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The Impact of FATCA

11/12/2014/0 Comments/in Articles, Taxation/by Christian Reeves

Foreign Account Tax Compliance Act is finally here and you can be sure that the impact of FATCA will be severe. This brief article considers the impact of FATCA on Americans living, working, or investing overseas.

FATCA is founded in a U.S. tax code that attacks small business and lavishes tax holidays on the wealthy (tax inversions, for example). It came about because America is the only large economy which taxes its citizens on their worldwide income. We are the only country that forces our citizens abroad, including those who are residents of another country, to pay tax at home.

In to this system comes FATCA. It basically turns bank tellers at foreign institutions in to unpaid IRS agents. The first impact of FATCA is to require all foreign banks to determine which of its clients are U.S. persons and to report all of their transactions to the IRS.

The problem is, proving someone is a U.S. person for tax purposes is tough. Of course, anyone with a U.S. passport is caught. But the law also tags those who spend 183 days a year in America. It expects the banker to determine who has “other substantial ties” to the United States and thus might be subject to income tax here.

If the banker fails to report, the bank will lose its ability to work with any U.S. banks, correspondents, and U.S.-based companies. While FATCA says U.S. banks must withhold 30% of all transactions going to non-compliant banks. This is unsustainable and means the offshore bank is effectively blocked from all U.S.-based transactions. Banks that don’t sign up are pushed out of the worldwide system.

The next impact of FATCA is to outsource tax compliance and policing to foreign banks. The law puts the onus on bankers and tellers to ensure everyone around the world is paying Uncle Sam. These people might have no understanding of the U.S. tax system, or the intricacies of our law, but they become the gatekeepers. And, if they fail, the costs to their employer will be swift and severe.

As an expat myself, the most direct impact of FATCA in my life is that very few foreign banks will to have anything to do with me. We 7 million Americans abroad now wear a scarlet letter A which causes most bankers to turn up their noses when we enter the room.

The majority of banks, brokerage firms, insurance companies and mortgage lenders are now closed to U.S. persons. Where it was once tough to get a loan or open an account, it is now nearly impossible. Those banks that are open to us charge hundreds of dollars in extra fees and offer lower returns on investments than they did last year. This is done to recoup the hundreds of thousands, or even millions, of dollars they were forced to pay out to set up compliant systems.

The most notable unintended consequence of FATCA is that many foreign companies are now hesitant to hire U.S. expats. It is becoming more and more difficult to find a job outside of our borders. If the employer doesn’t already have American workers, they won’t want to deal with the risks and paperwork.

Having U.S. employees also comes with banking risks. The employer will be depositing money in to an American’s account, be it onshore or offshore. This might trigger FATCA reporting by the bank on the company, bringing with it attention and problems they don’t want.

The impact of FATCA which garners all of the headlines is that record numbers of Americans are giving up their citizenships and passports. In fact, the latest numbers show that expatriations have quadrupled in anticipation of FATCA.

* If you renounce your citizenship and provide your bank with a letter from the U.S. State Dept. confirming expatriation, FATCA no longer applies. Though, you must go through a lengthy process and audit to receive that letter. You will find a number of articles on giving up your U.S. citizenship and obtaining a second passport on this site.

I hope you have found this article on the impact of FATCA interesting, if not disheartening. For more information, please send me an email to info@premieroffshore.com. I will be happy to help you structure your affairs abroad and keep you in compliance with ever changing U.S. laws.

Panama Tax Review

11/10/2014/0 Comments/in Articles/by Christian Reeves

If you’re an American living, working, or investing in Panama, the Panama tax system is your friend. The Panama tax code may allow you to live tax free in Panama and, possibly, in the United States. This Panama Tax Review will explain how to reduce your worldwide tax bill.

Before getting in to specifics, it’s important to note that Panama, like all civilized nations (not the U.S.), taxes you on your local income. Only America taxes its citizens on their worldwide income.

So, if you move to Panama and open a restaurant, you pay income tax on your profits. You will also be subject to payroll and social security taxes. This is the same result you get in the United States.

However, if you move to Panama, and structure your business properly, you won’t pay Panama tax on foreign incomes. If your business is selling a product to clients in the United States, all income earned in Panama is foreign source (from the U.S.) and not taxable in Panama. If you are selling to individuals in Panama and the United States, only those sales to Panamanians are taxable.

This is the opposite result you get with a U.S.-based business. When you operate from America, and sell to people outside of the country, 100% of the income earned by your company is taxable here. Even if you move abroad Uncle wants his cut. Though, this article will help you minimize that tax bill.

This article is focused on the Panama tax rules for those living, working, or investing in Panama. If you retire to Panama, but don’t buy real estate there, then you should have no Panama tax issues.

Introduction to Panama Tax

Panama taxes its citizens and residents on income earned within its borders. You, the American citizen, become a Panama tax resident if you live in Panama for more than 183 days within a calendar year. If you don’t operate a business in Panama, or purchase real estate there, it’s unlikely their tax laws will affect you.

Panama has no wealth, inheritance or gift taxes. Therefore, it’s an excellent jurisdiction in which to form an international trust (called a Panama Foundation, but it functions under U.S. laws as a foreign or grantor trust). Such a structure will allow you to protect your savings and minimize U.S. estate taxes by facilitating transfers to heirs and moving assets out of your taxable U.S. estate.

