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Panama Financial Services License

01/04/2017/0 Comments/in Articles, International Business/by Christian Reeves

A Panama Financial Services Company is a licensed but unregulated financial entity which allows you to hold and manage client funds in Panama. The Panama financial services license is issued by the Panamanian Ministry of Commerce (Ministerio de Comercio and Industrias). It’s much easier to keep in compliance than a license issued by the banking authority (Superintendencia de Bancos de Panamá).

Here’s a summary of the benefits of a Panama financial services license:

These licensed Panama corporations are most commonly used by offshore financial services companies and international banks that handle third-party funds. For example, cash management and investment services for an offshore bank licensed in another jurisdiction or for providing electronic payments services, credit and debit cards, or other similar payment processing activities.
If you will manage client money, you must have a of license. The lowest cost and most efficient licensed but unregulated entity is the The Panama Financial Services Company.
These financial services companies can work effectively with other foreign structures – for example, to outsource services for tax efficiency (because Panama won’t tax foreign sourced profits) and/or to set up a trading desk in a more reputable jurisdiction than your country of licensure.

A Panama financial services license allows you to conduct the following types of transactions on behalf of your financial institution (in addition to the normal business functions of the company):

Open corporate bank accounts and accept client funds, usually on behalf of a licensed and regulated entity operating in another jurisdiction.
Operate as a basic correspondent account managing and transferring funds on behalf of clients of a bank licensed in a separate jurisdiction.
Act as a payment Intermediary.
Currency / FX and Bitcoin accounts.
Conduct precious metal trading (gold, silver, platinum, etc.).
Factoring.
Leasing.

Capital and Office Requirements

In most cases, a Panama Financial Services Company will not have a capital requirement (a minimum amount of paid in capital). The only major exception is leasing services, which requires special permission and capital of $100,000.

While it’s not required, I recommend clients contribute as much capital as possible if they’re going to operate as a correspondent bank account. Starting with $100,000 to $250,000 paid-in shows prospective banks your commitment to your Panama Financial Services Company.

I also recommend correspondent banking desks open an office in Panama with one or more employees. Turn your offshore corporation into a domestic operating company. It’s not required under the law, but it will improve your chances of success.

A local presence will give you access to a wider range of banks in Panama. Many banks will only do business with local companies. Having an office and an employee will help you throughout the process and gives you someone on the ground to deal with issues as they arise.

You can get this done at a low cost by setting up a small executive suite and paying an employee for half of his or her time. For example, Regus has 6 office buildings in Panama City and provides excellent services. Click here to find a Regus office.

Remember what’s important here is what a local bank / correspondent partner wants to see, not the minimum requirements listed in the law.

Limitations of a Panama Financial Services Company

The Panama financial services license does not allow the Panama company to engage regulated activities such as:

Securities trading or broker-dealer activities including investment funds, managed trading etc.
Credit Union (cooperativas)
Savings and Loan (financiera)
Fiduciary (trust company) services
Cash transmittal services or currency exchange (e.g. bureau de change)

These services are regulated differently by the Panamanian government and all require their own license with minimum capital and audit requirements.

It’s also prohibited for the Panama Financial Services Company to offer any banking services. To be clear regarding “correspondent banking,” a Panama Financial Services Company may offer services to a licensed and regulated bank in another jurisdiction. It may not offer services to the clients of the bank, only to the bank.

Conclusion

The setup costs for a Panama Financial Services Company are $35,500 and the annual fees are about $1,250 depending on nominee directors and other factors. This does not include a registered or virtual office.

In most cases, a Panama Financial Services Company can be completed in about 15 days once all of the documents are submitted.

I hope you’ve found this article on the Panama Financial Services Company company to be helpful. For more information, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Trump is Good for Most Offshore Businesses

01/03/2017/0 Comments/in Articles, Banking Offshore, International Business, Offshore Bank Accounts, Offshore Company, Offshore Company Taxation/by Christian Reeves

With all the talk about keeping jobs at home and taxing foreign corporations, I wanted to start the year with a post on why Trump is great for the offshore industry… at least, for those operating small businesses, investing abroad, and/or moving assets offshore for asset protection.

This article will focus on why a Trump presidency is good for small businesses operated outside of the United States. Businesses where the owner is living and working abroad or a semi-autonomous division of an online or service business is based in a zero tax foreign country.

If you’re an American expat, don’t worry, President Trump is focused on the big guys…

Unless you’re a multinational with intellectual property offshore, or a manufacturing firm with a plant in Mexico, President Trump will be a friend (or a non-issue).

Tax laws that are likely to change involve intellectual property and imports from certain countries. These don’t impact small business, they’re used by multinationals to stash cash offshore.

Trump says he’ll bring back jobs and cash to the United States. He’ll do that by offering a tax holiday for previous retained earnings. Then he’ll make it more difficult for large companies to stash cash offshore and benefit from cheap foreign labor.

To reduce the benefits of going offshore, Trump says he’ll cut the U.S. corporate tax rate, modify the intellectual property laws, and impose import duties on goods from China and Mexico if they don’t agree to renegotiate existing trade deals.

None of these changes affect U.S. expat entrepreneurs and small business owners. If you’re running an online business from a low tax country, you have nothing to worry about.

First, a lower U.S. corporate tax rate doesn’t make any difference to you or change your reasons for going offshore. You wouldn’t be paying corporate tax in the United States anyway… you’d set up as an S-Corporation or Limited Liability Company and pay only personal income tax.

In fact, more than 90% of US businesses don’t pay corporate income tax. Profits flow through to the owners, who pay personal income tax, but not corporate rates. For more on this, see Forbes.

So, a lower U.S. corporate tax rate doesn’t make any difference to a small business. Moving a small business offshore is about reducing your personal income tax rate, not your corporate tax rate. Trump is all about the corporate rate.

The key to reducing your personal income tax rate by moving offshore is to qualify for the Foreign Earned Income Exclusion. If you’re a resident of a foreign country, or you’re out of the United States for 330 out of 365 days, you can earn $102,100 in salary from your offshore corporation and pay zero taxes. If a husband and wife both work in the business and qualify for the Exclusion, you could earn over $200,000 tax free.

If you net more than the Exclusion, you can hold these profits in your offshore corporation as foreign retained earnings tax deferred. When you take them out, you’ll pay personal income taxes on the dividend.

The bottom line is, if you’re offering a service or operating online, there’s nothing to worry about. The same goes for internet marketers, bloggers, and anyone with a portable business. You have no treaty or import / export concerns, so Trump will make no difference to you.

As an expat, you should focus on the tax laws of your country of residency. Stick with nations that won’t tax your foreign sourced income, and qualify for the Exclusion, and you’ll pay zero tax on your profits.

For a list of countries that don’t tax foreign sourced income, see territorial tax jurisdictions. These countries tax local income but not profits from sales to people and companies outside of their borders.

For example, Panama has a territorial tax system. If you’re living and working in Panama, operating an online business, and selling products to clients in the U.S., all of your income is foreign sourced to Panama and not taxable there.

What if you’re business is netting well over $100,000 (single) or $200,000 (joint)? Then you might consider going “offshore” to the U.S. territory of Puerto Rico. The tax deal offered by Puerto Rico is the opposite of the Foreign Earned Income Exclusion.

Under Puerto Rico’s Act 20 and 22, you’ll pay tax on your salary at ordinary rates and zero tax on dividends from your corporation. So, if you net $500,000, and draw a salary of $100,000, you pay tax on the first $100,000 and nothing on the remaining $400,000. Net $2 million, pay tax on the first $100,000, and zero on $1.9 million.

Note that I said the amount after your salary is tax free, not tax deferred. For mid-sized corporations or very profitable online businesses, Puerto Rico is a unique opportunity. You can realize a significant savings over the FEIE.

I hope you’ve found this article on why Trump is great for offshore corporations to be helpful. For more information on how to structure your international business, or set up in Puerto Rico under Act 20, please contact me at info@premieroffshore.com or call us at (619) 483-1708 for consultation.

Another EB-5 Visa Scam

01/03/2017/0 Comments/in Articles/by Christian Reeves

The EB-5 visa program is fraught with fraud and under fire from Democrats in the U.S. Congress. I expect it to survive, but problems will continue to plague the program. Here’s why and what you can do to protect yourself.

First, a brief review. The U.S. EB-5 visa program promises high net-worth foreigners a green card in exchange for an investment of $500,000 to $1 million depending on where the investment or business is located. After 5 years of residency, you’re guaranteed citizenship and a passport.

Most of the money for EB-5 visas has come from Chinese investors. In fact, 84% of U.S. visas issued under the EB-5 program are to Chinese nationals.

There are two ways to use the EB-5 visa program. You can start a business or invest in someone else’s project. The only requirement is that the businesses must hire 10 employees. The purpose of the EB-5 program is job creation.

It’s that second option, investing in another person’s project or business, where the risk of fraud comes in. I’ve been warning about this for years, but investors continue to be scammed and robbed by unscrupulous promoters.

The most recent EB-5 visa scam hit us at Premier very close to home… literally.

Here’s the story:

As reported in the Los Angeles Times, the SEC alleges that Orange County lawyer Emilio Francisco misspent at least $9.5 million from 131 investors who wanted to participate in the federal EB-5 visa program. Apparently, he diverted cash from Chinese investors to support his business and buy a yacht.

This likely means that the investors have lost their money, their green cards, and their residency status. Because the money wasn’t used to build a business, it’s safe to assume Mr. Francisco can’t afford to hire 10 employees for each investor and keep them employed for 5 years until his clients receive their passports.

Mr. Francisco promised to build assisted living facilities and restaurants under the name Cafe Primo throughout Southern California. He built a few Primo’s, but no assisted living units.

And here’s why it hits close to home: Our office is in a building in San Diego with one of the few Cafe Primo’s that was actually built out and operational. Primo’s was where we’d meet for lunch to plan our publishing schedule, gather for a beer or three after work, and watch NFL games.

I was basically sitting above Cafe Primo when I wrote my most recent article on EB-5 visa fraud. The coincidence is amazing…

Coincidence aside, the EB-5 visa scam is relatively common. The U.S. government has indicted about 10 groups of promoters in the last 2 years. Based on the various court filings and news reports, hundreds of millions of dollars has been lost to fraudsters.

There’s only one way to avoid the EB-5 visa scam – start your own business in the United States. Don’t rely on a promoter or bet your future on the success of a large real estate development. Set up a small business with 10 employees and do it yourself.

We at Premier offer a very unique version of the EB-5 visa. One that eliminates U.S. tax on your business and on your worldwide income.

Once you have a green card, the U.S. will tax your worldwide income. The only way to avoid this is with pre-immigration tax planning and the option described below.
Most EB-5 visa applicants pay about 35% in Federal taxes and 7 to 12% in state taxes on their worldwide income.

Here’s how to qualify for the EB-5 visa and cut your tax rate down to 4%.

U.S. Federal taxes apply to U.S. citizens no matter where they live. Americans in every state pay Federal taxes. American’s living abroad pay Federal taxes.

The ONLY exception to U.S. Federal income tax is found in the U.S. territories. Federal tax law does not apply in the U.S. territories. Each territory has its own tax code which superseeds the Federal code.

And the U.S. territory of Puerto Rico has a tax deal you can’t refuse: start a service business with 5 employees on the island and pay only 4% corporate tax on your profits. If you live on the island, you’ll pay zero Federal income tax on your capital gains and dividends from your Puerto Rico company.

As a territory, the island’s tax laws trump Federal tax law. But, U.S. immigration law applies, thus the EB-5 visa program is available (and thriving). I should also note that anyone born in Puerto Rico is a U.S. citizen, just as they are when born in a state.

When we combine Puerto Rico’s tax laws with the EB-5 visa program, we get a service business with at least 10 employees operated from Puerto Rico. A business that’s providing a service from Puerto Rico to persons and companies outside of Puerto Rico.

Puerto Rico’s tax law required 5 employees, but the EB-5 program required 10.

Using Puerto Rico’s tax laws and the EB-5 visa program together, you have a business paying only 4% in tax and a green card. You can immigrate to the United States, stay as a resident for 5 years, and be guaranteed citizenship and a passport… all without paying U.S. taxes.

For the entrepreneur, the EB-5 visa program is an amazing opportunity. And Puerto Rico is the ONLY place this tax efficient version can be had.

I hope you’ve found this article. For more on setting up an EB-5 visa business in Puerto Rico, see: Coming to America Tax Free with the EB-5 Visa and Puerto Rico

For assistance with Puerto Rico, you can reach me at info@premieroffshore.com or call us at (619) 483-1708.

شاهد الإباحية مع زوجتك – لماذا يجب أن تفعل ذلك

12/30/2016/in Articles/by design

ما هي العوامل التي تجعل xnxx مختلفًا عن الأفلام العادية؟ كيف أصبحوا مشهورين جدا بين الناس؟ هناك عدة عوامل وكلها تتلخص في شيء واحد – التحفيز البصري!

يمكن مقارنة التحفيز البصري في xnxx بالشعور الذي تشعر به عندما ترى شخصًا واقعيًا يقوم بعمل مشابه لك. الأفلام الإباحية أو مقاطع الفيديو المثيرة أو أفلام الجنس الحقيقي هي أفلام تصور موضوعات جنسية صريحة حتى يتمكن المشاهد من تحفيز أنفسهم وإمتاعهم. تقدم الأفلام الإباحية محتوى حقيقي للبالغين يتضمن عادةً العُري وأحيانًا الاتصال الجنسي والمداعبة. عادةً ما يكون المحتوى في هذه الأفلام بالغًا بطبيعته ، لكن ليس بالضرورة أن يكون ضارًا ويمكن أن يكون ممتعًا للغاية بالنسبة لبعض الأشخاص.

إذا لم تكن قد شاهدت واحدة من تلك المجانية على الإنترنت xxx ، فأنت تفقد شيئًا مثيرًا ومثيرًا للدغدغة. ربما تكون قد سمعت عن النجوم الإباحية الحقيقية للهواة أيضًا. هم الذين يفضلون معظم المشاهدين النظر إليهن ويقدمن أفضل المص الذي رآه أي شخص على الإطلاق. عادةً ما تكون مقاطع الفيديو الخاصة بها متاحة عبر الإنترنت ليراها الجميع.

