to mention the need to increase revenues from the producers, trumped your right to travel, self determination, and to international commerce.

H.R. 22 adds section 7345 to the Internal Revenue Code. The law says the State Department can revoke, deny or limit passports for anyone the IRS certifies as having a seriously delinquent tax debt in excess of $50,000.

  • I read this to mean that the IRS can revoke your passport if you owe back taxes or have unfiled returns. This is because failure to file typically results in returns being prepared by the IRS computers on your behalf, no human intervention or review required.  These computer generated return create a balance due and then a tax debt. See SFRs below for more information.

The amount of $50,000 includes interest and penalties, so it’s a very low threshold. If your tax debt has been around for a few years, it’s common for 50% to 75% of the amount owed to be from interest and penalties.

The standard FBAR penalty starts $10,000 per year and can reach as high as $100,000. The same goes for Foreign Corporate returns. Specifically, IRC Section 6038(b)(1) provides for a penalty of $10,000 for each Form 5471 that is filed after the due date.

This is all to say, $50,000 is pocket change when it comes to a tax dispute involving an offshore company or business.

Here’s how a tax debt gets “certified” without you ever being notified.

Let’s consider the word “certify” for a minute. As I said above, anyone the IRS certifies as having a seriously delinquent tax debt in excess of $50,000 is at risk.  The IRS can “certify” a debt by simply printing out a report showing their internal processes were followed and that the computer says you owe money. No need to prove their case in court, get a judgment or collection order from a judge as is required in all other civil cases, audit the file, or even telephone the taxpayer and ask for an explanation. If the computer says you owe money, your passport can be revoked or refused.

Let’s say you’re living abroad and haven’t filed your tax returns for a year or two. The IRS computers get a report of your offshore accounts under FATCA and generate what are called Substitutes for Returns (SFRs). SFRs are prepared on your behalf using whatever data the computers has with zero deductions, exemptions, or expenses. The balance due from an SFR is always much higher than had you prepared a proper return.

Once the SFRs are entered into the system, a notice is mailed to your last known address informing you of the amount due. After a few notice, a final letter called a CP-504 is sent certified mail. If you don’t contest this bill in tax court within 30 days, the amount becomes final and payable.

The IRS can now “certify” the debt, file a tax lien, and revoke your passport. It matters not that you never received any of the letters. Their only obligation is to mail notices to your last known address using traditional US mail. If you’ve moved, or letters never reach you because you are abroad, that’s your problem. No one will search for you or call you at this stage of the process.

A warning for Expats:

I get calls all the time from people who assume they don’t need to file returns if their income is under the Foreign Earned Income Exclusion amount. They are living abroad, never set foot in the US, and make under $100,000. Americans abroad all to often think they aren’t required to file. They feel no sense of urgency because, once the forms are in, no taxes will be due. Why spend money on tax preparation?

Here’s the problem with that plan: As of January 1, 2015, your foreign bank account and income has been reported to the IRS under FATCA. This data can be used to prepare SFRs, create a debt, and then the IRS has you. The IRS will not give you credit for the FEIE when they prepare an SFR.

Here are other examples of erroneous tax debts that are frequently certified by the IRS.

Let’s say you are living in the United States and recently moved. You forgot to inform the Service of the move. Someone files a report of income (Form 1099, W-2 or K-1) in error.

If you have already filed your returns, the IRS will send you a Notice of Proposed Changes. If you fail to respond to this letter, the change will be made and a tax debt created. Again, it doesn’t matter if you participated in the process or had knowledge of what was going on.  

This will also apply to someone whose identity is stolen. I can’t tell you how many cases I’ve had over the years where someone’s Social Security number was used by an illegal alien to get a job. The worker gets paid under your Social with zero withholding, a W-2 was issued tied to your account and the IRS comes after you for the taxes owed.

Because the alien claimed 20 dependents, there was no withholding… no money paid to the IRS for taxes due against the wages earned. Add to this the fact that it takes several years for the IRS to come after you, and that interest and penalties are added to the balance, and you will see that $50,000 is a very low threshold.

  • There were almost 2 million suspected tax identity theft incidents in 2013, the most recent data available. This compares to about 440,000 in 2010 according to the Treasury Inspector General for Tax Administration. Cases of tax identity theft are on the rise in 2014 and 2015. Click here for a list of IRS prosecutions for identity theft in 2015.

Just like in the examples above, a tax debt that involves identity theft is created and certified without the taxpayer having any idea what’s happening. This situation takes months of hard work to unwind… work that can only begin after the you find out there’s a problem. It’s now possible that the first you hear about the debt is when you are being forcibly returned to the US, your passport shredded, and your reputation destroyed.