Also, interest from bank accounts, Certification of Deposits, and most forms of investments are tax free. If you buy and then sell stock on the Panama exchange, no tax will be charged. No tax is due when you sell stock on a foreign exchange either, but the point here is that buying and selling stock within Panama, even on their exchange, does not bring you in to their tax system.

At this point, you might be wondering how Panama earns money. Well, residents pay tax on local income, corporations pay tax on gains derived from business transactions within Panama, and just about everything sold in Panama is subject to a 7% Value Added Tax (VAT). And, of course, they make buckets of money from the Panama Canal.

Taxation of Real Estate Transactions in Panama

Real estate transactions within Panama are taxed as capital gains. There is only one rate for such gains, 10%. No differentiation is made between long term and short term capital gains.

This Panama tax rate of 10% on the net profit from the sale is the general rule for real estate. You can also elect a 3% rate on the gross sale price. Here’s how it works.

Just like in the United States, you pay capital gains in Panama on net profit earned when you sell real estate. If you buy a condo for $250,000, put $25,000 of improvements in to it, and sell it for $300,000, your gain is $25,000 and your tax due is about $2,500 … simple enough.

* You will also pay a 2% transfer tax at the time of sale. This is based on the sale price or the assessed value, whichever is higher. Your transfer tax is increased by 5% for each full calendar year you hold the property.

The government ensures compliance with its tax laws by requiring the buyer to withhold 3% of the purchase price and pay that over to the tax authorities. You, the seller, file a return to claim a refund the next year. In the example above, the buyer would withhold 3% of $300,000, or $4,000, and you will file a refund for $9,000 – $2,500 = $6,600.

If this 3% on the gross sale price is lower than the 10% capital gains tax on the net profit, you may elect to not file a return. You have the choice of paying the 3% or 10% rate on the sale of real estate.

So, in the example above, if you bought the property many years ago for $20,000, didn’t make any improvements, and sold it for $300, 00, you would choose to pay the 3% tax of $9,000. The 10% tax on the net gain would result in a bill of $28,000.

VAT in Real Estate: I will conclude this section on Panama tax by noting that VAT applies to short term rental income. If you rent out your condo for a term of six months or less, you will pay 7% VAT, VAT doesn’t apply to rental contracts longer than six months.

Personal Income Tax in Panama

If you operate a business in Panama, work for a local company, have employees in the country, or draw a salary, you need to understand their personal income tax rules.

Panama’s tax code is much more efficient than that of the United States. They have only three tax brackets:

If you earn $0 to $11,000, you pay zero tax.
If you earn $11,000 to $50,000, you pay 15% on the amount owner $11,000 (that is to say, the first $11,000 is tax free).
If you earn over $50,000, you pay $5,850 on the first $50,000 plus 25% on the amount over $50,000. So, your Panama tax rate on a salary of $150,000 would be $5,850 + $25,000 = $30,850 less any deductions.

Each person is allowed a standard deduction of $800. Other allowed reductions include mortgage interest, charitable and political contributions, and unreimbursed medical expenses.

You’re not required to file a return if your only income is from salary (you have no capital gains, etc.) and you don’t wish to take any deductions other than the standard at $800. In that case, the employer withholds the required amount from each paycheck and no return need be filed.

If you wish to file a personal income tax return in Panama, it is due March 15. You may request an extension until May 15.

Employment Taxes in Panama

If you have employees in Panama, be ready to pay significant employment taxes. Social Security and employment taxes are a primary revenue sources for Panama and a reason they are willing to offer corporate tax deals … to increase employment and employment taxes.

* Employment taxes in Panama are about 30% higher than United States. However, the cost of labor is less than 25% of major cities in America, so the employment tax expense is relatively minimal.

As the employer, you pay employment tax of 12% on wages. Also, you must withhold 9% from the employee. Therefore, total employment tax in Panama is 21%. This compares to 15% (self-employed) to 17% (with Obamacare) in the United States.

Also, you are obligated to pay a one month bonus to each employee each year. So, when you calculate costs per employee, you will take the base salary times 13 (not 12 months) and add 21% for employment taxes.

For example, if your employee earns $1,200 per month, they’ll cost you $1,200 x 13 months = $15,600 in salary and $1,872 in employment taxes.

Corporate Tax in Panama

The Panama tax rate on corporations is 25% compared to 35% in the United States. Panama taxes only local source income. There is no Panama tax on income from outside the territory, even if that money is deposited in to a Panama corporation and account.

Most of my readers will avoid corporate tax in Panama all together. It should only apply if you are selling goods or services to Panamanians. If all of your sales are done through the internet to persons in the U.S. and Europe, you may have no Panama source income.

Also like the United States, corporate income tax usually applies to money you leave in the company … retained earnings held by the Panama Corporation. If you do have Panama source income, you may be able to eliminate corporate level tax by withdrawing your net profits as salary. You will pay personal income taxes but avoid double taxation.

However, if you operate a “large” business within Panama, and your Panama source gross income is $1.5 million or more, you may be subject to alternate minimum corporate tax.

First, I note that corporations are taxed on their net business income. You may deduct salaries, as well as all “ordinary and necessary” business expenses … just as you do in the United States.

However, if you gross more than $1.5 million in Panama source sales, you will be required to pay minimum corporate income tax of 4.5% on those gross sales.