لكن الشيء هو أنهم ليسوا مجرد فتيات يؤدين هذه الأنواع من xnxx. إنهم في الواقع رجال أيضًا يحبون الأداء في هذه الأفلام الإباحية. بغض النظر عن مدى جودة أو سوء النجمة الإباحية ، فإنها ستظل إباحية من قبل زوجها بطريقة أو بأخرى.

هذا هو السبب في أن هذه المواقع تحظى بشعبية كبيرة بين النساء. يمكنهم الاستمتاع بمشاهدة نجومهم الإباحية المفضلين أثناء الاستمتاع بكل أنواع الأشياء الأخرى التي يمكنهم العثور عليها في هذه المواقع. كل ذلك يضيف شيئًا مدهشًا تمامًا لأي امرأة.

ميزة أخرى مع توفر هذه xnxx المجانية عبر الإنترنت هي أنه يمكنك الانتقال بينها بسهولة. قد ترغب بعض النساء فقط في مشاهدة نوع واحد من الأفلام الإباحية. في هذه الحالة ، يمكنهم بسهولة الالتزام بموقع واحد والاستمرار في الوصول إلى مقاطع الفيديو طالما يحلو لهم. بهذه الطريقة ، يمكنهم أيضًا اختيار واختيار نوع الفيديو الإباحي الذي يرغبون في مشاهدته في وقت معين.

هناك أيضًا بعض النساء اللواتي يعشقن فكرة القدرة على تنزيل مقاطع فيديو إباحية مجانية من الإنترنت. بالطبع ، هناك بعض النساء الأخريات اللواتي قد يعتقدن أن تنزيل الأفلام الإباحية هو ببساطة أمر سيء للغاية. بعد كل شيء ، قد يعتقدون أنها سرقة. بالطبع ، ليس لديهم الحق في إخبار رجالهم أنه لا ينبغي لهم الانغماس في هذا النشاط. كل ما يجب عليهم قوله هو أن هناك بعض المزايا لمشاهدة مقاطع الفيديو الإباحية المجانية من الانخراط في تنزيل المواد الإباحية.

بالطبع ، لا يوجد فرق كبير بين مشاهدة xnxx مجانًا وتنزيل المواد الإباحية. كلاهما وسيلة فعالة للغاية للبقاء في حالة مزاجية. بعد كل شيء ، الشيء المهم هو أن تجد النوع المناسب من المواد الإباحية للتمتع والرضا.

بالطبع لا ضير من الاستمتاع بكلا النوعين من المواد الإباحية ، خاصة إذا كنت امرأة ومتزوجة. طالما أنك لا تؤذي أي شخص ، فأنت ضمن حقوقك تمامًا في الانغماس في كلا النشاطين. علاوة على ذلك ، ليس عليك حتى إنفاق الكثير من المال للحصول على مقاطع فيديو إباحية مجانية من الإنترنت. بعد كل شيء ، حتى تكلفة الدخول إلى بعض دور السينما للبالغين لا تُقارن بالمزايا التي يمكنك الحصول عليها من مشاهدة مقاطع الفيديو الإباحية المجانية عبر الإنترنت.

ومع ذلك ، إذا كنت رجلاً ، فعليك توخي الحذر. يجب ألا تفكر أبدًا في أن السيدات سوف يسمحون لك بالانغماس في الإباحية إذا أخبرتهن أنك مهتم بمشاهدة xxx مجانًا. هذا لأن النساء أكثر تحفظًا ولا يستطعن تحمل فكرة وجود رجل يراقبهن. سيكون من الأفضل أن تتظاهر باهتمامك بالاباحية حتى تتمكن زوجتك أو صديقتك من إقناعك بأنه ليس شيئًا تريد فعله حقًا. بهذه الطريقة ، يمكنك الاستمرار في الاستمتاع بوقتك في مشاهدة مقاطع الفيديو الإباحية المجانية على الإنترنت دون الحاجة إلى مواجهة أي نوع من المشاكل من زوجتك أو صديقتك.

في الواقع ، يمكنك حتى مشاهدة الأفلام الإباحية أثناء العشاء. بهذه الطريقة ، لن تشك زوجتك أو صديقتك في أنك تخفي شيئًا عنها. طالما بقيت بعيدًا عن غرفة النوم عندما يكون شريكك في الجوار ، فلن تشك أبدًا في أنك تحب الإباحية على الإطلاق. بعد كل شيء ، لا فائدة من إخفاء فيلم إباحي في غرفة العربة ، خاصة إذا كنت ستعرضه على زوجتك أو صديقتك في كل مرة تدخل فيها إلى المنزل.

بالطبع ، لا حرج في الإباحية. طالما أنك تستخدمه باعتدال ، فلن يضر بعلاقتك بزوجتك أو صديقتك. إذا كنت قد جربت الأفلام الإباحية في الماضي ، فقد ترغب في تجربة هذه الأنواع من الأفلام قبل أن تتخذ خطوة أخرى وتحاول تلبية احتياجاتك الجنسية من خلال إقامة علاقة جنسية حقيقية. فقط تأكد من أنك لا تشاهد الكثير من مقاطع الفيديو الإباحية المجانية لأن هذا قد يؤدي في النهاية إلى ممارسات جنسية أكثر خطورة. إلى جانب ذلك ، تحب النساء رجالهن ، ومن المرجح جدًا أن يقلبن عشاقهن عندما يكتشفن أن أزواجهن أو أصدقائهن هم من عشاق الإباحية.

Top 5 Offshore Bank License Jurisdictions for 2017

12/19/2016/0 Comments/in Articles, Banking Offshore, Offshore Bank License, Offshore Banking/by Christian Reeves

There have been big time changes in the offshore bank license industry over the last year. If you’re looking to form an international bank, here are the top 5 offshore bank license jurisdictions for 2017.

In this post, I’m talking about countries where you can get a license… countries that will issue a license to a startup bank. This is not a list of the largest or most respected banking jurisdictions. It’s a list of countries where you will be approved if you have a solid business plan, an experienced board of directors, and the requisite capital.

My list of the top 5 offshore bank license jurisdictions for 2017 is focused on offshore options where you will get a license and a correspondent account from a reputable institution. Sure, you can buy a cheap license from Africa or elsewhere, but good luck using it.

1. Dominica

The best “pure” offshore bank license is from the Caribbean nation of Dominica. The Commonwealth of Dominica is a sovereign island country and part of the Windward islands in the Lesser Antilles archipelago of the Caribbean Sea. It’s current population is about 75,000 and it’s a member of the Eastern Caribbean group of countries and the ECC banking system.

Dominica is a leader in the offshore banking and second passport industries. Many who establish a bank on the island also buy a passport from Dominica. For more on second passports, see A Second Passport from Dominica.

The reason I have Dominica at the top of my list is that this island is actively seeking new candidates, has a reasonably efficient application process, has a relatively low capital requirement, and banks from Dominica are able to find correspondent banking partners.

The capital required to secure a license on Dominica is only $1 million. That’s the lowest of any reputable offshore jurisdiction.

I should point out that, once you have your license, you will probably need more capital to get a correspondent banking account. It will be difficult to find a partner bank to take on a client with only $1 million in cash. The costs and compliance overhead on correspondent accounts make small clients unattractive.

For more on a bank license from Dominica, see: How to get an Offshore Bank License in Dominica.

2. Puerto Rico

Above, I wrote that the best “pure” offshore license is from Dominica. The best hybrid bank license, and possibly the best overall depending on your objectives, is from the U.S. territory of Puerto Rico.

Capital required is only $550,000. Of this, $200,000 should be paid-in capital to your corporation and $350,000 on deposit with the government.

The costs of formation, licensure and operation in Puerto Rico will be a fraction of the other options on this list. For this reason, the lowest cost offshore bank license is Puerto Rico. For example, the annual license fee in Cayman is about $85,000 compared to $8,000 in Dominica and only $5,000 in Puerto Rico.

Finally, there are no FATCA or U.S. reporting for the bank or the customers of the bank. U.S. citizens can go offshore to Puerto Rico with zero IRS reporting headaches. This is a major competitive advantage and cost savings for an international bank licensed in Puerto Rico.

I’ve listed all the positives as to why you should consider an offshore bank license from Puerto Rico.

The negatives are that your bank will be tied to U.S, government oversight, SEC and other rules, U.S. immigration considerations, and your bank must have a minimum of 5 employees in Puerto Rico.

This low license fee is balanced against your tax costs. If you have 5 employees in Puerto Rico, and qualify under Act 273, your tax rate will be 4%. If you do not meet these requirements, your tax rate will be about 35%.

Immigration can be an issue for some. All employees must be U.S. citizens and you must meet Federal immigration criteria to move to Puerto Rico. If you buy a passport from Dominica you can become a citizen in about 90 days. It’s not so easy to immigrate to the United States.

If you want to run a bank without U.S. oversight, Puerto Rico is not for you. If you want a bank with a solid reputation based on a rigorous compliance and regulatory environment, then give Puerto Rico a chance as a low cost high value hybrid license.

3. Cayman Islands

Puerto Rico is the second largest offshore banking jurisdiction after Cayman Islands. Cayman is the most reputable and highest cost “pure” offshore banking jurisdiction. There are about 70,000 companies registered in Cayman, along with 350 banks and 700 insurance companies. There’s over US $1 Trillion in assets in Cayman banks.

The cost of a banking license in Cayman Island (the fees paid to the government upon issuance) are quite high. They range from $160,000 to $600,000 for a Class A license. Add on to this about $500,000 in legal fees, not to mention auditors and other required professionals, and the startup costs add up quickly.

Also, the vetting process will take over 12 months and a Cayman banking license is notoriously difficult to negotiate. For more on the costs and process, see the Cayman Islands Monetary Authority website.

If you can make it through the gauntlet, you’ll come out the other end with a world class offshore banking license.

4. Belize

The banking law in Belize says an international license requires $1 million in capital and a full license required $3 million in capital. In practice, be prepared to deposit $5 million for the international license. No one bothers with the full license any longer (which allows you to sell to Belizeans).

If you’d like to do some market research, annual and quarterly reports for all Belize banks are available on the Central Bank’s website. This is a great resource if you’re considering a bank license from Belize.

The due diligence process in Belize will be a minimum of 12 months (compared to 3 to 4 months in Puerto Rico). Some offshore bank licenses have taken as long as 18 months to complete.

If you are planning to setup an investment management bank, Belize has some of the highest capital ratios in the world (20% in many cases). For this reason, Belize banks are considered safe by depositors.

5. Panama

Panama is a top tier banking jurisdiction with many billion dollar institutions and a well developed regulatory system. If I were to describe Panama in one sentence, it would be “the best offshore bank license when cost / capital is no issue.”

Like Belize, Panama has an international license and a full license. The problem is that Panama won’t issue an international license unless you already have a full license from your home country. For example, if you have a U.S. license, you can get a subsidiary bank license in Panama.

This means that a startup bank will need to open under the full license which is likely to require $24 million in capital. The law says $10 million for a general license and $3 million for an international license, but these values will increase significantly when negotiations begin with the Central Bank.

I should point out that Panama has many different financial services licenses. For example, a bank in Dominica or Belize, that wants to manage client funds in Panama, might apply for a Financial Services license. This would allow you to operate a trading desk and open a correspondent account in Panama without a local license.

Another option in Panama is to set up a Credit Union. Similar to U.S. cooperatives, Panama’s credit unions are savings and loans where each depositor is a shareholder. Known as “Cooperativas”, Panamanian credit unions are licensed as financial co-op institutions. They are regulated under Law 17 of 1997 which granted them non-profit tax free standing.

There are hundreds of credit unions in Panama, but most are for employees of one industry or another. For an example of a public cooperativa, see Cooptavanza.

Depending on your business model, it might be possible to set up in Panama with capital of $1 to $3 million as a credit union. The IPACOOP “Instituto Panameno Autonomo Cooperativo regulates all of Panama’s credit unions. For more informaiton, see: www.ipacoop.gob.pa

For more how to accept deposits from clients, and alternatives to an offshore banking license, take a read through Offshore Money Management Business: How to Accept Client Funds and Deposits.

To delve deeper into offshore bank licensing and operation, please review my articles on offshore bank licensing and operation. I’ve been working in offshore banking for over a decade. My recent articles on the topic are:

Lowest Cost Offshore Bank License is Puerto Rico
Offshore Bank Advertising Rules (a review of Reg. S)
Offshore Banking Licenses (on lowtax.net)
Capital Reserve Requirements (on lowtax.net)
Correspondent Accounts for Offshore Banks (on escapeartist.com)
Best Offshore Banking Jurisdictions

If you’re considering forming an offshore bank or filing for an offshore banking license, you need to be ready for a lot of red tape, a significant vetting process, and to maintain a sizable deposit with the central bank (your corporate capital).

Countries are cautious when issuing offshore banking licenses. If any bank fails in a small country, it can result in a loss of confidence in the entire system. And, of course, no country wants to risk upsetting the mighty U.S. of A, as Belize did. This little spat shut down their banks for about 6 months.

If you want to enter the offshore banking market today, you need a solid business plan, an experienced board of directors, and an agent to quarterback your application.

I hope you’ve found this review of the top 5 offshore bank license jurisdictions to be helpful. If you’d like more information, please contact me for a consultation at info@premieroffshore.com or call (619) 483-1708

Benefits of Private Placement Life Insurance

12/19/2016/0 Comments/in Articles, Asset Protection, Asset Protection Trust, Offshore Trust/by Christian Reeves

For top tier investors, hedge funds and foreign investments offer broad diversification and attractive returns. Because these returns are often taxed at ordinary rates, affluent investors turn to private placement life insurance for tax efficiency.

The reason to invest using a private placement life insurance is to reduce or eliminate income and estate taxes. All gains inside a properly structured PPLI are tax deferred until taken out as a distribution by the investor. If you leave those investments in the policy, and set up an irrevocable life insurance trust, it’s possible to transfer these assets to your heirs with a step-up in basis and tax free (no estate tax).

This is important because hedge funds and offshore investments can be extremely tax-inefficient. Most hedge fund earnings are taxed as ordinary income or short-term capital gains. Federal rates can be as high ast 43.4% and, when you add in state taxes, the combined rate can be near 50%.

The same goes for many types of offshore investments and foreign mutual funds (which may be inside a hedge fund or you may hold directly). Any foreign investment where 75% of the returns are passive, or 50% of the capital is held in passive investments, is a Passive Foreign Investment Company (PFIC). PFICs are taxed at ordinary rates and gains are taxed in the year accrued, not in the year sold.