Here’s what happens when the IRS revokes your passport:

If your passport is revoked, and you don’t have a second passport in hand, you will be prevented from traveling outside of the United States. If you’re abroad when the hammer comes down, you will be forced to return to US.

In addition to the travel issues, it will be impossible to open bank or brokerage accounts abroad, create asset protection structures, operate a business, or invest outside of the land of the free without a passport.

It matters not to Uncle Sam that forcing you to return to the US without notice will cause you significant financial harm. There is no process for an appeal… you are simply put on the first plan to the US and told to go deal with the IRS. The only good news is that the flight home is free. The bad news is that you don’t get to chose your travel date or the US city in which you are deposited (usually a major hub).

  • You’d better hope to God your credit cards are working or you’ll be sleeping on the street in Miami or Houston until someone sends you money.

If you don’t have a second passport, there is no right to an appeal, to speak with an attorney, plead your case to a judge in your country, nor any way to stop the airport from sending you back to face the Service. Without valid travel document you are in legal limbo and have no recourse or rights.

You see, the IRS will revoke your passport while you are in transit. They know when you are flying from one country to another and will revoke your passport while you are in the air with a few keystrokes.

When you land and attempt to enter your destination country, you find your passport’s invalid. The airline is now required to return you to the country that issued your passport. You have no right to an attorney, no right to enter the country to fight the claim of a certified debt, and no right to an appeal.

You will be held in the transit area under guard until being put on the next flight. Think of Tom Hanks in The Terminal (2004) and Edward Snowden. Unless Mr. Putin comes to your rescue, you are headed back to the States.

Being denied admission to a country is not the same as being extradited. Once you are in a country, you have all the rights conveyed by their legal system and courts.  When you’re in transit, you have no rights… you are at the mercy of the country whose passport you hold. If you don’t have a valid travel document, your only choice is to return to your home country.

Here’s what you can do to protect your freedom:

Your best defense against H.R. 22 is a Second Passport. With a second passport in hand, you are in control. You can leave the US, do business abroad, access your foreign assets, open bank accounts, and generally live your life where you wish.

If you are caught at an airport, and you have a second passport, you can’t be forcibly removed to the US. You do have a valid travel document and must be allowed to continue on your way.  

Even if the country you were attempting to enter sides with the US and denies you entry, you can pick any departing flight to a country that allows visa free travel on your second passport. For this reason, we value second passports based on the number of visa free countries they offer.

You can only be forced to return to the US if you don’t have a valid travel document / second passport in hand. For this reason, it is the first, best, and possibly the only defense against the Internal Revenue Service.

There are four ways to get a second passport:

  1. By heritage. If your parents or grandparents were born outside of the United States, you may be eligible for citizenship from their original country.  If you would like us to review your heritage options, please send an email to info@premieroffshore.com.
  2. By marriage. Most countries grant residency and then citizenship to the spouse of a citizen.
  3. By investment or cash payment. You can make an investment and/or pay cash to get a second passport immediately. If you don’t qualify for a second passport by family lineage, and have the money to spend or invest, we can help.  
  4. Earn citizenship through residency. In some countries, you can become a resident, contribute to their economy and culture, and earn the right to apply for citizenship after a few years.

Several quality countries will sell you a second passport for the right price. Cash offers start at about $300,000 all-in and will exceed $1 million for a top tier EU passport (Malta and Austria). For a list of countries and programs, see: 10 Best Second Passports.

As you can see, second passports are expensive and not for everyone. The next best thing is to residency with a path to citizenship. For example, if you qualify, you can become a resident of Panama for about $8.600. Once you have residency, you can enter Panama using your visa and identification card.

Also, as a resident you have more rights to contest an attack by the IRS. A tourist has little or no standing, but a resident has been given status by the fact that he or she is a lawful member of the community.

Finally, a resident may stay in a country as long as they wish. A tourist must usually travel outside the country every four or six months, putting them at risk each and every trip. Also, if you’re caught overstaying your tourist visa, you can be removed from the country… something that is common in Latin America.  

Most importantly, some forms of residency lead to citizenship after a few years. For example, if you’re a resident of Panama for four years, you can apply for citizenship. With citizenship comes a second passport.

Just about every country has a residency program but few lead to citizenship. The lowest cost residency options are Panama and Belize. Belize does not have a path to citizenship. A passport from Panama is an excellent travel document, so I recommend that program for anyone that wants to “earn” citizenship over a number of years rather than purchase it.  For more information, please checkout our post on The Panama Friendly Nations Visa.