* Another way to express Alt Min tax in Panama is that your large business pays tax on local sales minus 95.5%. If your local sales are less than $1.5 million, you are exempt from Alt Min tax in Panama.

Let’s say your Panama Corporation earns $2 million in local income. It’s your first or second year of operation and your deductible expenses are more than $2 million … so you have a tax loss for the year. Panama Alt Min tax comes in and requires you to pay 4.5% on $2 million, or about $90,000 in corporate taxes.

That means you’ll pay at least 4.5% on local sales in a large business. If 25% on net profits results in more tax being due than 4.5% on gross sales, then you pay Panama tax at the 25% rate.

In order to deter untaxed transfers between Panama corporations and any other tax shenanigans to minimize tax on local source income, Panama taxes/dividends, loans and advances. A 10% withholding tax applies to dividends between corporations on income derived from local sources. Also, a 10% tax is levied on loans or advances to corporate shareholders. If these transfers are done in a structure involving bearer shares, a 20% withholding tax (rather than 10%) applies.

If you can prove that the income being transferred is foreign source (earned in transactions outside of Panama), these taxes do not apply. In that case, there is no withholding on dividends, loans or advances.

* These corporate tax laws apply to companies operating within Panama City. Special rules apply to businesses within the Colon Free Zone, City of Knowledge, Panama Pacifico (my favorite tax free region), or any of the other free zones within the country.

* Special rates may apply to corporations with local gross sales of less than $200,000. These “small” businesses pay a lower blended personal/corporate rate.

Taxation of Americans in Panama

There is no Panama tax on bank interest, CDs, U.S. retirement distributions, or income derived from sources outside of Panama. Therefore, most of you won’t be subject to Panama tax unless you invest in local real estate.

Unfortunately, Uncle Sam wants his cut no matter where you live and/or invest. Though, you do have tools at your disposal to reduce your U.S. tax bill.

First, you can make investments in Panama through your U.S. retirement account. By forming an offshore IRA LLC, you can defer U.S. tax in a traditional IRA or eliminate it all together in a ROTH IRA.

Next, if you live in Panama, and will qualify for the Foreign Earned Income Exclusion (FEIE), you can draw a salary from your active business of about $100,000 per year ($200,000 husband and wife), retain the balance in your Panama Corporation, and pay no U.S. tax. You will find a number of articles here on the FEIE and operating through an offshore corporation to reduce or eliminate U.S. tax.

If you are living in Panama, you might bill your customers through an offshore company formed in another jurisdiction. When your sales are to persons in America and you are living in Panama, bill through a corporation in Belize. Then, draw a salary of up to the FEIE from that Belize Corporation to eliminate Panama employment taxes.

* This only works for you, the U.S. person living in Panama. Don’t try it with Panamanians or you might find yourself in trouble with the local authorities.

I hope you’ve found this Panama Tax Review helpful. If you have any questions, or would like assistance moving you or your business to Panama, please give us a call or send me an email to info@premieroffshore.com.

Panama 2015 and Beyond

11/07/2014/0 Comments/in Articles/by Christian Reeves

Panama 2015 looks to be a great investment with continued growth of 7%. While the tiny economy will face a number of challenges, chief among them is competition to its canal, expect solid returns to continue.

First, a brief mention of Panama’s 2015 banking sector. Significant amounts of wealth will continue to flow in to Panama as crisis hit and Venezuelans look for investments, work, shopping, and a safe haven for their cash. In fact, I expect wealth will continue to be transferred from a number of Latin American nations in the coming years. Venezuela, Colombia, and Mexico all seek safety and security in Panama.

Basically these investors are wanting the stability of a U.S. dollar based economy without the risk of putting their money in the United States. Where it was once easy for foreigners to open accounts here, FATCA has made it more risky. While information flow has been one way (in to the United States), expect that to change as our neighbors to the south get tired of the hypocrisy. Beware of this concern; capital will leave Miami for Panama in 2015. Expect this to continue in 2016.

In 2014, public investment of $19 billion was made in Panama. This is an enormous amount considering their GDP for this year will be $24 billion. Of this amount, $5.2 billion was put in to the Panama Canal.

As a result, we’ve seen an average growth rate of 8% over the last few years. It has brought about a new metro rail, a giant causeway (one of my favorite areas to hang out in Panama), and hundreds of new skyscrapers.

Now, here’s the bad news. The Panama Canal has been fraught with disputes. First, a billing problem slowed down the project by one year. The European firms were billions of dollars over budget and Panama refused to pay for the overages. Once this was settled, the workers went on strike. At the time of this writing, it is expected the project will resume within the week.

Next, there has been no urban planning in Panama. The building boom in Panama City is all about speed and graft. As a result, traffic is out of control and no parking was allotted in many areas. Just try going near the banking district on a workday.

Another urban planning issue is that many of the buildings have water flow problems. When it rains, they flood. For example, when the center piece of Trump Towers opened, rain stranded the President and those attending the grand opening festivities.

I would like to note that Panama is not a desert climate! They have two seasons: rainy and rainier. So, when urban planning fails to account for the daily downpours, there’s a problem.

Panama will continue spending big on development and improvements. For 2015, Panama will invest $3 billion and should see growth of about 7% (1% less than in previous years).

Wile I expect the economy to remain strong, I bet some real estate will lag behind. While it’s true that many international persons are flowing in to Panama, there is also a lot of capacity coming online. I look for appreciation of 5% to 8% depending on where you invest in Panama City. Focus on San Francisco (a region of Panama City) and the like for the best returns. Avoid Trump and Punta Pacifica.