Likewise, dividends from an offshore investments are often non-qualified dividends for U.S. tax purposes. Non-qualified dividends are taxed at ordinary income rates.

Anyone investing in foreign products or companies generating ordinary income, or PFIC income, should do so through an insurance policy. Gains inside of a Private Placement Life Insurance policy are tax free if held for the life of the insured or tax deferred if taken out as a distribution by the insured.

In most cases, you can use low interest loans against the policy to access the cash during the life of the insured without incurring U.S. tax. Also, you can typically withdraw your original investment in the contract tax free.

But, the real value of a Private Placement Life Insurance policy is in allowing the investments to grow and compound tax free.

Another way to look at the PPLI is as giant IRA without distribution requirements or contribution limits. Investments in an IRA grow tax free (ROTH) or tax deferred (traditional). Add a UBIT blocker corporation to an offshore IRA LLC and you effectively convert investments that would have otherwise generated ordinary income into tax free capital gains.

Like an offshore IRA, a Private Placement Life Insurance policy increases your returns without increasing risk. This “structured alpha” is based on reducing tax costs, not increasing returns.

Note that this article is focused on foreign investments and those returning ordinary income. A PPLI might not be right for U.S. investments taxed as long term capital gains rates. This is because distributions from the policy to the insured are taxed at ordinary rates.

Thus, it would be possible for a Private Placement Life Insurance policy to convert long term capital gains into ordinary gains. Conversely, if held (deferred) for many years and passed to your heirs tax free with a step-up in basis, a PPLI might be efficient for long term capital gains… it will depend on your situation.

A PPLI provides advanced investors a tax efficient management system not available in any other product. It offers the flexibility to invest in hedge funds, offshore companies, active businesses, foreign mutual funds, and offshore passive foreign investment companies without the tax penalties that keep average people from making these investments and realizing these higher returns.

Likewise, a Private Placement Life Insurance policy eliminates “phantom income” from partnerships or PFICs. Because the gains are tax free, there are no issues of taxable income on a K-1 when no actual distribution is made.

I’ll close by noting that PPLI’s offer excellent asset protection benefits. When held inside of an offshore trust, it’s impossible for a future civil creditor to breach your life policy or access your profits.

Add to this the fact that the trustee can retain the right to limit distributions to heirs if they’re being sued, and you will see significant multigenerational tax and asset protection benefits by combining an offshore trust with a PPLI.

These products are only available to accredited investors and qualified purchasers. You must have a net worth of $1 million (excluding your primary residence) or income of $200,000 (single) to $300,000 (joint) in each of the preceding two years to be an accredited investor. You will also need to have at least $5 million in net investments to be a qualified purchaser.

I hope you’ve found this article on Private Placement Life Insurance to be helpful. For more information, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We can assist you to set up offshore and introduce you to a qualified PPLI agent.

We can also assist you to transfer an existing life insurance policy into a PPLI using a tax-free exchange (called a 1035 exchange).

What is a PFIC Investment – Passive Foreign Investment Company

12/13/2016/0 Comments/in Articles, International Business, Offshore Company, Offshore Company Taxation/by Christian Reeves

In this article, I’ll review the rules around PFIC investments and the Passive Foreign Investment Company statutes. Here’s everything you need to know about passive income in an offshore corporation.

First let me define a few terms around PFIC.

Passive Income: Income from interest, dividends, annuities, capital gains, and most rents and royalties.

Passive Foreign Investment Company: An offshore company used primarily to hold passive investments rather than to operate an active business. The two tests to determine if a corporation or LLC is a Passive Foreign Investment Company are:

Any foreign company where 75% of it’s is passive is a PFIC, and
Any foreign company where 50% or more of its assets are assets that produce passive income is a PFIC

PFIC Investment: A passive investment within a Passive Foreign Investment Company. Also, any investment in a foreign mutual fund, or in a corporation treated as a PFIC is a PFIC investment. Buying stock in company generating passive income, and not operating an active business, can be a PFIC investment.

Second, here are the consequences of investing in a PFIC.

I’ll start with a little commentary in saying that these punitive PFIC rules are a form of capital control imposed on Americans who want to invest offshore. The IRS is charging you a penalty for investing offshore. And, god forbid you make a mistake in reporting your offshore account. The penalties will be swift and severe.

These PFIC penalties where the brainchild of the U.S. mutual fund industry… not a political conspiracy. The industry didn’t want to compete with the better products available abroad, so they paid lobbyists and Congress to invent the PFIC. But, the result is the same as if the Illuminati were imposing capital control on average Americans.

As for the reporting, the IRS estimates it taxes up to 30 hours of work to complete Form 8621, which must be filed each year for each PFIC investment. Add to this forms for the corporation, foreign asset statement, FBAR, and maybe a trust, and you’re over 200 hours to report your offshore investment.

And most of these forms are required no matter the size of your investment and regardless of whether you made a profit. Having a single PFIC investment of $100 inside of an offshore corporation will trigger multiple filing obligations and cost a couple thousand in tax prep should you decide to hire a professional.

This, and the fact that the penalty for getting it wrong on that $100 investment is over $10,000 per year, and you see that average American’s can afford to go offshore. This effectively locks them and their cash in the United States.

All of this negativity and I haven’t even gotten to the PFIC penalties yet. Here they are:

Penalty 1: When you receive a dividend or sell a PFIC share, you must prorate the investment over your holding period and pay an interest charge in addition to the tax.

That’s right, where passive investments in the United States are taxed when sold, those same investments offshore pay tax for each year they are held plus an interest penalty. The purpose of the interest charge is to treat the gain as if it were earned and taxed each year over the holding period.

For example, let’s say you buy a PFIC investment in 2017. You hold it for 3 years and sell it for a gain of $300,000 in 2019. When you file your 2019 return, you’ll need to split the investment over the holding period and pay tax on it as if ⅓ was sold in 2017, ⅓ in 2018 and ⅓ in 2019. That is to say, report $100,000 in gains for each year, plus pay interest on the gains made in 2017 and 2018 (because you reported them “late.”)

Penalty 2: Capital gains from PFIC investments are taxed at the highest ordinary income rate plus the interest charge. Long term capital gains rates are NOT available.

While long term capital gains are taxed by the Feds at 20% to 23.8% (including Obamacare taxes as applicable), the top ordinary income rate is 39.6%. When you add up penalties 1 and 2, the tax and interest penalties for investing offshore can eat up 70% or more of your gain.

Penalty 3: Capital losses on PFIC investments can’t be used to offset capital gains on domestic investments.

While U.S. passive gains and losses offset each other, you can’t reduce your U.S. capital gains with offshore capital losses from PFIC investments. This means your offshore investments MUST turn a profit, or the penalties for going offshore will be severe.

Here are a few exceptions to the PFIC investment penalties…

You can opt out of the PFIC Investment rules with an LLC. If you form an offshore LLC and then make an election to be classified as a disregarded entity or partnership, you will not be considered a PFIC. Only a foreign entity with the ability to retain earnings, such as a corporation or an LLC treated as a corporation, is classified as a PFIC.

In most cases, the PFIC rules do not apply to investments of less than $25,000 (single) or $50,000 (joint).

My example above of a $100 investment was inside a corporation, which must always be reported no matter the size.

You can opt out of the PFIC investment rules by making a QEF Election. If a PFIC meets certain accounting and reporting requirements, and is FATCA compliant, you can avoid the PFIC penalties by treating the investment as a Qualified Electing Fund (QEF).

But a QEF election is very complex and difficult to use unless your offshore investment or fund is set up for QEF reporting. In my experience, only the very largest offshore funds have the ability to provide QEF reports that allow you to use the QEF election. This is because:

You must report and pay tax on your share the ordinary gains and passive income of the PFIC investment each year. Your investment might not be able to provide (or willing to provide) such an annual report.
You can elect to report but pay no tax on the QEF elected gains in a PFIC. In this case, you will pay interest on untaxed gains when the investment is sold. You are effectively “carrying over” your gains and losses year to year and paying the tax plus interest when the sale is made. This is best if the returns are uncertain or you have gains in some years and losses in others.
If you don’t make the QEF election in the first year, it becomes difficult to make it later. You need to report a “deemed sale” and then begin with the QEF from that year.

The bottom line is that Passive Foreign Investment Company rules are complex and punitive. They’re a form of capital controls being imposed on Americans by the Internal Revenue Service.

And I haven’t even covered the more esoteric areas of PFIC investing, such as 1291 funds, or the mark-to-market election for stock under the PFIC and section 1296.

For this reason, it’s important to hire a U.S. expert to form ANY offshore structure. Whether you use it to buy real estate, invest in stocks, hold a bank account, or operate a business, a U.S. expert should be the one to quarterback your offshore adventure.

I hope you’ve found this article on the joys of PFIC investments and the Passive Foreign Investment Company Rules helpful. For more information on structuring your investments offshore, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Which Countries Tax Worldwide Income?

12/13/2016/0 Comments/in Articles, Offshore Company, Offshore Company Taxation, Taxation, Travel, Lifestyle and Culture/by Christian Reeves

When you’re planning a move abroad, you need to consider the tax laws of your country of citizenship and your country of residence. The key to a solid expat move is to determine which countries tax worldwide income and avoid them whenever possible.

There are four basic tax groupings of countries. I won’t consider the 22 countries that don’t tax citizens or residents. You can find that list here.

Here’s the 4 tax categories:

Countries that tax citizens and legal residents on their worldwide income no matter where they live. These countries also tax residents on their worldwide income.
Countries that tax residents on their worldwide income. This is called a residential or physical presence tax system.
Countries that tax citizen residents on their worldwide income but not foreign residents.
Countries that tax residents on their local source income but not foreign source income. This is called a territorial tax system.

The only major nation that taxes its citizens (and green card holders) regardless of where they live is the United States. So long as you hold a U.S. passport or green card, the Internal Revenue Service wants its cut of your profits and capital gains.

Some lists of countries that tax citizens and legal residents on their worldwide income include Libya, North Korea, Eritrea and the Philippines. The tax systems of these countries are not well developed and data is limited.

The United States taxes all U.S. persons on their worldwide income. A U.S. person is a citizen, green card holder (who is a legal resident but not necessarily present in the United States), and residents. A resident is anyone who spends more than 183 days a year in the United States.

If you’re living and working outside the United States, and qualify for the Foreign Earned Income Exclusion, you can earn up to $102,100 in salary during 2017 free of Federal income tax. If your salary is more than the FEIE, you will pay US tax on the excess.

Also, the FEIE only applies to your salary. You will pay US tax on capital gains, dividends, rents, royalties, and passive income no matter where you live.

Category two includes countries that tax residents on their worldwide income. In most cases, a resident is anyone who spends more than 183 days a year in the country. If you’re not living within their borders, you won’t pay tax to these nations, even if you’re a citizen.

I should point out that the “183 days” test is the standard definition of a resident. Some have more complex tests to determine who is and who is not a tax resident. For example, Colombia uses your presence in the country and the following:

1. Staying continuously or non-continuously in Colombian jurisdiction for more than 183 calendar days during a 365 day period (1 year);
2. 50% or more of your income comes from Colombian sources;
3. 50% or more of your assets are held in Colombian Territory;
4. 50% or more of your assets are managed from Colombian Territory;
5. Having a tax residence in a jurisdiction declared as “tax haven” by the Colombian government.

The best known category two residential taxation countries are Australia, Austria, Brazil, China, Colombia, Japan and Mexico. The residency tax system is the most common and a complete list can be found here.

Category three, countries that tax foreign residents differently than citizen residents, technically includes only Saudi Arabia, Cuba and Philippines. However, some countries impose worldwide taxation on residents only after they have been in the country for several years. So, this category can vary by your situation.

When you’re moving abroad and looking to reduce or eliminate income taxes, you want to move to a category 4 country. These nations are on a territorial tax system and tax only your local source income.

If you live in a category 4 country, operate an online business from a territorial tax country, and don’t sell to locals, you won’t pay income tax to your country of residence. If you move to a territorial tax country and open a restaurant, you will have local source income and thus pay tax on your profits.

The most “business friendly” territorial tax system is in Panama. Other options include Belize, Costa Rica, Hong Kong, Malaysia, and Singapore. For a complete list, click here.

Those are the four tax systems available, with territorial and residency based taxation being the most common. Your objective should be to become a resident of a category 4 country and be a tourist or visitor in countries who would want to tax your business income.

There’s a fifth option you if you plan to spend a lot of time on the road.

You can elect to become a perpetual traveler, as so many internet marketers and entrepreneurs with portable businesses do. If you keep moving, never spending 183 days a year in any one country, you never become a tax resident and are not subject to their income tax reporting or paying requirements.

A perpetual traveler might split her time between Europe, Canada and Asia, or between the United States, Mexico, and South or Central America, never becoming subject to any of these countries tax laws. This option has become popular with nomad internet professionals.

I have two important notes for perpetual travelers:

The first is for Americans. Remember that the U.S. taxes its citizens on their worldwide income, including perpetual travelers. If you go this route, you need to qualify for the FEIE using the 330 day test and not the residency test. Here’s a detailed article on the FEIE for US citizen perpetual travelers. It’s much easier to qualify for the FEIE if you’re a resident of a foreign country for U.S. purposes, even if you spend less than 183 days in that nation.

The second is for everyone else. Several countries will attempt to tax you based on citizenship if you’re a perpetual traveler with no tax home. While their legal standing to require a tax home is unclear, I have seen many nomad clients go to battle with their home country on this issue.

Therefore, I suggest all perpetual travelers become residents of a country with a territorial tax system for the purpose of reporting (or defending your status) to your country of citizenship. Becoming a resident of Panama, while spending only a few days a year there, can simplify your worldwide tax picture.

Panama has one of the lowest cost residency programs. If you’re from a top 50 country, you can become a resident with an investment of only $20,000.

I hope you’ve found this article on which countries tax worldwide income to be helpful. For more on how to setup an offshore company or plan an international trust, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Offshore Trust or Panama Foundation?

12/05/2016/0 Comments/in Articles, Asset Protection, Asset Protection Trust, offshore asset protection, Offshore Trust, Panama/by Christian Reeves

The top two international asset protection structures are the offshore trust and the Panama foundation. These tools are very different from one another and I don’t think of them as competing solutions. Even so, I’m asked all the time, offshore trust or Panama foundation? In this article I’ll try to explain the differences.