I hope this article has been helpful. For more information on second passports and residency programs, or to see if you qualify for citizenship through family heritage, please send an email to info@premieroffshore.com or give me a call at (619) 483-1708. 

Christian Reeves

Offshore Tax and Business App – Free Download

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The Premier Offshore mobile app is now available in the Apple store!

And, for a limited time,  it’s a free download. I just ask you give me a good rating in the app store and let me know if you have any issues.

Access my library of international tax and business articles any time from any iPhone or iPad.

  • Need to know the tax consequences of an investment while you’re in the heat of negotiation?
  • Whether you qualify for the FEIE or if you can do a 1031 exchange?
  • Read up on offshore inversions while your stuck on a plane?
  • Catch up on the latest and greatest second passport offer?
  • Peruse my 130 page tax and business guide before bed? I’m told it’s more effective than Melatonin and Ambian!

 

Download my app and you’ll have all of this and more at your fingertips.

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I’ll be releasing exclusive content, offshore tracking tools and calculators, and more free downloads on the App in the coming weeks. For example, the 2016 International Tax and Business Guide will only be available on my App.

Fyi… My 2015 International Tax and Business Guide is currently available for free on the App.

I hope this application will become an essential tool for every investor, business person, attorney, accountant and expat. If you’re living, working, or doing business abroad, it will become your personal international advisor on the go.

And, if you have not succumbed to the Apple marketing machine – don’t have an iPhone or iPad – don’t worry. My Android App is in beta in the Google Play Store and will be released in a few weeks.

You can download my apple app by clicking the link below or by searching for “offshore tax” in the Apple store.

Available_on_the_App_Store_(black)

 

Thank you for your feedback and support!

Best Regards,

Editor, PremierOffshore.com

Puerto Rico Tax Deal
Christian Reeves

Puerto Rico Tax Deal vs Foreign Earned Income Exclusion

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The Puerto Rico tax deal is the inverse of the Foreign Earned Income Exclusion. Here’s why:

  • With a Puerto Rico tax contract you can live in the US, your first $100,000 or so in salary is taxable, with rest deferred at 4%.
  • If you live offshore and qualify for the FEIE, your first $101,300 is tax free in 2016 and the rest is taxable in the US as earned.

The FEIE is intended for those living abroad and operating a business that earns $100,000 to $200,000 max. The Puerto Rico deal is intended for those who live in the US or PR and net $400,000 or more.

This article will compare and contrast the Foreign Earned Income Exclusion with the Puerto Rico Tax Deal. There are still deals out there for Americans if you know how to work the system.

Here’s how the Foreign Earned Income Exclusion works:

If you live abroad and work for someone else, or have your own business, the Foreign Earned Income Exclusion is the best tool in your expat toolbox. The FEIE allows you to exclude up to $101,300 in salary in 2016 from your US taxes.

This salary can come from your own offshore corporation or from your employer. So long as the company is located outside of the US, and you qualify for the Exclusion, you’re golden.

If a husband and wife are both working in the business, they can each earn $101,300 in salary tax free for a total of $202,600. Take out more, and the excess is taxable in the US at about 40%.

Likewise, if you work for someone else, the amount you earn over the FEIE is taxable in the United States. If you work for yourself, and hold earnings in an offshore corporation, you can usually defer tax on these retained earnings.

To qualify for the Foreign Earned Income Exclusion, you must be 1) outside of the US for 330 out of any 365 days, or 2) be a legal resident of a foreign country, file taxes in that country, and travel to the US only occasionally for work or vacation.

  • What qualifies you a resident of a foreign country is a complex matter. For a more detailed article on the FEIE, see: Foreign Earned Income Exclusion Basics
  • The above assumes you are living in a low or no tax country and does not consider the Foreign Tax Credit.

The Foreign Earned Income Exclusion is an excellent tax tool for those willing to live and work outside of the US. If you wish to spend more than a couple months a year in the US, or to take out a salary of more than $101,300, the FEIE might not be your best bet.

Here’s how the Puerto Rico Act 20 tax deal works:

If you incorporate your business in Puerto Rico, you can qualify for an 4% corporate tax rate. That is to say, you can live in the US, operate your business through a Puerto Rico company, and get tax deferral at 4%.

In order to qualify, you must hire at least 5 full time employees in Puerto Rico and provide a service from the island to businesses or individuals outside of PR. Popular examples are affiliate marketers, website developers, investment funds, phone and online support providers, and any other business that is portable or operates via the internet. Really, any company that can put a division in Puerto Rico can benefit from Act 20.