I also believe the long term outlook for Panama is strong. The primary limiting factor in business growth is a lack of educated workers and English speakers. All of the new shiny towers need workers that speak English. If schools begin turning out a quality work force even faster than they do today, the sky’s the limit for Panama.

In addition to the need for more workers, there are issues surrounding politics and the Canal. The current administration, which came in to office a few months ago, is proposing price fixing for groceries. The influx of high net-worth individuals is pushing prices beyond the reach of average Panamanians and the government is considering Venezuelan type price controls.

A longer term risk factor is the Panama Canal… the pride of this nation which was returned by President Carter and signed over by President Clinton.

The current expansion is the first in over a century. The Canal opened August 15, 1914 and might be finished this year or in 2015.

Panama has upgraded its locks to allow ships carrying up to 13,000 containers. Before the upgrade, size was limited to 5,000 containers. However, the largest ships today are at 18,000 containers, and expected to reach 22,000 in the years to come.

And there is now competition to the Panama Canal. The Suez Canal in Egypt completed its expansion (the first in 145 years) and can handle ships of all sizes. Piling on, Nicaragua plans a $40 billion canal of its own. This one, funded (of course) by China, could put significant pressure on Panama’s margins because it would not be limited by locks or ship size.

The Suez Canal was a more costly route because it’s a longer journey from Circe (further south), times are changing. Significant manufacturing has moved out of China to its southern neighbors. From these ports, the Suez Canal is either more efficient, or just as long a journey, as Panama.

Like Nicaragua, the Suez Canal is at sea level. Therefore, no locks are required and any future expansion (widening) can be done more efficiently than in Panama. Expect Suez to allow for any and all cargo ships while Panama is limited to those holding 13,000 or fewer containers for decades to come.

All of this is to say that the Panama Canal will need to compete on price in the years to come. Though, I remain strong in my short term and long term outlook. I expect education to keep pace with demand and for this to push businesses like mine and your forward.

For information on moving to or incorporating in Panama, please give us a call or send an email to info@premieroffshore.com.

IRS Criminal Investigations on the Rise

11/02/2014/0 Comments/in Articles, My Thoughts/by Christian Reeves

If you thought an IRS audit was bad news, just wait until the IRS agents with guns come and take you down. The IRS Criminal Investigation Division, or CID, can seize your records, tap your phone, spy on your emails, and treat you like a major criminal – all for failing to pay up. The IRS CID has the ability to take everything from you… including your freedom.

Once indicted, you have a 98.5% probability of going to jail. The average sentence is 27 months. And these weapons of mass destruction are being turned on all high net worth Americans, not just those with offshore accounts.

Under President Obama, the wealthy are more likely to come under criminal investigation. The IRS Criminal Investigation Division (CID) has increased referrals for prosecution by nearly 40% under this President and I expect this number will double (to an 80 – 100% increase) before his term is over.

Just as the IRS targeted conservative fund raising organizations, they are now being accused of hitting wealthy Americans that “fit the mold” of Republican donors. Many, such as Grover Norquest of Americans for Tax Reform, claim that some of these attacks are political assassinations meant to cut off money flow to rivals. That the IRS is targeting Republican donors for criminal prosecution. Others have suggested that its wealthy conservatives who are the big fish each IRS CID agent wants to mount on his wall. That it’s open season on the wealthy in America.

Here are the stats: The IRS CID recommended criminal prosecution in 4,201 cases last year, an increase of 38% from 2012. The Department of Justice indicted 2,010 of these referrals. Expect these numbers to increase during the remainder of Obama’s term as the IRS CID and DOJ are hiring as quickly as possible.

Let me give you a little background. Just 10 years ago, no one other than drug dealers and money launderers were charged with offshore tax crimes. These laws, and their draconian penalties, were intended to target dangerous individuals who couldn’t be taken down otherwise. Think Al Capone and that ilk.

Tax preparers and lawyers had never heard of what is now the IRS’s primary weapon: the Foreign Bank Account Report (FBAR), though it had been a law on the books for decades. There was no effort to criminalize most forms of tax planning and offshore tax matters were civil cases, just like traditional IRS audits.

That is, until the IRS learned how profitable putting Americans in jail could be!

From 2006 though 2008, the IRS Criminal Investigation Division waged an all out war on offshore accounts. The Swiss bank UBS eventually fell and released the names of 3,000 of its clients, who immediately became targets of the CID. So far, the IRS prosecuted about 550 of these individuals. They selected one or two from each state to maximize the news cycle impact…to make sure their press releases got on every news cast and in every paper in the country.

* Eighty percent of the press releases just happen to come out in the weeks before April 15. Are they criminals or pawns in the Government’s marketing campaign?

This strategy worked great for the IRS…maybe not as well for the pawns. It brought in about $10 billion in new revenue from taxes, interest and penalties. Thousands of high net worth individuals, as well as average citizens living abroad and those with extended families in foreign countries, all lined up to pay to avoid jail.

Very little of these payments came from actual targets of the IRS CID. Those with offshore account went broke defending themselves and while in jail. Most of the revenues came from expats and others with accounts that the IRS did not know of..which was the purpose of the campaign.