A properly structured offshore trust formed in and managed from a tax free and max protect jurisdiction such as Belize or Cook Islands, provides the strongest asset protection. A foreign trust is more secure than a Panama foundation and offers a wider range of estate and tax planning options.

But these benefits come with limitations. In order to maximize the asset protection benefits, you must be willing to give up control of the assets. An offshore trust is best when a foreign trustee and a foreign investment advisor are making the decisions.

Likewise, the settlor (you) and any U.S. persons connected to the trust should not have the ability to replace the trustee nor the right to terminate the trust. If these rights rest in a U.S. person, a U.S. court can compel the trust be dissolved and the assets brought back to this country.

In most cases, both the offshore trust and the Panama foundation will be tax neutral. They’ll not increase nor decrease your U.S. taxes and all income and gains generated in the structure will be taxable to the settlor as earned.

A trust has additional advanced tax planning options not available to the foundation. For example, you can build a dynasty trust or multi generational trust that can eliminate gift, estate, and capital gains tax. In addition, a trust can hold a U.S. compliant offshore insurance policy which will operate as a massive tax free account, with no capital gains and estate tax due when the assets are distributed to your heirs.

For these reasons, an offshore trust is best for someone who wants to put a nest egg offshore for his or her heirs. A foreign trust will provide the highest level of protection and give you access to banks and investment options around the world typically closed to Americans. And it will accomplish this by bringing in foreign advisors and other professionals to make the trades, distancing itself from its American owner.

An offshore trust is not the structure for someone who wants to manage their own investments, is an active trader, or wants to protect an active business. A trust is meant to be static and stable over many years. It’s the castle behind whose walls you store your wealth… a castle that will stand the test of time and will prove impenetrable for decades and generations to come.

If you prefer to balance flexibility with asset protection, then consider a Panama Foundation. While the offshore trust is about maximum protection, the foundation is about control and maximum privacy. If you need an estate planning and asset protection structure to hold an active business, look to a Panama foundation.

The Panama foundation is a hybrid foreign trust and holding company. It’s meant to hold both active businesses and investments (real estate, brokerage accounts, etc.). And it comes with many of the same asset protection benefits of a traditional offshore trust.

One reason I’m so high on the foundation is that it’s used by foreigners (Americans, Canadians, etc.), expats, and locals (Panamanians). Every wealthy family in Panama holds their local assets inside of a foundation. Also, the shares of most most banks, investment firms, and large businesses in the country are held inside of foundations.

Because Panama is a major financial center, and because the foundation is used by both locals and foreigners, it’s unlikely the laws will ever change. The Panamanian government will not reduce the protection or privacy of it’s foundations because to do so would go against their ruling class and entrepreneurs.

The bottom line is that both offshore trusts and foundations are sold asset protection and estate planning tools. Each has its strengths and weaknesses and each will give you access to a wide range of offshore banks and investment opportunities.

So, should you go with an offshore trust or Panama foundation? That depends on your situation. If the above hasn’t answered this question yet, then consider the costs of each and compare that to amount of assets you need to protect.

The costs to form an offshore trust can range from $10,000 to $30,000 compared to $3,500 to $9,500 for a Panama foundation. Also, the costs to maintain an offshore trust will be much higher than a foundation because of the use of foreign trustees and advisors. Most foundations are managed by the founder / owner.

For this reason I recommend a trust when a client has $2 million or more in assets they wish to protect. More importantly, they have this amount in cash and want to hold it offshore to be managed by a Swiss, Cook Islands, or Belize investment advisor.

A Panama foundation can be formed for a variety of reasons. Most clients either hold $100,000 in assets or an active business. Because of it’s lower cost, the foundation is an excellent estate planning tool for anyone with foreign investments.

I hope you’ve found this article on the offshore trust vs Panama foundation to be helpful. For more information, and a confidential consultation, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We will be happy to review your situation and devise a custom solution that fits your needs.

Best Lawsuit Protection

12/05/2016/0 Comments/in Articles, Asset Protection, Asset Protection Trust, offshore asset protection, Offshore Trust/by Christian Reeves

The best lawsuit protection is an offshore trust… period. No structure or plan, no matter how complex, can compete with the good old offshore trust for lawsuit protection. It’s the only way to move your assets out of the United States, out of our court system, out of the reach of creditors and U.S. judges, and behind an impenetrable barrier.

To come to the conclusion that the best lawsuit protection is an offshore trust, I start from the position that all U.S. structures are flawed. Domestic asset protection is governed by U.S. law and U.S. judges. So long as your assets are in this country, they’re subject to the whims of an American court.

The way to escape our creditor friendly country is to change the jurisdiction and venue of the fight. To move your assets to a country that values your rights of ownership and self determination. To a country whose laws were specifically designed to protect you and your family from civil creditors and to get the case heard by a judge who will uphold those laws.

The two most important components of building the best lawsuit protection trust offshore are timing and control.

Timing is everything when funding an offshore trust. You must setup your asset protection structure before you have a problem. Once the cause of action has arisen, you will be unable to transfer assets out of the United States.

For example, if you hit someone with your car today, and fund a trust tomorrow, your offshore trust won’t protect you. A U.S. judge will likely claim the transfer is a fraudulent conveyance and hold you in contempt until you bring the cash back under his or her control.

The cause of action arises when the harm occurs, not when a case is filed.

The second component of the best asset protection is that you should give up control over your assets once they’re in the trust. Professional investment advisors and a trustee should be hired to manage the trust per your written directives. These experts should be outside of the United States and, like your assets, out of the reach of the U.S. courts. No one with the authority to dissolve or modify the trust should be in the United States.

Not everyone who sets up an offshore trust gives up control. It’s possible to retain control through a variety of mechanisms. What I’m saying here is that, if you want maximum protection, and truly the best lawsuit protection, you must turn over the management of the trust to a third party.

What I’m describing is the Cadillac of asset protection structures – an offshore trust formed in the perfect jurisdiction managed by licensed and experienced professionals. This is not an off the shelf product for the masses. It’s not a cheap solution. It’s the best in lawsuit protection, not some offshore shelf company sold on the corner to anyone with a few grand to protect.

Not everyone can afford an offshore trust, nor does every situation call for a top of the line solution. For example, I would not recommend an offshore trust to anyone looking to protect less than $2 million.

If an international trust isn’t appropriate, then the best lawsuit protection is the offshore structure you can afford to build, maintain, and keep in compliance.

If the Cadillac is a foreign trust, then the Ford is a Panama Foundation. This will cost a fraction of a trust, allows you to maintain control of your investments, and is a solid deterrent. This structure will get you into some good banks, doesn’t require a foreign trustee or investment advisor, and has a strong world image (Panama Papers notwithstanding).

Another lower cost option is to move your retirement account offshore. Rather than a trust, you might form a single member LLC, owned by your IRA, and place that with an international bank… one with no branches or exposure to the United States.

The most important advice I can give you about the best lawsuit protection, and going offshore in general, is this: If you can’t afford to do it right, don’t do it at all.

Any American living, working, investing, or doing business offshore is a target. The IRS is waging war on those who move their cash out of the reach of their government, and the penalties for failing to comply are severe.

For example, failing to properly report an offshore trust can result in minimum penalties of $40,000 per year ($10,000 for each missed form, 3520, 3520-A, FBAR and 8938). Worse, the penalties for 3520 and 3520-A can be 10% of the trusts assets. If the trust has $5 million, your penalty could be $500,000 per year!

For these reasons, you must hire a U.S. expert to quarterback your offshore plan. If you’re a U.S. citizen, you need someone who understands the laws of your home country and how those interact with your country of formation.

Remember that 100% of your risk of liability is in the United States. Your offshore trust or other structure is a tool to protect your assets from U.S. creditors. Thus, only someone experienced in both jurisdictions is qualified to help you achieve your goals.

If you’re unable or unwilling to pay the fees charged by U.S. professionals, stick to domestic asset protection. If you’re going to go offshore, you need to do it right or not at all.

I hope this article on the best lawsuit protection has been helpful. For more information, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Offshore Trust Tax Status and U.S. Tax Filing Requirements (Form 3520-A)

11/28/2016/0 Comments/in Articles, Asset Protection Trust, Offshore Trust, Taxation/by Christian Reeves

An offshore trust owned by a U.S. person must file Form 3520-A and a variety of other reports to remain in compliance with the IRS. Here are the tax filing requirements for offshore trusts with U.S. owners.

First, allow me to define a few terms around offshore trust tax reporting:

Settlor or Grantor: The person or persons creating and funding the trust. The terms settlor and grantor are synonyms for estate planning and the U.S. tax code.

Owner of an Offshore Trust: The settlor is the owner of the trust until his death. Once the trust passes to the heirs, they become the owners for U.S. tax purposes.

Grantor Trust: A grantor trust is considered a disregarded entity for income tax purposes. Any taxable income or deduction earned by the trust will be taxed on the grantor’s tax return. The settlor(s) or grantor(s) are the beneficial owner of the trust for tax purposes until his or her death.

Beneficial Owner: The owner of the assets of the trust for tax purposes. More specifically, Any person treated as an owner of any portion of a foreign trust under the grantor trust rules (Sections 671 to 679 of the U.S. Tax Code).

U.S. Person: Any U.S. citizen, green card holder, or tax resident. This article is focused on offshore trusts owned by U.S. persons. The rules are different for offshore trusts owned by non-resident aliens who become U.S. persons after the trust is funded.

Tax Resident: Any person who spends more than 183 days a year in the United States.

Now let’s get to the U.S. tax filing requirements of offshore trusts with U.S. owners.

We start from the position that U.S. persons are taxed on their worldwide income, no matter where it’s earned and no matter where they live. So long as you hold a U.S. passport or green card, or are a U.S. resident for tax purposes, the IRS will expect you send them their share each year.

Next, all offshore trusts with U.S. owners are grantor trusts for U.S. tax purposes. This means that all income earned within an offshore trust is taxable to the grantor. Likewise, this means that the settlor is considered the beneficial owner of the trust assets for tax purposes.

Note that I repeatedly write, “for tax purposes.” The settlor may not be considered the owner of the assets for liability and litigation purposes. Also, she might not be the owner of the assets for estate planning purposes. This article on the U.S. tax status and filing requirements of offshore trusts looks at these matters only from the point of view of the IRS.

This all means that the settlor or owner of an offshore trust must pay U.S. tax on the taxable gains earned within the trust. This includes capital gains from stock trading, rental income from real estate, and the gain realized on the sale of any trust assets.

Of course, it’s possible for an offshore trust to have non-taxable gains. For example, profits earned within a U.S. compliant offshore insurance wrapper are not taxable to the owner.

The bottom line is that, any income earned within an offshore trust which is not within a tax exempt structure is taxable to the owner. Taxes are not deferred until the profits are brought into the United States, they’re due when the gains are realized.

U.S. Tax Filing Requirements for Offshore Trusts

The most important filing requirement for an offshore trust with a U.S. owner is Form 3520-A.

An offshore trust treated as a grantor trust for U.S. tax purposes must file IRS Form 3520-A each year. Gains, losses and ownership are reported to the IRS on this form. It doesn’t matter whether there were transactions or gains in the trust, Form 3520-A must be filed each and every year.

Failure to file Form 3520-A, or filing an incomplete or inaccurate Form 3520-A can result in a penalty of the greater of $10,000 per year or 5% of the gross value of the trust assets owned by U.S. persons. That means that the minimum penalty for failing to file this form is $10,000 per year.

An offshore trust where the settlor is alive and a U.S. person will be 100% owned by a U.S. person and the penalty for failing to file Form 3520-A will be 5% of 100% of the trust assets. In the situation where the settlor has passed and one or more of the beneficiaries are not U.S. persons, the penalty will apply only to the portion of the assets owned by U.S. persons.

Note that an offshore trust with U.S. owners must also file Form 3520 to report changes in ownership and certain transactions involving the trust. Failure to file this subform will result in an additional penalty of the greater of $10,000 per year or 5% of the gross value of the trust assets owned by U.S. persons.

So, failure to report an offshore trust in a year where both Form 3520-A and Form 3520 are required can result in a total penalty of $20,000 or 10% of the gross assets. Miss these forms or file them incorrectly for a few years and the penalties add up quickly.

Foreign Bank Account Report (FBAR)

The most basic offshore form is the Report of Foreign Bank and Financial Accounts, Form FinCEN 114, generally referred to as the FBAR. Anyone who is a signor or beneficial owner of a foreign bank or brokerage account with a value of more than $10,000 must disclose their account(s) to the U.S. Treasury.

The $10,000 amount is the value of all offshore bank and brokerage accounts combined. If you have 4 offshore accounts, each with $4,000, your total offshore balance is $16,000 and an FBAR report is due each year.

The penalty for failing to disclose an offshore bank account is $10,000 for each non-willful violation. If the violation is intentional, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation. A separate penalty will be imposed for each year you failed to report the international bank and/or brokerage account associated with your offshore trust.

In addition to filing the Foreign Bank Account Report, your offshore account must be disclosed on Form 1040, Schedule B of your personal tax return.

Other Tax Forms for Offshore Trusts

Form 5471 – Information Return of U.S. Persons with Respect to Certain Foreign Corporations. If your trust owns a foreign corporation, Form 5471 will be required.

A foreign corporation or limited liability company owned by an offshore trust should review the default classifications in Form 8832, Entity Classification Election and decide whether to make an election to be treated as a corporation, partnership, or disregarded entity.

Form 8858 – Information Return of U.S. Persons with Respect to Foreign Disregarded Entities. If your foreign trust owns an offshore Limited Liability Company, you might need to file Form 8858. If not this form, then Form 5471. Which form is required is determined using the instructions to Form 8832.

Form 5472 – Information Return of a 25% Foreign-Owned U.S. Corporation. If your offshore trust invests in a U.S. business, or in an offshore corporation that does business in the United States, you may need to file Form 5472 to report U.S. source income.

Form 926 – Return by a U.S. Transferor of Property to a Foreign Corporation. Form 3520 is generally used to report transfers to an offshore trust. Form 926 can be required if you transfer property into a foreign corporation owned by your trust.

Form 8938 – Statement of Foreign Financial Assets was introduced in 2011 and must be filed by anyone with significant assets outside of the United States. Whether this Form 8938 is required will depend on many factors, such as the value of your foreign assets and whether you’re living in the United States or abroad. I won’t go into the details here. Suffice it to say that most offshore trusts are large enough that Form 8938 is required.