  • If you don’t need 5 employees, we might create a joint venture that allows partners to share employees in one corporation that benefits the group.
  • EDITORS NOTE: On July 11, 2017, the government of Puerto Rico did away with the requirement to hire 5 employees to qualify for Act 20. You can now set up an Act 20 company with only 1 employee (you, the business owner). For more information, see: Puerto Rico Eliminates 5 Employee Requirement

If you, the business owner and operator, live in the US, you must take a “fair market” salary that’s taxable and reported on Form W-2. This might be around $100,000, but the exact amount will depend on many factors. The remaining net profits of the income attributable to the Puerto Rican company will be taxed at 4%.

This is basically the inverse of the Foreign Earned Income Exclusion. With a Puerto Rico contract, you pay tax on your fair market salary and defer the balance at 4%. With the FEIE, the first $100,000 (or $200,000 if married and both are working in the business) is tax free and the excess is taxable at ordinary rates.

I note that the Act 20 offer is a better deal than the multinationals have in Europe. Most of them are paying about 12.5% for tax deferral. Even at 12.5%, their tax contracts are under constant attack by the US and the EU. If you want to out maneuver Apple, and get an offshore tax deal blessed by the US government, move your business to Puerto Rico!

So, what’s different about Puerto Rico? As a US territory, it’s tax code trumps the Federal Code… or, more properly put, PR’s tax code is on equal footing with the US Federal code.

This is not the case in a foreign jurisdiction. So long as you hold a US passport, you’re subject to US taxation. The IRS doesn’t give a damn about the laws of your new country. They want their cut.

The US code is clear when it comes to Puerto Rico: Income earned in a Puerto Rican corporation, or as a resident of Puerto Rico, is exempt from US taxation. See: 26 U.S. Code § 933 – Income from sources within Puerto Rico.  

The code as applied to foreign jurisdictions is incredibly complex. Try reading up Controlled Foreign Corporations, Passive Foreign Investment Company rules, and Sub Part F of the code.

I suggest a Puerto Rico tax contract is best suited to firms with at least $400,000 in net profits that can benefit from (or, at least, break-even on) three employees in Puerto Rico. 

In contrast, the FEIE is great for those who wish to live outside of the United States and earn a profit of of $100,000 to $200,000 from a business. Additional tax deferral is available to business owners who live abroad operate through an offshore corporation.

I hope you have found this article on the Foreign Earned Income Exclusion vs. the Puerto Rico Tax Deal helpful. For more information, please send an email to info@premieroffshore.com or give me a call at (619) 483-1708. 

Offshore Tax Planning Puerto Rico
Christian Reeves

Blood in the Streets Offshore Tax Planning

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You’ve heard the adage of investing when there’s blood in the streets… to buy when all hell is breaking loose and the market is at bottom. Well, now is your opportunity for some offshore tax planning while there’s blood in the streets. An offshore tax planning opportunity that will cut your corporate rate to 4%!

  • Baron Rothschild, an eighteenth century British nobleman, is reputed to have said, “The time to buy is when there is blood in the streets.” Those words are so true today in Puerto Rico and their offshore tax planning deal.

If you have not been reading the papers lately, PR is broke and the Federal Govt doesn’t want to bail them out. Specifically, the GOP says no way to a Puerto Rico bailout.

So the Feds have allowed Puerto Rico to create a Tax Incentive Strategy to try and bail out PR by offering a 20 year deal where companies only pay 4% on their retained earnings.

Yes you read that correctly only 4% – that is lower than what many very large corporations are presently paying to Ireland 12.5%. It’s the best offshore tax planning deal available to US citizens.

If you’re a small to medium sized internet business, or one that can spin off a division like marketing, call center, or similar group, here’s your chance to pay only 4% on your profits. Here’s how to make an offshore tax planning deal with a desperate government to defer tax offshore like the Apples and Googles of the world.

In fact, you can negotiate a offshore tax planning deal far better than the big guys. Most of their tax contracts in Ireland and Luxembourg are at around 12.5%.

The US government is offering you an offshore tax planning contract that allows you to live in the United States and cut your corporate tax to 4%. No need to move abroad, uproot your family, etc. It’s akin to the offshore tax planning tool generally referred to as a corporate inversion. These inversions have become all the rage where the business operations are outside of the U.S. but the headquarters and business executives remain here.

Here’s how this unique offshore tax planning opportunity works:

The U.S. territory of Puerto Rico is broke. The island is essentially bankrupt – owing creditors over $70 billion with no chance of repayment and a US bailout seems unlikely. But, as territory, PR is prohibited from declaring bankruptcy. As of December 1, 2015, they are out of cash.