NOTE: If you have an offshore account and don’t want to become one of the pawns, please take a read through my post on the IRS’s Voluntary Disclosure Program.

After maximize returns on their attack on the Swiss banks, , the IRS Criminal Investigation Division and other government agencies turned their sights of fining just about any international bank they could find. They quickly learned that they could fine banks just about any amount of money and get paid. This brought in a few more billion and the free for all was on. See my post on the $9 billion extorted from the French bank BNP Paribas.

IRS criminal investigations have been so profitable that the government is doubling down and hiring new gunslingers as fast as they can sign them up. This also means that they will need to expand their number of targets and their case selection criteria.

As a result, the IRS is now targeting all wealthy Americans, not just those with offshore accounts. Just because you have no international exposure, don’t think you’re safe from the new and more aggressive IRS CID. Many tax matters that were once civil cases are turning criminal. The IRS has found its targets are much more pliable, and willing to pay big fines, when they are at risk of going to jail for a few years.

It is possible that these cases are targeting high net worth Republican donors. At least, that’s how it appears to lawyers and targets in the fight. And, considering the IRS’s track record on targeting political rivals (Republican foundations and Gov. Perry to name two), it doesn’t seem to far fetched that they would use the criminal system to cut the purse strings of Republicans.

* The IRS Director Doug Sholman paid nearly 150 visits to the Obama White House from 2010 to 2012, far more than any other IRS director.

To put your mind at ease, or to increase the pressure, depending on where you land on the financial spectrum, here is a summary of your IRS audit risks.

For most working families, the probability of going before the great collector is slim. If you earn $50,000 to $100,000 per year, you have only a .06% chance of being audited.

For those with incomes of $100,000 to $1 million, it varies from 1% to about 5%. If you are self-employed and filing a Schedule C, you are at the higher end. A W-2 with no charitable contributions or capital gains and you are near the bottom.

Now for the bad news. If you earn over $1 million, your audit risk jumps to 12%. If you reach the top of the heap and have an income of over $10 million, you have a 25% chance of facing down a very aggressive IRS agent.

Note that a 25% chance of being audited means you will likely be under the microscope three out of every four years. An IRS exam typically covers three tax years. So, you have a one in four chance of being audited and, once selected, they will analyze three years of returns.

It’s these higher net worth individuals who have the highest likelihood of criminal persecution. Of those earning less than $250,000, the risk of a criminal charge is minimal. Eighty-five percent of the cases brought are filed against those earning $1 million or more. Though, the UBS cases were an exception because the government needed targets in each state.

Once you’re targeted by the IRS Criminal Investigation Division, you have a nearly 50% chance of going to jail. The DOJ prosecutes about 50% of the cases referred by IRS CID (at least until they hire more staff) and 95% of these settle. Also, the average time to complete a tax fraud case is 2 years and the average jail sentence is 27 months. That’s followed by 3 to 5 years of probation.

While the case is going on, you must report all of your comings and goings to Pretrial Services and submit financial statements each month. Most find it near impossible to work while on Pretrial release…especially those with small businesses or the self-employed.

As a result of their finances and businesses being destroyed in this process, many families don’t survive. About 1/3^rd are divorced by the time the target gets out of jail.

The U.S. government is going all in on criminal prosecutions by the IRS CID. It is by far the best returning division of the IRS and you can expect it to continue bringing in the cash in the years to come.

Will Anyone Stand Up?

The government fired the first shots in the war on financial privacy with the Patriot Act in 2001. As we all cowered under our desks in fear of another terrorist attack, our freedoms went out the back door…and no one said a word.

The U.S. extorted billions from Swiss banks and ruined the lives of 550 of its citizens, all in the name of increased revenue. Americas were used as pawns in the tax game and no one stood up.

Then the U.S. turned offshore bankers in to unpaid IRS agents with FACTA. As a result, Americans are persona non grata at most banks around the world. Yet, no one said enough is enough.

Now that the IRS CID is targeting the wealthy, possible for political gain, will anyone step up and say enough is enough?

When the IRS knocks down your door with men in military style clothes and weaponry, will anyone resist?

When it’s you handcuffed on the floor with your wife crying and your kids screaming in the corner, being restrained by wanna-be commandos in flack jackets and guns drawn, will anyone come to your aid?

If you have unreported offshore accounts and would like to know your options, please email us at info@premieroffshore.com. We can review your situation and refer you to an experienced attorney if necessary.

If you are thinking of living, investing, or doing business offshore, and need an international tax and business consultant who will keep you in compliance with the US government, give is a call at (619) 483-1708.

Should I Give My Son a U.S. Passport?

11/02/2014/0 Comments/in Articles, My Thoughts/by Christian Reeves

My son Timothy is nearing his first birthday and our household is filled with debate and discord. Should I give him a U.S. passport? Is a U.S. passport his birthright or a curse? Should my son identify as a U.S. citizen, a Panamanian, or both?

Allow me to give you a bit of background. I am an expat American living and working in Panama. I spent 15 years in the U.S. as a tax lawyer and now call Panama home. Timothy was born in Panama, his mother is Panamanian, and he holds a passport from Panama. By filling out a few forms he can become a U.S. citizen and become subject to the laws of my home country.

As a Panamanian, he has no trouble visiting the U.S. We travel to San Diego often to see his grandparents. He and his mother both have 10 year U.S. visas and I don’t expect travel to become an issue.