Conclusion

Because of the complex web of tax forms and rules that apply to offshore trusts, the severe penalties for getting it wrong, and the potential to use an offshore trust as a tax planning tool (when combined with an insurance wrapper) or as a way to minimize estate tax, I strongly suggest you hire a U.S. expert to form your structure.

Only a U.S. tax and asset protection lawyer is qualified to design and implement an offshore trust for an American citizen or resident.

Only a professional with years of experience in the field should be hired to quarterback your asset protection team.

Only a U.S. lawyer can build an asset protection trust to protect you from U.S. creditors. If your risks are in the United States, so must be your legal counsel.

Only a U.S. tax expert is qualified to keep your offshore trust in compliance.

Only an attorney experienced in both offshore planning and U.S. taxation can assist you with pre-immigration planning using offshore trusts.

Sure, it’s cheaper to hire an offshore trust agent. Take a read through the penalties for failure to file or report again, and then consider whether the savings are worth the risk.

Here’s the bottom line: If you can’t afford to do it right, don’t do it at all. If the amount of assets you want to transfer offshore don’t warrant hiring a U.S. lawyer, then don’t go with a trust. Plant your first flags offshore in a less costly and less complex structure.

For example, if you will move $100,000 offshore, go with a Panama Foundation rather than an offshore trust. The cost savings will be significant and the Foundation offers many of the same asset protection benefits. Also, a Panama Foundation is a great way to hold active trading accounts and businesses, which don’t play well with offshore trusts.

If you want to take a U.S. retirement account offshore, use an offshore IRA LLC rather than an international trust. Your setup and ongoing costs will be a small fraction of those associated with a properly designed trust.

Finally, it’s possible to invest offshore and legally report nothing to the IRS. If you buy foreign real estate, or hold gold offshore in your name, there will be no IRS reports to file. Stick to gold and real estate, avoid offshore structures, and do not have an offshore bank accounts with more than $10,000, and your investments will remain totally private.

Assets within an offshore corporation, including gold and real estate, must be reported on Form 5471. The above refers only to assets held in your name without a corporate structure, LLC, or foreign trust. For more, see: Offshore Privacy Exists!

I hope you’ve found this article on the U.S. tax status and IRS filing obligations of offshore trusts to be helpful. For more information on building an international asset protection structure, please contact me at info@premieroffshore.com or call us at (619) 483-1708 for a confidential consultation.

How to Stop Paying Payroll Tax

11/20/2016/0 Comments/in Articles, International Business, Offshore Company Taxation, Taxation/by Christian Reeves

During the election,Trump claimed he’s paid “hundreds of millions of dollars” in taxes over the years. Yet, he probably didn’t pay any personal income taxes since 1995 because of a $916 million loss carryforward. How can both of these statements be true? Because most Americans pay more in payroll taxes than income tax!

In this article, I will explore how you can opt out of the US payroll tax and self employment tax systems by going offshore. How to stop paying into Social Security and other government programs that might not be there when you need them. How to create your own security blanket offshore that’s under your control.

Federal payroll tax is about 15%, with half being paid by your employer and half being deducted from your check. In addition, most states charge a payroll tax of 1.5% to 7.5%, again with half coming from the employee and half from the employer.

Self employment tax is basically payroll tax for small business. If you operate without a corporation, and report your income and expenses on Schedule C of your personal return, you will pay 15% of self employment tax. This is intended to match up with the 7.5% paid by an employer and the 7.5% withheld from every paycheck.

I’m using round numbers to keep it simple. For the precise cost of hiring an employee in California, see this great infographic.
For purposes of this article, I’ll use the terms self employment tax and payroll tax interchangeably.

When the Donald says he’s paid hundreds of millions in taxes, he’s probably counting employment taxes paid by his many companies, plus payroll and other taxes he’s paid personally. Assuming a payroll tax cost of 10% for each employee, the numbers add up quickly and his boast is probably correct… even if he paid zero in personal income taxes.

About 66% percent of households will pay more in payroll taxes than they will in income tax. Only one in five households will pay more in income taxes than employment taxes. Those who do pay more income taxes than payroll taxes are at the very top of the wage scale. Middle income and low income taxpayers are paying far more in payroll than income tax.

Only 18% of US households pay neither payroll nor income tax. Of these, half are retirees living on their Social Security and have no other taxable income. The rest have no jobs and not much income. (source: T16-0129 – Distribution of Federal Payroll and Income Taxes by Expanded Cash Income Percentile, 2016, Tax Policy Center)

If you’re a business owner or an independent contractor, here’s how to stop paying payroll taxes… and income tax on your first $102,100 of salary in 2017.

Live outside of the United States, qualify for the Foreign Earned Income Exclusion, operate your business through an offshore corporation in a zero tax jurisdiction, and you will pay no payroll taxes of any kind.

In order to qualify for the Foreign Earned Income Exclusion, you must be out of the United States for 330 out of 365 days or be a legal resident of a foreign country and out of the US for 7 or 8 months a year. Any income earned while in the US will be taxable here.

As a legal resident, your new country should be your home base for the foreseeable future. If you move somewhere for a short term job, you’re not a resident for purposes of the FEIE. You need to move to a foreign country with the intent to live there indefinitely.

If you don’t want to go through the hassle of getting a residency visa, you need to be out of the US for 330 out of 365 days. While this version of the test doesn’t give you much time with friends and family in America, it’s far easier to prove should the IRS challenge your tax return.

If you live abroad and qualify for the FEIE, but don’t operate your business through an offshore corporation, you will still pay payroll taxes! You will eliminate income tax on your first $102,100 in 2017, but self employment tax will apply at 15%. So, a business that net’s $100,000 is basically paying a penalty of $15,000 for failing to incorporate offshore. A husband and wife who net $200,000, could pay a $30,000 penalty.

If you run your foreign business through a US corporation, you will pay payroll taxes. If you don’t have any corporate structure, you will pay self employment tax.

What happens if you make more than $100,000 (single) or $200,000 (both spouses work in the business)? Any excess salary you take out of the business will be taxed at about 32% by the IRS. Still, no payroll or self employment taxes will apply.

If you’re operating through an offshore corporation, you may be eligible to hold those profits in the company and not pay tax on them until they are distributed. That is to say, you can hold income over the FEIE amount as retained earnings in your offshore corporation.

These retained earnings will basically create a giant retirement account or security blanket. Like money contributed to an IRA, this cash is untaxed until you take it out of the corporation. Unlike an IRA, there are no rules or age requirements forcing distributions.

So, if you want to stop paying payroll taxes and self employment taxes, move out of the United States, qualify for the FEIE, and operate your business through an offshore corporation.

For help on setting up a tax compliant structure, please contact me at info@premieroffshore.com or call us at (619) 483-1708. I will be happy to assist you to set up offshore.

Offshore Money Management Business: How to Accept Client Funds and Deposits

11/20/2016/0 Comments/in Articles, International Business, Offshore Banking, Offshore Company/by Christian Reeves

If you want to receive client funds into your offshore account, you must have a license or set up a specially designed offshore structure. Whether you’re raising money or managing money, if you’re not the owner of the cash in your offshore bank account, you will need an offshore money management license. In this article, I will describe how to accept client funds and deposits offshore.

First, let me explain what I mean by client funds. It’s money that doesn’t belong to you, the owner of the offshore company. The most common examples of “other people’s money” in offshore accounts are brokerage firms, FX or Bitcoin exchanges, and anyone who manages or invests money for other people.

This does not include income from selling a product or a service. Nor does it include money invested by shareholders of the offshore company. So long as those shareholders are disclosed and provide due diligence documents to the bank, and you’re operating a business, not an investment pool, the account will be in compliance.

I should point out that most offshore banks will limit the number of shareholders… not for legal reasons, but for practical ones. No bank will want to put in the time and effort to research 50 shareholders investing $5,000 each. That doesn’t make economic sense for a bank. In most cases, you will be limited to 2 to 5 shareholders per offshore company.

Also, even if all of your shareholders are approved, no offshore bank will allow you to operate a money management business without a license. You can’t combine client money into a pool and invest it for their benefit, even if they’re all shareholders of the corporation.

With that in mind, here’s how to accept client money as an offshore investment advisor.

Power of Attorney Model

In my opinion, the most efficient offshore solution for private wealth managers is the Power of Attorney model. I’ve seen the POA model work well for investment advisors with over 2,500 clients, all with managed accounts in Switzerland, and for smaller firms with accounts in Asia and the Caribbean.

You simply form an offshore company for each and every client. That offshore company is in the name of the owner (your client) and opens an account at the bank you wish to trade through. Then the client gives you (the investment advisor) a Power of Attorney over his or her company’s bank account.

With that Power of Attorney, you can invest the client’s funds per your agreement. You have full control without the need to be licensed as a broker or as a brokerage in the country where you’re trading.

The POA model completely eliminates licensing and regulation issues. It also allows you to bring client money together in an omnibus account or into a hedge fund. When combined with a white label trading platform, available from major international banks, you will present a solid image and back office to your clients.

The limitation of the POA model for managing client funds is obvious – the cost. You will need to form a separate LLC or corporation for every client and go through the account opening process at your trading bank for each.

Depending on your jurisdiction, an offshore company might cost $2,000 to $3,500 to setup and $850 per year to maintain. This cost is typically borne by the trader, so this model only makes sense for those managing larger accounts.

Bottom line: if you want to open accounts at major banks in Europe without setting up a fully licensed brokerage, the POA model is the way to go.

Bank License

Let’s jump from the easiest and most efficient option to manage client money offshore to the most complex and burdensome. If you want to go big into offshore, consider forming a fully licensed and regulated offshore bank.

An offshore banking license from a country like Dominica, St. Lucia, or Belize might cost $70,000 to $300,000+ and require capital of $1 million to $5 million. In addition, you will need a solid board of directors, 5 year business plan, an office with employees on the island, and licensing will take 6 to 16 months to complete.

Once you have your bank license, you will need a correspondent bank account. As no bank will bother to open a correspondent account for a bank with only $1 million in its coffers, you will need significantly more capital at this stage.

There’s one interesting hybrid license available to U.S. investment managers. You can form an “offshore” bank in the U.S. territory of Puerto Rico with only $550,000 in capital. U.S. Federal laws apply on Puerto Rico, but U.S. tax laws do not. This allows you to operate a bank from the island and pay only 4% in corporate income tax.

For more on Puerto Rico’s offshore banking statute, checkout: Lowest Cost Offshore Bank License is Puerto Rico.

For more information on offshore bank licenses in general, please review my articles below.

Best Offshore Banking Jurisdictions
Offshore Bank Advertising Rules (a review of Reg. S)
Offshore Banking Licenses (on lowtax.net)
Capital Reserve Requirements (on lowtax.net)
Correspondent Accounts for Offshore Banks (on escapeartist.com)

Brokerage License

Brokerage licenses are available from a number of jurisdictions. The lowest cost and capital requirements are in Belize, Anguilla, St. Lucia, Nevis, Seychelles and St. Vincent. The top offshore jurisdictions are Panama, Cayman and BVI.

We do not offer licenses from Comoros or any African nations. For my thoughts on a similar topic, see: Gambia Bank Licenses are a Scam

The cost to secure a brokerage license in Belize is around $35,000 and the capital required is $50,000 to $150,000 depending on a number of factors.

Licenses from the countries above do not require you pass an exam or receive a personal license (like a Series 7). The corporate brokerage license will require you demonstrate proficiency and standing in the industry, but not in your country of licensure.

Before selecting a jurisdiction for an offshore brokerage, a review of local rules should be undertaken to ensure your client base is compatible with FATCA and other island requirements.

Fund License

The next level down from a brokerage license would be a licensed or registered hedge fund. The best jurisdictions for a fund are Cayman and BVI, but licenses are also available from Nevis and Belize.

There are four options for an offshore fund in Cayman:

You can form a licensed fund, involving a rigorous investigation by the Monetary Authority of the fund documentation and promoters. These are rare (about 10% of Cayman funds) and allow you to accept investments of any size.
You can form a registered fund, which requires only a form setting out the particulars of the fund, together with a copy of the offering document and consent letters from the Cayman licensed auditor and Cayman licensed administrator. This is available to funds that require a minimum initial investment per investor of US$100,000. The majority of funds in the Cayman Islands are registered funds.
You can form an administered fund if you will have 15 or more investors. To be approved as an administered fund, you must have a Cayman fund administrator providing your principal office. The regulatory responsibility (and, thus the risk and liability) for the administered fund, which has more than 15 investors and which is not licensed or registered, is placed largely in the hands of a Cayman licensed fund administrator.
You can form a non reported fund in Cayman if you have 14 or fewer investors. Cayman will allow you to form a company and launch a fund without much regulation or oversight. Once you reach 14 investors (call it a proof of concept), you’ll need to step up to an administered, registered or licensed fund.

To set up a Cayman licensed or regulated fund, one would first form a Cayman company, then open a Cayman office or have a local registered office, and then file an application with the government. In order to be approved, the manager must have a net worth of at least US$500,000 and the manager and prove himself competent as a based on past work experience. The application process can take 3 to 6 months.

Most of the funds we set up are master / feeder structures for U.S. and international investors. Note that tax preferred investors, such as offshore IRA LLCs, come in through the offshore feeder.

For more on master / feeder funds, please contact me at info@premieroffshore.com for a confidential consultation.

Licensed but not Regulated Offshore Entities

In addition to funds, the Cayman Islands offers a licensed but not regulated option for FX and BitCoin firms. If you’re in the currency exchange or money transmission business, you might find Cayman one of the most marketable options… a jurisdictions that your clients will be comfortable with.

For a licensed Forex Brokerage operating in the Cayman Islands, see: Xenia.ky

For a licensed and regulated brokerage firm in the Cayman Islands, see: OneTRADEx.com

Note that, if you’re going to run a full-service brokerage, you must be a regulated entity. The licensed but unregulated option is available to FX and Bitcoin operators.

Another licensed but unregulated entity is a Panama Financial Services Company. This structure can be used to hold third-party funds or to operate an FX or Bitcoin business.

These structures are popular for holding client funds on behalf of a regulated entity from another jurisdiction. For example, you want to manage client money in Panama on behalf of your bank or brokerage licensed in Dominica. This is a way to outsource your investment management activities to a low-cost jurisdiction like Panama without setting up a full brokerage.