Puerto Rico’s laws are a mixture of US Federal statutes and local ordinances. And that is where your opportunity exist: Income earned in a Puerto Rican corporation or as a resident of Puerto Rico is exempt from U.S. taxation. See: 26 U.S. Code § 933 – Income from sources within Puerto Rico.  

In order increase employment, motivate investment, and benefit from it’s unique position in the US code, the island offers two tax deals:

1. Start a business in Puerto Rico with at least 5 employees, apply for an Act 20 tax contract, and receive a 20 year agreement with a corporate tax rate of 4%.

or

2. Move to Puerto Rico, be approved for an Act 22 contract, and pay $0 capital gains tax on assets purchased after you become a resident and sold during your time on the island.  

Act 22 requires you to live in Puerto Rico for at least 6 months of the year. Act 20 does not. In this article I’ll focus on the Act 20 offshore tax planning contract for business owners.

If you don’t require 5 employees, we can create a joint venture company that will share costs and benefit the group. For example, if 2 partners come together in a “captive” internet marketing firm, they could license one business under Act 20. Different classes of stock and separate bank accounts could protect each partner’s interests.

To qualify under Act 20, your business should be providing a service in Puerto Rico to corporations or individuals outside of Puerto Rico. Internet marketers, website developers, investment advisors, hedge funds, call centers, and any other type of “portable” business are good candidates.

  • No matter your industry, if you can spin-off a division into a Puerto Rico corporation, you can benefit from an Act 20 contract. For example, I recently assisted a manufacturing company setup a web marketing group on the island.

Next, you need to hire at least 3 full time employees in Puerto Rico. These workers must be earning the minimum wage (currently $7.25) or better, be W-2 employees and not independent contractors, come into the office each day, and work at least 40 hours per week (full time).

Then, you, as the owner and operator of the business, must draw a fair market salary from the Puerto Rican company. This salary is taxable in the U.S. because it’s earned from work you did while living in the States.

The remainder of the income you earn in Puerto Rico is taxed at 4%. In other words, net profits in excess of your salary are taxed at 4%. You may retain these profits in your Puerto Rican corporation indefinitely tax deferred… an absolutely amazing offshore tax planning deal!

This gets you to a similar place as the Microsofts of the world… low cost offshore tax deferral. In fact, you’ve out maneuvered these giants by securing a deal at 4% rather than the typical 12.5%.

Puerto Rican profits must be left in the corporation, or can be moved to an offshore subsidiary. They can be used to grow the business and generally managed as corporate capital. You may not borrow against them or otherwise personally benefit from these retained earnings. They belong to the corporation until taken out as a distribution or dividend.

Now, here’s where things get really interesting in the Puerto Rico offshore tax plan:

With a typical offshore tax plan, profits are locked in the corporation. When taken as a dividend or distribution, they come out at ordinary income rates. Lower qualified dividend rates do not apply to distributions from a foreign corporation.  

Puerto Rico provides a path to tax free dividends not available in other offshore tax plans. If you decide to move to Puerto Rico after a few years of operating the business, and qualify as a resident under Act 22, dividends from your Puerto Rican corporation will be tax free.

Of course, you’re not required to move to Puerto Rico to cut your corporate tax rate to 4%. You may leave the money in the company tax deferred, take it out years or decades later and pay the tax, or continue to use it to grow the business.You can hold the Act 22 card in your back pocket should you decide to play it.

We can assist you to implement the Puerto Rico offshore tax plan in two ways.

  1. We can setup your corporate entity, negotiate an Act 20 contract in Puerto Rico, and write a custom a game plan / opinion letter on how to operate your Puerto Rican business in compliance with PR and US tax laws.

or

  1.   Provide a turnkey solution in Puerto Rico with office space, employees, etc. to maximize the benefits of your offshore tax plan.

Our turnkey solution includes analysis, tax and business planning, tax opinion letter with “action plan,” Act 20 application and negotiation, Act 20 license, and opening a PR bank account. It also includes sourcing and negotiating an office lease, hiring 3 qualified employees, 12 months of employee management, and 12 months of tax and business consulting service.

  • We will locate and hire 5 employees to your specifications. You can interview them by Skype or in person. We will also replace these employees if they resign or are not pulling their weight, manage their time, and handle all office and employment matters.
  • Our turnkey solution is intended to cover all first year costs related to setting up shop in Puerto Rico except salary, payroll taxes, and office rent.

I hope you have found this article on the offshore tax planning benefits of Puerto Rico helpful. For more information, please send an email to info@premieroffshore.com or give me a call at (619) 483-1708. 

For more information, you might read my post comparing the Puerto Rico tax deal with the Foreign Earned Income Exclusion.