A Panamanian passport is a solid travel document that gives him access to most countries. Had his mother been Cuban or Venezuelan we wouldn’t be having this debate…he’d have a U.S. passport. Likewise, if his mother was from the U.K. or an EU country, we wouldn’t have an issue…I wouldn’t burden him with U.S. citizenship.

My position on second passports for U.S. persons is that they provide wealth and lifestyle insurance. If you hold a second passport, you have the ability to give up your U.S. citizenship, stop paying U.S. taxes, stop reporting your income and assets as an expat, and become a more complete part of whichever country you have decided to make your home. You might pay a significant “exit tax” but you will be free and international banks will no longer report your transactions under the Foreign Account Tax Compliance Act (FATCA).

While that’s all fine and good for adults, what about a child who’s just starting out in life? Do I have a right to impose my biased worldview (all be it based on experience) by refusing him U.S. citizenship? Is U.S. citizenship something to be valued or a burden that he will have to carry in the years to come? Am I helping him to walk in my footsteps and to benefit from my experience?

Being the logical sort I made a list of pros and cons of giving little Timothy a blue passport:

For

Easy access to U.S. schools,
Can live in the U.S., as I did,
College scholarships and aid are available to U.S. citizens
Work in the United States during and after college,
Right to renounce U.S. citizenship if he chooses… gives him the right to decide when he’s of age,
Gives him a choice in where to live, go to school, and in the lifestyle he finds to his liking. My choice is to live in Panama and vacation in Colombia, but I spent 35 years in the United States. Without citizenship, Timothy wouldn’t have that opportunity.

Against

The U.S. could prevent Americans from renouncing their citizenships or make it more difficult. Since FATCA, expatriations have quadrupled and are expected to double again in 2015.
U.S. citizens are taxed on their worldwide income, no matter where they live.
U.S. citizens are a part of the U.S. tax, legal, and court system. He will always be subject to the whims of U.S. judges and politicians.
U.S. citizens can be forced to return at any time for any reason.
A risk of falling in to the U.S. inheritance and estate tax system if parents were to pass away unexpectedly.
Costs of compliance with U.S. tax laws of about $2,500 per year on average.
Costs of $10,000+ to expatriate.

* If you can think of arguments on either side, please post them as comments. This is obviously an area near and dear to my heart.

As I write them out, it seems most of the benefits apply through Timothy’s college days and then come the risks and costs of being an American. It becomes time to pay the piper, as it were.

As long as the laws don’t change, one might come to the conclusion that he should hold U.S. citizenship through college and then renounce if he so chooses before making any real money.

Of course, the risks of a law change are significant. Also, the risk that we as a family put off expatriation too long and he gets caught up in legal troubles or tax problems with the great collector is a concern thousands of expats, especially Canadians with U.S. parents, are dealing with today.

Let me take a minute to explain my thought process. We American expats wear a scarlet letter A on our chests, which is now stamped on any financial transaction or bank account application we touch. The majority of international banks, brokerages, insurance providers, and mortgage lenders don’t want to have anything to do with us. Since FATCA turned foreign banks tellers into unpaid IRS agents, we are persona non grata in many corners of the world.

And this will impact Timothy’s early life. It will limit his ability to get a “starter” job at most companies in Latin America. Almost no one is willing to hire an American citizen these days.

* Of course, as his mother points out, he can always work here at Premier!

Also, being an American means that the U.S. government will collect massive amounts of information on his life and financial history. Is it right to allow the American authorities to invade his privacy from day one? Is it preferable to keep him away from his unscrupulous and nosy Uncle?

And these issues extend to Timothy’s mother. Spouses of U.S. citizens with shared ownership of assets are subject to FATCA’s disclosure requirements. Because she chose an American (me), all of her personal data and banking information are likely to be shared with the United States. This may currently applies to joint accounts, but I expect Panama to take the conservative or CYA approach of sending all data. They will report on their own citizens if there is any risk of running afoul of the U.S. authorities.

Finally, if I don’t give Timothy a U.S. passport, is he at risk of being caught up in the U.S. tax system anyway? Will banks only consider clients with U.S. addresses or passports and send them to the IRS? Will they take the extra step of doing a forensic analysis of everyone’s account activity, legal status, and ancestry?

When you look at FATCA, a complete analysis of all customer data is what the law requires. How far the banks will go is to be seen.

So, there’s my dilemma. Do I give my son a U.S. passport? Our household is greatly divided on the issue. Your comments or suggestions are welcome.

The Costs of Banking Regulation

10/31/2014/in Articles, Offshore Banking/by Christian Reeves

As U.S. banking regulations have increased each and every year, the costs for smaller domestic and offshore banks have made doing business with the U.S. prohibitive. These banking regulation costs have more than doubled since 2003, and are now running at about 15% of most institution’s income… essentially, a 15% tax levied on all banks doing business in the U.S. or that allow U.S. clients.

So, why are banking regulations so costly? In order to understand their obligations to the U.S. government, and avoid fines that are being handed out like candy on Halloween, banks must employ an army of lawyers to read, analyze, and then implement each and every rule that comes out.

For example, the latest banking regulation is called the Volcker Rule. It basically prohibits banks from speculative trading. In order to define what banks can and can’t do, a 71 page rule, and 900 pages of explanation, was required. Clearly, only a legal genius can figure out all of the nuances of such a convoluted law, so compliance costs associated with banking regulation go through the roof.