A Panama Financial Services Company is a cost-effective structure to accept client funds as an offshore money manager. Compliance is light because Bitcoin and FX are regulated by the Ministry of Commerce and Industry and not the Banking Commission.

The following activities require a banking or brokerage license in Panama, and thus may not be offered through a Panama Financial Services Company:

Securities broker-dealer activities including investment funds, managed trading etc.
Savings and Loan (financiera)
Fiduciary (trust company) services
Any banking services including credit and debit cards
Cash money transmittal services or money exchange (e.g. bureau de change)

For an example of a BitCoin exchange operating in Panama under this license, see: Crypto Capital

Belize Licensing Options

You can generally expect Belize to be the lowest cost reputable jurisdiction for licensed businesses. Licenses available in Belize include:

International money lending license
Money brokering services
Money transmission services
Money exchange services
Mutual and hedge funds
International insurance services
Brokerage, consultancy, and advisory services
Foreign exchange services
Payment processing services
International safe custody services
International banking license
Captive banking license
General banking license

For a list of applicable legislation, see: International Financial Services Commission, Belize

Conclusion

I hope you have found this article on how to accept client funds and deposits in an offshore money management business to be helpful. For more information on how to setup an offshore investment management firm, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Barron’s Interview: Top 5 Second Passports for 2017

11/16/2016/0 Comments/in Articles, Second Passport/by Christian Reeves

Dear Readers,

My interview with Barron’s was published this morning. You can find it here:

Top Five Countries for Secondary Citizenship

And here are links to detailed posts on the countries that made my top 5 list for 2017:

Dominica (best value)
St. Lucia (best investment option)
Malta (when money’s no object)
Austria (the gold standard, I will publish on this one shortly)
Dominican Republic (best low cost backup passport)

Feel free to contact me at info@premieroffshore.com or call us at (619) 483-1708 with any questions on second passports. We will be happy to work with you to find the best program and negotiate your citizenship.

Best Regards,

Christian Reeves

Publisher, PremierOffshore.com

second passport from the dominican republic

The Lowest Cost Second Passport is from the Dominican Republic

11/14/2016/0 Comments/in Articles, Second Passport/by Christian Reeves

The lowest cost second passport is from the Dominican Republic… period. The program from the Dominican Republic is a fraction of the cost of competitors like St. Kitts, Dominica, St. Lucia, and Malta.

If you’re looking for a low cost citizenship option, take a look at the Dominican Republic. If you want to maximize the value of the U.S. Foreign Earned Income Exclusion, or improve your asset protection and banking options, a second passport from the Dominican Republic might be the way to go.

Note that this article describes a second passport from the Dominican Republic and not Dominica. Dominica has a strong passport which is available for purchase for about $140,000. For more, see: A Second Passport from Dominica is the Best Value in the Caribbean

I should point out that Dominica and Dominican Republic are not direct competitors. The uses and benefits of a DR passport are very different from those of Dominica or the European Union passports we offer (such as Malta which requires an investment of $1.2 million).

Who the Dominican Republic second passport program is for…

Here’s how to get a low cost second passport from the Dominican Republic in about 8 months from the date your residency is approved.

A second passport from the Dominican Republic is for those looking to diversify their current citizenship. It’s for citizens of top tier countries, such as the United States, Canada, United Kingdom, European Union, Japan, Australia, New Zealand, etc. Those who already have a strong passport and want a supporting travel and citizenship document.

If you’re concerned with the state of affairs in your home country, and want a hedge against country risk, consider a second passport from the Dominican Republic.

If you want to have a second passport in hand in the event that you decide to expatriate from the United States, think about the Dominican Republic.

If you want a smooth transition or landing spot should you pull the ripcord on your exit strategy, having a second passport is key.

If you’d like to invest and transact in private, a second passport from the Dominican Republic will help.

If you’re a U.S. citizen and concerned with the IRS or another government agency confiscating your passport, you must have a second passport in hand before trouble comes. Keep in mind that a U.S. passport is not a right, it’s a privilege bestowed upon us by our government. Your U.S. passport can be revoked for any reason at any time.

For more on how and why the U.S. can revoke your passport, see;

The bottom line is this: if you’re a citizen of a top tier country, and want the privacy, and security of a second passport, the lowest cost option is the Dominican Republic.

Who the Dominican Republic second passport program is NOT for…

The second passport program of the Dominican Republic is not for those who need to upgrade their passport. If you’re looking for a passport with more visa free travel options, the DR is not for you.

A passport from the Dominican Republic gets you visa free or visa on arrival access to only 54 countries and territories, ranking it 83rd in the world. Here is a list of visa free countries.

By comparison, a passport from China gives you access to 50 countries and a passport from India gets you access to 52 countries. There is little benefit to persons of these countries in buying a second passport from the Dominican Republic

Citizens of China and India are the most likely to want to upgrade their passports rather than diversify as Americans and Europeans do. For more on upgrading your passport, see: 10 Best Second Passports and Citizenship by Investment Programs For 2016

The lowest cost passport upgrade is Dominica at about $170,000 for a person from China and India (compared to about $140,000 for a U.S. citizen). You’ll receive your passport from Dominica in about 90 days.

The lowest cost residency program for Chinese and Indian nationals is Panama, which requires an investment of $80,000. You can apply for citizenship and a passport after 5 years of residency. This passport gets you visa free travel to 127 countries, including all of the European Union and the Schengen Region.

Citizens of China, India, and other restricted nationalities can apply for a passport from the Dominican Republic. I’m not suggesting you are ineligible… my point is that a DR passport won’t be a major upgrade to your current passport.

Process to obtain a second passport from the Dominican Republic

There are two second passport programs available from the Dominican Republic. The fast track investor program and the fast track retiree / foreign passive income option. Both will get you a passport within 8 months of your becoming a permanent resident.

Fast Track Investment Option: Start a business in the Dominican Republic with an investment of $200,000 or deposit $200,000 into a bank in the Dominican Republic (typically a CD which will provide a nice rate of return).

For the business option, all you need to do is form a corporation and deposit the capital into a local bank. There is no requirement to hire employees, operate the business, or pay taxes in the DR.

Your $200,000 must remain in the corporate account, or in your CD, for a minimum of 3 years. Some local banks offer accounts in US Dollars, Euros, the Dominican Peso (which is the local currency)

If you change your mind, you may withdraw your money from the Dominican Republic at any time. In that case, your residency and citizenship application will be cancelled.

Early withdrawal penalties may apply to CDs or other long term investments. If you perceive risk in the DR banking system, and want immediate access to your capital throughout the application process, hold it in a corporate checking account.

Most applications for citizenship under this fast track program are completed within 8 months of your residency being approved. The timeline of the corporate option is as follows:

We form a Limited Liability Company for you in the Dominican Republic. Typically completed in one week.
You travel to the Dominican Republic to open the bank account with our assistance. We suggest you stay a minimum of 3 nights on the island.
You deposit the $200,000.00 into your corporate bank account and receive a confirmation letter. Note that you are the only signer on this account and the funds are always under your control. Typical processing time is 5 business days.
Reporting the investment and filing various documents with the government. This takes 30 to 40 days.
You provide us the certified and apostilled documents listed below and return to the Dominican Republic for a medical exam. This can be completed in one day.
We prepare and file your permanent residency application, which requires about 30 days. In most cases, your permanent residency will be approved in 2 to 4 months.
You travel to the Dominican Republic to receive your permanent residency documents and photo ID.
Once you have your residency card in hand, you must wait for 6 months before you can apply for Citizenship. Typical processing time of these citizenship and passport applications is 60 to 90 days. You will need to travel to the Dominican Republic to receive your passport.

If you’re able to travel as soon as each step is completed, and you provide the required documents in a timely manner, we can complete your citizenship application in 8 to 10 months after you receive your residency card, depending on your availability.

The only timeline that’s fixed by statute is the 6 month wait between receipt of your permanent residency card and filing for citizenship.

Retiree / Foreign Passive Income Option: Retirees are those with passive income from retirement accounts. Passive income applicants are those with rental properties, dividends, foreign bank deposits (from banks outside of the Dominican Republic), investment returns from foreign companies, and other forms of passive income which has been earned over 5 consecutive years.

Retirees must show income from a pension or retirement plan of $1,500 per month plus $250 for each dependent. There is no minimum age requirement to be considered a “retiree.” So long as you have a pension plan sending you regular payments, you will qualify.

Passive income applicants must show a minimum fixed monthly income of $2,000 plus $250 for each dependent.

Dependents include your spouse and any children under 18 years of age. College students who can prove they are dependent upon you for support may also be included in your application.

The typical processing time for a retiree / passive investor application is 8 months after you have your permanent residency card in hand.

Documents to Become a Resident of the Dominican Republic

We will need the following documents from each applicant to complete your residency and second passport package for the Dominican Republic.

One questionnaire per family unit, a notarized copy of each applicant’s passport, and a notarized copy of a utility bill showing the primary applicant’s name and home address.
1. A family unit is the primary applicant, your spouse, and your dependent children under 18 years of age. Full time college students who are dependent on you for support may also be included.
A complete copy of each applicant’s passport (every page, including blank pages). Each passport should have 4 months of validity remaining. If less, you should renew before applying to the Dominican Republic.
A government issued birth certificate notarized and apostilled in your country, or at the nearest Dominican Consulate. This document must be translated to Spanish and the translation also must be certified.
Government issued marriage and divorce as applicable. These are to be translated into Spanish, certified and apostilled.
Resume or biography for the primary applicant. A resume or bio from your spouse will also be helpful. There is no specific format, just something that gives the reader an idea of your education, work history, and some interesting facts about you.
If applying as a retiree, proof of your monthly pension translated to Spanish and certified by the Dominican Consulate and at the Ministry of Foreign Affairs of the Dominican Republic.
If applying as a passive investor, proof of such income over the last 5 years translated to Spanish and certified by the Dominican Consulate and at the Ministry of Foreign Affairs of the Dominican Republic.
1. For example, a copy of the fixed income contract/certificate of deposit will be accepted.
If applying as a corporation, various corporate documents to be certified by a local notary and authenticated at the Attorney General’s Office. A
Police clearance report or FBI background report showing no criminal record. This should come from your home country. If you have lived abroad for 5 years or more, this should come from your country of residence.
1. U.S. citizens, click here for information on obtaining an FBI clearance report.
If you have lived in the Dominican Republic for 30 days or more (for example, during the residency period but before applying for citizenship), each applicant 16 years of age and older should provide a Certificate of Good Conduct by the Dominican authorities.
Each applicant over 16 years of age is required to provide 9 passport photos (6 front pictures and 3 right profile). For children under 16, 5 passport photos are required (3 front and 2 right profile). Pictures should be 2”x2”, against a white background, and accessories such as earrings or sunglasses are not permitted

From time to time, the government might ask for additional or supporting documents. You should begin collecting these documents after you submit the questionnaire. The police report or FBI report can take months to complete. If you plan to use the fast track or expedited fast track program, start on these ASAP.

Costs of Residency and a Second Passport in the Dominican Republic

The cost for a single applicant from the US, EU, UK, Canada, or a similar country is $35,000. The cost for a husband and wife is $45,000. Each dependent will add about $3,300, but fees will vary based on age and history.

Fees for those from restricted countries, such as China, India, Pakistan, African nations, etc. will vary from case to case. The average has been an additional processing and due diligence fee of $10.000 per adult applicant. So, a single applicant would be $55,000 and a husband and wife would be $65,000 on average.

The fees listed above include both your residency and citizenship. That is to say, they the include filing and management of your application throughout the program until you have your second passport from the Dominican Republic in hand. They also include all government and other costs.

The government of the Dominican Republic is planning to add one or two investment options to it’s second passport program in the coming months. While we don’t have any details yet, I expect they’ll be based around government bonds and green reforestation programs.

For example, it might be possible to invest $150,000 in teak and receive residency and a second passport in exchange. Alternatively, you might be allowed in invest $250,000 in government bonds for 5 years and become a citizen after 6 months.

No matter what changes come down, the lowest cost options will be those described above. If you have a pension or passive income, you can buy a passport from the Dominican Republic for $35,000. If you don’t have a consistent cash flow, you can deposit $200,000 and qualify for a second passport.

Second Passport Scams from the Dominican Republic

A number of countries have been the targets of passport scam artists. I’ve seen scams from Panama, Mexico, Antigua, Paraguay, Comoros, and the Dominican Republic.

The program we are offering was signed into law in 2014 and became active in 2015. Any website promoting a DR passport before this date is a scam. Only a formal program, founded in the law, will guarantee you a second passport.

Likewise, any website promoting an “instant passport” from the Dominican Republic is a scam. All legal programs require you become a resident for at least 6 months before you apply for citizenship. There is no way to expedite or pay a fee to circumvent this requirement.

Before publishing on this low cost second passport offering from the Dominican Republic, I did a great deal of research. I made multiple trips to the island, met with lawyers, promoters, and government officers and cabinet members at all levels.

Still not satisfied, I reviewed the files of 42 completed applications and spoke with many of the investors over the phone. In this way, I was able to confirm that each and every applicant has been approved and had received their passport after the statutory waiting period.

This is to say, I’ve been aware of the DR program for many months now. I did not write it up until I did my of research and had followed over 40 cases from start to finish. Only then did I feel comfortable bringing this to my readers.

I’m now 100% confident in the second passport program offered by the Dominican Republic.

Contact Us

Please contact me for more information on the Dominican Republic second passport program. We will be happy to work with you to gain residency and a second passport from the DR. All consultations are confidential. You can reach me directly at info@premieroffshore.com or at (619) 483-1708.

How to get an Offshore Bank License in Dominica

11/14/2016/0 Comments/in Articles, Banking Offshore, International Business, Offshore Banking/by Christian Reeves

The most active low cost offshore bank license jurisdiction is Dominica. If you’re in the process of selecting a country to incorporate and license an offshore bank, give the Caribbean Island of Dominica a look.

You’ll find that the capital required for a bank license in Dominica is a fraction of it’s competitors. You will also find that the government and regulators want you to succeed… that they’ll work with you to build your brand and your bank… the opposite of what you’ll experience in competing financial centers like Belize, Panama and Cayman.