Then, you need to buy computer systems and hire employees to implement the new requirements. All the lawyer tells you is what to do. Now, you get to hire a team to do it. These start-up costs can be a killer for small banks. It might not be a big deal for the likes of JP Morgan to spend $3 billion of shareholder money over 3 years to implement the new regulations, but for a small local bank to spend $95 million on the same, might put them out of business.

Now, let’s say you are a small offshore bank with half of your clients coming from the United States and half from elsewhere. Under FATCA, you are required to report all transactions to the U.S., just like a U.S. bank. Also, you are required to follow money laundering and terrorist financing rules, which means any time you send a wire of more than $3,000, you must independently review it and make detailed records of where it went and why. Failure to comply will result in major fines. Failure to pay those fines will result in your being put out of business… unable to transact in USD and unable to do business with any correspondent bank.

* Obviously, these rules have very little to do with terrorists. They are targeted at U.S. citizens with unreported assets abroad and those who aren’t giving unto Uncle what is his (paying their taxes).

If you’re a smaller offshore bank, say in Belize, that wants to keep doing business with U.S. persons, then you need to find a way to cover these costs. Many have implemented account opening fees and monthly charges, which cover only about 50% of the new banking regulation costs.

At the end of the day, if a small bank is netting about $5million a year in profits, and regulations come out that increase their costs by $2 million, they can either dump their U.S. clients or increase their fees.

Why Banks in Belize are Safer than Those in the U.S.

I’ll leave you with this on banking in countries like Belize. These institutions have very strict capital requirements. They hold 20% to 50% in reserve for every transaction. This compares to just 2% to 4% for U.S. banks.

Such calculations are strict, but the cost of compliance is relatively low… the legal fees and accounting costs, not the cost of capital. Basically, banks in Belize must perform six to twelve calculations each quarter and adjust their capitalization accordingly.

Large banks in the United States basically get to self-regulate, though they must follow an incredible array of capital reserve requirements. According to one study, these rules require as many as 200 million calculations to determine capitalization.

Any model with that many calculations will leave plenty of room to game the system… which is exactly what a number of U.S. banks have been accused of doing. No one in the industry trusts the U.S. capital model, while small foreign banks have kept to a simple system that promotes security and transparency.

I hope you’ve found this post on banking regulations informative. For more information on taking your assets or business offshore, maybe to a jurisdiction such as Belize, please give me a call or send an email to info@premieroffshore.com. I’ll be happy to work with you and answer any questions you may have.

The Foreign Earned Income Exclusion 2015

10/30/2014/0 Comments/in Articles, Offshore Company Taxation/by Christian Reeves

The Foreign Earned Income Exclusion 2015 has finally hit six figures. The FEIE for 2015 is $100,800, up from $99,200 for 2014. The FEIE is the best way to minimize your US taxes as an Expat and the most important tool in your tax kit.

This means that each American living and working abroad, who qualifies for the Foreign Earned Income Exclusion in 2015, can earn up to $100,800 in salary without paying personal income tax. If that salary comes from a US employer, then you still pay social and employment taxes (7% deducted from your check and 7% paid by your employer). If you are self employed and don’t have a corporation, then you pay self employment tax at 15%.

Basically, if you have a US structure, or are self employed without a foreign corporation, you pay 15% tax + Obamacare and other charges on your 2015 salary. The FEIE only cuts out your personal income taxes.

If you work for a foreign employer, or you operate your business through an offshore corporation, then you can avoid this 15%+ tax. It is possible to use the Foreign Earned Income Exclusion 2015 with an offshore corporation and pay zero to Uncle Sam on income of $100,800. If a husband and wife both operate the business and qualify for the FEIE, you can take out $201,600 in salaries tax free!

Next, if your profit exceeds $100,000 or $200,000, you can retain earnings in the offshore company and defer US taxes on that income. This tax deferal is a major benefit of living and working abroad for high net worth business owners.

Let’s say your net profit is $300,000 in 2015. You and your wife take out $200,000 in salary using the FEIE. This leaves $100,000 in untaxed profits. If you hold this money in the offshore corporation, you can defer US tax until you take a distribution. If you draw it out as salary, commissions, dividends, or in any other form in 2015, you will pay US taxes at about 32% (Federal).

For a 100+ page book on expat tax issues and how to maximize the FEIE 2015, please join my mailing list.

My posts on the Foreign Earned Income Exclusion for entrepreneurs include:

Finally, if you’re a glutton for punishment, I recorded a 3 hour dissertation on the Foreign Earned Income Exclusion for the Overseas Radio Network. See my ORN page.

I hope this post has been helpful. Please send an email to info@premieroffshore.com if you have questions about forming an offshore corporation or maximizing the FEIE as an entrepreneur.

Foreign Assets and FBAR Reporting

10/29/2014/in Articles/by Christian Reeves

Ever increasing U.S. reporting obligations on Americans living, working, and/or investing abroad, make it difficult to keep up. This is a review of your foreign assets and FBAR reporting requirements. Foreign assets are reported on IRS Form 8938 and the FBAR is sent to the Treasury on FinCEN Form 114 (Report of Foreign Bank and Financial Accounts).

These two forms are quite similar, and many are confused about when and why to file each. I note that you must file if you meet the reporting threshold. Basically, the IRS wants you to send in the same information twice… so they know exactly where your assets are and how they are invested.