This article is about Dominica, one of the Windward Islands, the southern group of the Lesser Antilles in the West Indies, and a leader in the financial services industry. Please don’t confuse Dominica with the Dominican Republic.

An offshore bank license from Dominica will allow you to offer all manner of banking services. This includes deposit taking, wealth management, lending, credit cards, secured cards, debit cards, certificates of deposits, tax and business planning, currency exchange, and correspondent banking services.

The only limitation on an offshore bank licensed in Dominica is that it’s prohibited from offering services to locals. You may not sell banking services to residents or citizens of Dominica.

An offshore bank in Dominica might also offer company formation, asset protection structures, business and tax planning, tax efficient loans for corporations holding retained earnings in your bank, and wealth management. By maximizing the tax and privacy benefits of Dominica, you might leverage an offshore bank license several fold.

As an enticement to bring jobs and grow the financial sector, you (the owner of an offshore bank in Dominica) may qualify for a second passport or citizenship in the country. Shareholder can apply for immediate citizenship and a second passport. In most cases, the cost will be $130,000 to $180,000 for a single applicant.

An offshore banking license from Dominica has the lowest capital requirement of any offshore jurisdiction. While Belize and others are demanding $5 million, Dominica will allow you to license a bank with only $1 million in capital.

With $1 million in capital, you will get your bank license. You’ll then need to search out a correspondent banking partner. It will be challenging to find such a partner for a small bank with minimal capitalization. Thus, many apply for the license with $1 million and then raise more money after the provisional license is granted.

Technically, the lowest capital requirement is the U.S. territory of Puerto Rico. That bank license can be had with $550,000 in capital. While Puerto Rico is “offshore” for tax purposes, it’s “onshore” for other Federal agencies.

Dominica is also the lowest cost license to procure. In fact, the cost of Dominica is a fraction of competitors such as Cayman and Belize. Assuming you have a business plan and a board of directors in place, a bank license from Dominica should cost around $100,000, including government and legal fees.

This estimate does not include due diligence fees on shareholders and directors. These will vary greatly depending on your country of citizenship. The typical range is $3,000 to $10,000 per person. The average is $7,500 for the primary applicant.

This would compare to $300,000+ in the Cayman Islands. The annual license fee alone in Cayman is about $85,000 compared to only $8,000 in Dominica and $5,000 in Puerto Rico.

In Cayman and Dominica, licensed banks are exempt from tax on their net income. The tax rate in Puerto Rico is 4% if you have at least 5 employees in the territory. If you don’t qualify for the Puerto Rico tax holiday, income will be taxed at about 35%.

Your offshore bank in Dominica will require an office, registered agent, and employees on the island. Compliance (FATCA, OECD, DAC, AML, etc.), account openings, information technology and security, and some basic services should be provided in Dominica.

It will be possible to manage bank assets outside of Dominica. For example, you might form a Financial Services Company in Panama as the management agent. This will allow you to work around some of the correspondent banking issues and manage client capital in a larger jurisdiction.

The typical annual fee for a registered agent in Dominica is $10,000. They will be your liaison to the government, agent for service, and local representative of the bank on the island.

In addition to the agent, employees, and office overhead, you will need to retain an audit and accounting firm to prepare quarterly reports to the government. The average cost of these services is $20,000, though fees vary widely from provider to provider.

The final major expense will be your banking software. We recommend Mobile Earth and
Temenos T24 Retail Banking Software Systems for Dominica. I won’t estimate prices here because of the variety of configurations available. Feel free to contact them directly for a quote.

Because of our long history and relationships on Dominica, we offer a turn-key offshore bank license in this jurisdiction. Everything required to be up and running in 3 to 6 months: government negotiations, board of directors, business plan, financial projections, office space, employees, etc.

If you’re considering forming an offshore bank, I suggest you take a look at Dominica. It’s the lowest cost and most efficient jurisdiction actively issuing licenses.

I hope you’ve found this article on how to get an offshore bank license in Dominica to be helpful. Please contact me at info@premieroffshore.com or call (619) 483-1708 for a confidential consultation on incorporating an international bank.

For more information on offshore banking licenses, please review my articles below.

Lowest Cost Offshore Bank License is Puerto Rico
Best Offshore Banking Jurisdictions
Offshore Bank Advertising Rules (a review of Reg. S)
Offshore Banking Licenses (on lowtax.net)
Capital Reserve Requirements (on lowtax.net)
Correspondent Accounts for Offshore Banks (on escapeartist.com)
Bank Licenses from Gambia are a Scam (on escapeartist.com)

European OECD Tax Exchange Agreements

11/14/2016/0 Comments/in Articles, International Business, Offshore Banking, Taxation/by Christian Reeves

As of November 2016, most offshore jurisdictions have signed on to the Automatic Exchange Agreements demanded by European governments and the Organisation for Economic Co-operation and Development (OECD). All but Panama has agreed to share information with European tax authorities.

On paper, the OECD defines itself as follows: “the mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world.The OECD provides a forum in which governments can work together to share experiences and seek solutions to common problems.”

In practice, the OECD has simply followed behind the US IRS and our Foreign Tax Compliance Act (FATCA), demanding information on the offshore transactions of EU citizens. Both sets of laws require banks, either directly or through their local government agents, to report ownership, control, and banking activity. The focus of FATCA is account size and transactions while the OECD is tax data (gross sales, profits, taxes paid, employees and assets of each entity).

A history of the OECD’s information exchange program can be found by clicking here.

For a list of countries that have signed on to the agreement, click here. The list is a real eye opener. As I said, the only offshore jurisdiction that hasn’t signed on is Panama.

You’ll find that most offshore jurisdictions have agreed to begin sharing data by 2018. Some, such as Cayman and Seychelles will begin in 2017, while Cook Islands, Belize and Andorra will implement in 2018.

You’ll also find that the list of compliant countries includes all but one… the largest tax haven in the world for everyone but it’s citizens… the U.S. of A.. While Russia, Switzerland, the United Kingdom, Mexico, China, Canada, Singapore, Japan, etc., have all signed on, the United States is nowhere to be found.

The fact that the US has refused to join will create some interesting challenges for US banks operating in compliant countries. How our global banks will coordinate compliance in one country while hiding assets based in America, will open the door to all manner of disputes.

As we international entrepreneurs move into 2017, we do so with the knowledge that privacy in our financial transactions is a thing of the past.

But these new rules shouldn’t dissuade you from protecting your assets offshore. Whether you live in the United States or the European Union, the key to solid asset protection is building a structure that no civil creditor can knock down.

In most cases, offshore asset protection should be tax neutral. It should not increase or decrease taxes in your home country. An offshore asset protection structure should do exactly what it’s name implies… protect your assets.

The key to asset protection is putting up impenetrable defenses, not hiding what you have. Even if a creditor has a road map to your offshore structure, it should be impossible for them to breach the walls of your fortress and get to the gold therein.

In fact, hiding your assets, and not being tax compliant in your home country will put your savings at risk. If you’re caught cheating on your taxes, the penalties will be severe and the value of your trust will be destroyed.

Considering how much effort governments are putting into ferreting out tax cheats, hiding assets should be the last thing on the mind of anyone looking to protect assets. All this does is add risk and pits you against both your creditors and your government.

Hiding assets offshore possible back in the day. Those days are long gone for Americans and Europeans. Now, the industry is all about tax compliant planning.

If you’re reading this and have a non-compliant offshore structure, you should take action immediately. Europeans should shut down, get in compliance, and rebuild a properly reported offshore trust.

We U.S. citizens have significantly more risk than our European counterparts. The US government is aggressively pursuing non-compliant citizens, putting them in jail, and levying mind boggling fines.

If the IRS is not on to you yet, it’s not too late. You can join the Offshore Voluntary Disclosure Program, get into compliance, pay what you owe (if anything), and then rebuild offshore.

If you are living or working abroad, you might be able to get into compliance and pay zero in taxes and penalties. If you’re living in the US and have an unreported account, the penalties will be high, but you can minimize risk and fines by coming forward now.

I hope this post on the OECD tax reporting initiative is helpful and puts offshore asset protection in perspective. For more information on legal and tax compliance asset protection techniques, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Offshore Asset Protection for Affiliate Marketers

11/02/2016/0 Comments/in Articles, Asset Protection, Asset Protection Trust, International Business, offshore asset protection/by Christian Reeves

Affiliate marketers face unique asset protection, privacy, and tax planning challenges. This article will review your options and point out some of the pitfalls to watch out for. We’re specialists in offshore asset protection for affiliate marketers and can help you to grow your online business in an efficient and compliant manner.

At the end of the day, www.premieroffshore.com, and our lifestyle site www.escapeartist.com, are internet based businesses. I write SEO optimized posts like this one to drive traffic and bring in leads. We’re a remote business with our publishing group based in San Diego and fulfillment in Belize and Panama City.

As the editor and chief marketing guy, I spend my days on the road, tapping away on my laptop. Our in-house attorneys are chained to their desks, but I made sure the marketing team was portable.

We’ve been providing offshore asset protection to affiliate marketers via the web since 2003 and understand the unique needs of your business model. We’re the only firm that provides offshore structures and U.S. tax compliance… at least, the only one in the middle of the market. Our price points are a bit lower than Deloitte, PwC, and E & Y.

Our offshore protection structures are positioned in the middle of the market. Less than big name CPA firms and higher than offshore incorporation mills that provide no guidance or support.

This post will focus on asset protection for affiliate marketers. As I said above, we also provide tax planning for offshore businesses, as well as for those in the U.S. territory of Puerto Rico. For more on Puerto Rico, see: Puerto Rico is the Top Offshore Jurisdiction for Americans.

To summarize Puerto Rico, if you move your business to the island, and hire 5 employees, you’ll cut your U.S. tax rate to 4%. To compare that tax deal to moving offshore, see: Puerto Rico Tax Deal vs Foreign Earned Income Exclusion.

The remainder of this article will focus on offshore asset protection. Offshore asset protection for affiliate marketers is generally tax neutral – it should not increase nor decrease your U.S. taxes. It’s meant to keep your transactions private and your cash safe from future civil creditors.

You can combine offshore asset protection with an office or division offshore that helps to manage your worldwide tax obligations. But, your asset protection plan is independent of your international tax plan. Thus, you might start with an offshore asset protection plan for your affiliate marketing business and grow it into a business tax savings plan.

Issues in Asset Protection for Affiliate Marketers

When planning an offshore asset protection structure, affiliate marketers face a number of interesting challenges. For example, the need for privacy and the ability to diversify with subsidiaries are more urgent than with other business models.

Affiliate marketers value their privacy. For this reason, we created the Panama max privacy structure. We use a Belize LLC as the founder of a Panama foundation and a Panama corporation under the foundation to run the business. We can add corporations from other jurisdictions, as active business subsidiaries of the foundation, where necessary.

For more on our max privacy structure, see: The Bearer Share Company Hack

The Panama foundation provides estate planning and asset protection for your business units… and acts as a holding company to bring them together under one umbrella.

Panama offers great asset protection and banking facilities. The problem is that they have a public registry of ownership. That means the founder of a foundation, along with the shareholders and directors of corporations, are public record. We work around this with a Belize LLC because Belize doesn’t maintain a registry and Panama allows the founder to be a person or a foreign company.

That’s all a fancy way of saying that the Belize LLC maximizes privacy by acting as the founder of your Panama Foundation. When someone searches the Panama registry, all they find is the name of your Belize company.

I believe you’ll find that the Panama foundation is the best choice when planning an asset protection structure for your affiliate marketing business. It’s primary competitor, the offshore trust, is a great tool, but not recommended for managing an active business.

An offshore asset protection trust is the solution for someone who wants to build a nest egg offshore out of the reach of future civil creditors. You can add money managers as trustees and maximize protection with a “protector” in case you (the settlor) come under duress.

That is to say, an international trust is perfect for someone who wants to put cash away for the future. A trust is not the structure to hold an active business where you want to maintain control and maximize privacy.

Many of our clients move a portion of their after tax net profits out of the Panama structure and into an offshore trust. You can combine both for the best of both worlds while diversifying your holdings.

Offshore Merchant Accounts

Specializing in offshore asset protection for affiliate marketers means working with many banks and acquirers around the world. We’re experienced in merchant account issues as described here: How to Get an Offshore Merchant Account.

For example, many of our clients run multiple MIDs and require subsidiaries from a variety of jurisdictions to hold those accounts. This allows them to maximize privacy, diversify risk, and build systems that spread chargebacks among their portfolio.

To support this requirement from affiliate marketers, we’ve built a network of agents around the world. We can incorporate subsidiaries in a different countries quickly and at a reasonable cost.

We also understand that subsidiaries must be formed in countries which are acceptable to your processor. For this reason, we have U.K., Hong Kong, E.U., Caribbean, and Panama solutions. We also advise on U.S. accounts for companies in Puerto Rico.

A comapny incorporated in the U.S. territory of Puerto Rico can open bank accounts at just about any U.S. bank.

Another option for a business with no office or employees in the United States, is to form a subsidiary in the U.S. That subsidiary will hold only bank and merchant accounts and pass profits to the parent company.

This solution is recommended for entities with no U.S. source income. You will likely need a U.S. person to open the account… it’s become difficult for foreign persons to open U.S. accounts… and nearly impossible for non-U.S. persons without U.S. credit scores to get a low cost merchant account.

Why Hire a U.S. Provider?

Internet marketers know how to outsource. How to leverage low cost labor around the world to get things done. Why should you pay U.S. prices for your international tax or offshore asset protection plan?

Simple: only a U.S. expert can build an offshore asset protection structure that’s U.S. compliant.

When you outsource your offshore structure, you will get answers to your questions and solutions based solely on the laws of that country. For example, contact an offshore trust promoter in Cook Islands and they’ll answer inquires based on Cook Island law.

But, when you’re a U.S. citizen, your compliance risk and liability from lawsuits is in the United States. Thus, the focus should be on how the laws of your asset protection jurisdiction interact with those of your home country.

Since this is a post on asset protection for affiliate marketers, here’s a tech example…

You, the IT professional, can outsource website design because you’re an expert in website design. You know exactly what you want to accomplish and how to get there. You write the text and manage the process from start to finish.

What if you weren’t an expert in design or SEO issues? Should you hire someone to quarterback the project or should you outsource? Knowing what you know now, would you have gone it alone or hired someone to guide you in those early days?

You’d hire a quarterback because you don’t know what you don’t know. As an an expert, you understand how complex a major design or redesign can be. You know that a layperson will likely screw it up terribly, putting the entire project at risk.

This knowledge has come over years in the industry. Through trial and error, you know where the pitfalls are. You know how to drive traffic and optimize your sites. You know what works and what doesn’t.

I have a friend who’s new to the online world. He was tasked to redesign a 10 year old website with 15,000 pages and a solid Google reputation. The owners of the site didn’t want to spend any money, so he was on his own and outsourced design.

While updating the site, he thought it would be a good idea to restructure the URLs. To create a few different categories and make the permalinks more descriptive. Yeh, he decided to change the URL structure and break the thousands of inbound links for an authoritative site… the links that gave the domain much of its “reputation.”

As an internet professional, you know what a bad idea it is to change the URL structure of an authoritative website with years of history. But my friend had no idea what he didn’t know. Had he hired a quarterback, the expert would have stopped him from falling in this obvious trap.

It’s the same when planning an offshore asset protection structure. You need someone to manage the process and keep you in compliance. Outsource and the promoter will tell you what you want to hear (sure, we can restructure your URLs). Hire an expert and they will tell you “no,” when you need to hear it!

For example, when you want to use a nominee singor on your offshore bank account, you need to hear no. When you, a U.S. resident with no employees offshore, want to setup a company to hold foreign profits and only pay U.S. tax when you bring the money into the U.S., you need to hear hell no!

As with internet marketing, there are many risks in going it alone. Unlike online risks, the penalties for getting out of compliance or using an offshore structure incorrectly can cost you hundreds of thousands of dollars in penalties or even land you in jail. The U.S. government has become extremely hostile to non-compliant offshore structures and you must have an expert in your corner to keep you from becoming a target.

The world of offshore is ever changing, complex, and fraught with risks you can’t see. We can guide you the maze and quarterback your offshore structure, all with a focus on your internet based business.

I hope you’ve found this article on asset protection for affiliate marketers to be helpful. For more information, please contact me at info@premieroffshore.com or call (619) 483-1708 for a confidential consultation.

Research and Development and Intangible Property Tax Breaks in Puerto Rico

11/02/2016/0 Comments/in Articles, International Business, Offshore Company, Offshore Company Taxation, Puerto Rico Tax Incentives, Taxation/by Christian Reeves

Puerto Rico has the best tax deals available to Americans… period. No offshore jurisdiction can compete with the US territory of Puerto Rico when it comes to cutting your taxes.

This post will focus on Puerto Rico’s research and development and intangible property tax breaks. Act 73 is for those who develop licensed or patented software that may be reproduced on a commercial scale and those who license intangible property.

I’ve also written on the more traditional business tax breaks available under Act 20. Basically, if you set up a business in Puerto Rico with at least 5 employees, your corporate tax rate on Puerto Rico sourced income will be 4%. For more, see: Puerto Rico is the Top Offshore Business Jurisdiction for Americans in 2016.

I focus on the the software development and intangible property or intellectual property development components of Act 73. These are 2 of the 12 industries covered by the Act. For example, tax breaks are also available to large scale manufacturing, scientific experiments and laboratories, recycling, hydroponics, etc.

Software developed under Puerto Rico’s Act 73 must be for commercial distribution. You may license or sell it, but it must be widely available. Software developed under the Act should not be for your company’s internal use or custom work done for a particular client.

Act 73 applies to any and all forms of intangible property. Intangible property is defined as something which a person or corporation can have ownership of and can transfer ownership to another person or corporation, but which has no physical substance. For example brand identity, knowledge, and intellectual property are forms of intangible property . Copyrights, trademarks, and patents are also forms of intangible property.

It doesn’t matter how the intangible property came to be owned by the Puerto Rico company. You may have developed it on the island within the corporation, or you can buy it from a related or unrelated company.

If you do develop the intangible property in Puerto Rico, you may receive additional tax incentives. Also, developing the IP in Puerto Rico rather than the United States will avoid a taxable event and transfer pricing issue when you sell / transfer the property to the Puerto Rico company.

Tax Exemptions Under Puerto Rico’s Act 73

Once you have your IP offshore, or begin selling your software, here are the applicable tax benefits. Remember that these replace the US federal income tax rates of 35% + your state (0 to 12%). In many cases, you can exchange a 40% tax rate for 4% or less.

The base tax rate for an Act 73 business in Puerto Rico is 4%. This rate is guaranteed for 15 years from the date your company is approved.

You might be thinking, wow, a 4% corporate tax rate is just too high. “Pioneer” activities in Puerto Rico are taxed at only 1%. Pioneer businesses are typically those who create or develop intangible property on the island.

If you’re still thinking this is too high, I say come on, give me a break… and it can still go lower. If you setup your business in an approved low income area, your corporate rate will be between 0.5% and 0%. Combine this with the tax credits below and you could have a net positive tax rate.

If you’re not a pioneer, you can get to a 3% tax rate. Any business where at least 50% of the shareholders are residents of Puerto Rico, the rate is lowered from 4% to 3%. The same goes for any small to medium sized software or IP development business operated from the island (where average gross income is $10 million or less during the previous three years).

Still not convinced? You will also find a 100% tax exemption on dividend distributions and a 2% or 12% withholding tax on royalty payments to foreign entities for intangible property used in the exempt business. The lower rate includes a 12% matching tax credit for royalties paid to foreign entities, so your rate may vary depending in your situation.

When you sell the business, you’ll pay a 4% fixed income tax rate on the gain. This tax on capital gains trumps any other Puerto Rico income tax code section. The 4% rate is guaranteed under Act 73 for 15 years, so you should have an exit strategy in place prior to this term expiring.

Other tax breaks include:

90% tax exemption from personal property taxes.
90% tax exemption from real property taxes.
90% tax exemption on municipal license taxes.
100% tax exemption on municipal construction taxes.
100% tax exemption on excise taxes.

Remember that this article is focused on IP and software development businesses. I do not discuss accelerated depreciation, sales and use, and other tax benefits.

Puerto Rico’s Act 73 Tax Credits

The Act provides various tax credits, including:

25% tax credit on purchases of products manufactured in Puerto Rico;
35% tax credit on purchases of products manufactured in Puerto Rico made from recycled materials;
Tax credit for job creation during the first year of operations that ranges from $1,000 per job created in an industrial area of intermediate development (as determined by the Office of Industrial Tax Exemption) to $2,500 for jobs created in an industrial area of low development. In the case of businesses established in the municipalities of Vieques and Culebra, this tax credit is $5,000 per job;
50% tax credit on eligible research and development activity costs; and
12% tax credit for royalties paid to foreign entities with respect to intangible property used in the exempt business.

When comparing Act 73 to Act 20, note that there is not a minimum number of employees attached to Act 73. Act 20 requires at least 5 employees. Both Acts 73 and 20 can be combined with Act 22 for a personal tax exemption.

Act 22 gives a Puerto Rico resident a 0% tax rate on capital gains and dividends. If you’re living in the United States, you will pay US tax on distributions from your Puerto Rico corporation. You are not required to take any distributions, but when you do, they will be taxed in the United States.

I hope you’ve found this article on Puerto Rico’s Act 73 research and development and intangible property tax breaks helpful. Click here for a list of my other articles on Puerto Rico’s tax deal.

For more information, and a confidential consultation on moving your business to Puerto Rico, you can reach me at info@premieroffshore.com or (619) 483-1708.

Foreign Earned Income Exclusion for 2017

11/01/2016/0 Comments/in Articles, International Business, Offshore Company, Taxation/by Christian Reeves

The Foreign Earned Income Exclusion for 2017 has finally been released and we expats get an increase of $800 this year. The U.S. government has increased the Foreign Earned Income Exclusion for 2017 to $102,100, up from $101,300 in 2016.

You can attribute this big time increase of the Foreign Earned Income Exclusion for 2017 to the “robust” U.S. economy. That’s because the FEIE is indexed annually for inflation. The official inflation rate for 2016 was 1.4% and it’s expected to between 1.5% to 1.6% for 2017.

Note that this article is about the 2017 FEIE. For the 2018 Exclusion, see: Foreign Earned Income Exclusion for 2018

The Foreign Earned Income Exclusion for 2017 is the amount of salary or business income you can exclude from your United States taxes while living abroad. If you qualify for the FEIE for 2017, and you earn $102,100 or less in wages, you will pay zero Federal income taxes.

To qualify for the FEIE, you must be out of the United States for 330 days during any 12 month period, or a legal resident of a foreign country for a full calendar year. The 330 day test is simple math… be out of the U.S. and you’re golden. It doesn’t matter where you are in the world, so long as you’re not in the U.S.

For more on the 330 day test, see: Changes to the FEIE Physical Presence Test Travel Days

To apply the FEIE for 2017 over two calendar years, see: How to Prorate the Foreign Earned Income Exclusion

The residency test is more complex and based on your intentions. You must move to a foreign country for the “foreseeable future.” This new country should be your home and your home base. When you travel, it’s where you return too. It’s where you lay down roots. It’s where you file taxes and where you’re a legal resident (with a residency permit).

You should be filing taxes in your new home. It doesn’t matter if you’re paying taxes… just that you are following their laws as a legal resident. If your country of residence doesn’t tax your income earned abroad or in an offshore corporation, all the better.

In most cases, you will use the 330 day test in your first year abroad. That will give you time to secure residency, find your home base, and do all the things necessary to break ties with the U.S. Beginning January 1 of year two, you will file for the Foreign Earned Income Exclusion using the residency test.

The reason you want to use the residency test when eligible is that it will allow you to spend more time in the United States. Under the 330 day test, you can spend all of 36 days a year in the land of the free. If you qualify for the residency test under the Foreign Earned Income Exclusion for 2017, you can spend 4 or 5 months a year in America.

Someone with no home base, and no residency visa, will never qualify under the residency test. A perpetual traveler will need to use the 330 day test. Likewise, someone on temporary assignment for a year or two, who intends to return to the U.S. when their job runs out, will need to use the 330 day test.

Just remember than any income earned in the USA is taxable here. The FEIE doesn’t apply to U.S. source income. If a U.S. citizen works for 10 days in the U.S., the income from those days is U.S. source and Uncle Sam wants his cut.

The FEIE for 2017 applies to married persons individually. A Husband and Wife working in their own corporation, or drawing salaries from a foreign company, can earn $204,200 combined this year and pay zero Federal income tax.

If you earn more than $102,100, you’ll pay U.S. income taxes on the excess. For example, if you earn $202,100, in salary, you will pay U.S. Federal income tax on $100,000 at 28% to 33%.

Note that your expat tax bracket begins at 18%. This is because the full $202,100 counts towards the bracket. Thus, you are paying a rate on your last $100,000 as if you had earned $202,100 in wages, not just $100,000.

If you pay tax in the country where you work, your U.S. tax on this $100,000 over and above the Foreign Earned Income Exclusion for 2017 will be reduced. Every dollar you pay in foreign income tax should reduce your U.S. rate by one dollar.

A dollar for dollar credit is the theory behind the foreign tax credit. You will see some variance on your return when you account for deductions, credits, etc.

Another tool for high earners who are self employed is to hold earnings over the Foreign Earned Income Exclusion for 2017 amount in their corporation. Pay yourself a salary of $102,100 and keep the rest in the corporation as retained earnings. For more on this, see: How to Manage Retained Earnings in an Offshore Corporation.

Be aware that the Foreign Earned Income Exclusion doesn’t apply to income that’s not “earned.” So, the FEIE doesn’t cover passive income like rents, royalties, dividends, or capital gains. Income which is earned is money made from paid work / labor.

For more on tax planning for foreign real estate, see: US Tax Breaks for Offshore Real Estate

Most clients who contact us about the FEIE are business owners or self employed. They want to form an offshore corporation to retain earnings, maximize the value of the FEIE, and eliminate Self Employment tax.

Note that the Foreign Earned Income Exclusion does not apply to Self Employment tax, only income tax. So, a self employed person living abroad and qualifying for the Exclusion will still pay 15% in SE tax. That means about $15,000 on your salary of $102,100 for FICA, Medicare, Obamacare, etc.

If you don’t want to contribute to Social Security, you can opt out of Self Employment tax by forming an offshore corporation. Incorporate in a country that won’t tax your income, get your clients to pay that company, draw a salary from your foreign corporation reported on U.S. Form 2555, and you’ve eliminated U.S. social taxes.

For more on the tax benefits of living abroad, see: Tax Benefits of Going Offshore

For more on setting up a business offshore, see: Benefits of an Offshore Company

If you’re reading this article on the Foreign Earned Income Exclusion for 2017 and planning to set up a large business offshore, you might consider Puerto Rico. If $102,100 is a small portion of your net profits, think Puerto Rico. If your take home is closer to $1 million than $100,000, think Puerto Rico. If you have at least 5 employees, Puerto Rico might be for you.

The Puerto Rico tax deal, referred to as Act 20, is the reverse of the Foreign Earned Income Exclusion. With Puerto Rico, you pay U.S. tax rates on your first $100,000. Then you pay 4% profits over this amount and distribute those profits to yourself as a tax free dividend.

The Puerto Rico tax deal requires you live on the island for 183 days or more, significantly less than the 330 days required by the FEIE. If your net business income is well over the FEIE of $102,100, consider Puerto Rico.

The catch in Puerto Rico is that you must hire 5 employees on the island. You and your spouse can be 2 of those 5, and then you need 3 more. When setting up offshore, there’s no minimum number of employees required.

For a comparison of the Puerto Rico deal with the FEIE, see: Puerto Rico Tax Deal vs Foreign Earned Income Exclusion

For more on who qualifies as a Puerto Rico employee, see: Who is a Resident of Puerto Rico for US Tax Purposes

To read more about Puerto Rico and the Foreign Earned Income Exclusion, see: How to Maximize the Tax Benefits of Puerto Rico

For more on setting up a one man or one woman business offshore, see: Move Your Internet Business to Cayman Islands Tax Free

The bottom line is that the FEIE is great for those earning $100,000 from a business (or $200,000 of both spouses are working). If you are earning well over this threshold, and you can benefit from 5 employees, take a look at Puerto Rico.

I hope you’ve found this article on the Foreign Earned Income Exclusion for 2017 to be helpful. For more information on taking your business offshore, to Puerto Rico, or for a referral to a U.S. tax preparer, please contact me at info@premieroffshore.com or call (619) 483-1708.