Who Must File Foreign Assets and FBAR

The Statement of Specified Foreign Assets must be filed by U.S. citizens, resident aliens, and some non-residents if your reportable foreign assets are at least $50,000 on the last day of the year, or $75,000 at any time during the tax year. Note that higher levels apply to married couples.

The FBAR is required from any U.S. person, including citizens, resident aliens, trusts, estates and U.S. structures that have foreign bank account(s) with at least $10,000 at any time during the year. So, if you have a foreign account with $11,000 for just one day, and the rest of the year your balance is $5,000, you still must report. Also, if you have 11 accounts, each with $1,000, you have $11,000 offshore and thus must report all of these accounts on your FBAR.

Foreign assets you own are reportable on Form 8938. This is to say, if you would need to report income or gains from these assets on your U.S. return, you must report their existence on Form 8938.

As for the FBAR, an interest in a financial account means you have signature authority over the account or you are the beneficial owner of the account. If you have a right to tell the bank what to do with the funds, how to invest the cash, or instruct them to send a wire, you are the signor and need to report.

You’re the beneficial owner if you’re the owner of record or holder of legal title. For example, if you have $100,000 deposited in to an account, and then assign a nominee account manager, you are the beneficial owner of the account because the funds belong to you. The signor and nominee in this case is acting on your behalf.

What is Reported as Foreign Assets and on the FBAR

When you are reporting foreign assets or the FBAR, you must report the maximum value. For the FBAR, you report the highest value in the account during the year. If you are holding funds in a currency other than USD, you should use an average FX rate, or convert on the day the account balance is at its high water mark.

This means that the amounts reported on your FBAR might be artificially inflated by transfers, one time deposits, etc. For example, you have $100,000 in account A, and transfer that to account B, and then to account C, all within the same year. Your FBAR will show three accounts, each with $100,000. The government won’t know whether you have $300,000 or $100,000 offshore but it allows them to maximize failure to report penalties.

On the Foreign Asset report, you’re to list the maximum value of each foreign asset, which includes bank and brokerage accounts, and certain other assets. You should report the fair market value in USD for each account and asset reported.

* Foreign Account: Is any bank or brokerage account at a financial institution outside of the United States (see below). For the FBAR, if the bank has a branch in the U.S., but your account is held at a foreign branch, it must be reported. If you have an account at Citibank, Panama, you have a foreign account and need to file the FBAR.

The foreign asset report is due with your U.S. tax return, including extensions. So, Form 8938 is usually due on April 15 or October 15. The FBAR is due by June 30 and no extensions are available. If you file your return on April 15, you should submit your FBAR at that time. If you get an extension for our 1040, your FBAR is still due by June 30.

The FBAR should be filed online through the FinCens BSA E-Filing System. Please see my article on how to file this form electronically.

Foreign Reporting Penalties

The penalties for failing to file the foreign assets and FBAR forms are severe… and can include criminal charges. There are many Americans sitting in jail for not telling their Uncle where their assets are. Some also

UK to follow IRS Levy Rules

10/27/2014/in Articles/by Christian Reeves

The U.K. tax authority to allow IRS Levy type actions. If you owe the HMRC, they now have the authority to seize your bank account and raid your assets, just like an IRS levy.

Now, it’s no surprise that the U.K. is following in the footsteps of the mighty IRS levy. It’s just interesting that it took them this long to do so.

I also find it interesting how strong the reaction against what we Americans think of as “normal” has been in England. For example, the primary body of accountants said that the HMRC had a record of making mistakes and should not be allowed to levy without court approval.

In its statement, the HMRC said that these regulations bring it in line with other tax authorities which already have the power to take money debts directly from an individual’s account, just like France and the U.S. Of course, advocacy groups respond saying the U.S. should not be regarded as a role model of what is right and just … just the opposite in fact.

Once interesting caveat of these new “draconian” laws that match the IRS levy system, is that the UK will leave 5,000 pounds in the person’s account so they can afford to pay for basic necessities. If the account holds 15,000, and the debt is 20,000, the U.K. gets to take 10,000.

The IRS levy system has no such requirement. So long as the U.S. IRS can find your account, they can empty it up to the amount of the alleged debt, including interest and penalties.

According to the U.K. Low Incomes Tax Reform Group, these new laws will allow the tax authority to run roughshod over low income persons who prioritize necessary payments over taxes.

“To allow the HMRC to raid their bank accounts without safeguards or recourse to the courts would be to flout the rule of law in a manner unworthy of a public service body. It is not the same as seizing physical goods, it is depriving the debtor of the very means to live. Given the way the HMRC continually fails to deal with taxpayers properly or fairly is hugely worrying. To introduce such draconian measures without proper safeguards could well lead to an abuse of power.”

This is exactly what we Americans have been dealing with for decades … a government agency who offers horrendous customer service, fails to deal with individuals fairly, and can levy your personal and business bank accounts at will … often as the first line of attack and then they negotiate a payment plan. The IRS shoots first and asks questions later.

If the U.K. wants to see what happens when you give one government agency unlimited power to attack its citizenry, just look over the pond at the IRS levy system.

Chile’s Tax & Economic Climate

10/24/2014/in Articles, Latin America/by Christian Reeves

The republic of Chile is one of the most business friendly nations on earth… as tax and business efficient as it is long. Chile’s focus on high-tech start-ups has brought a wealth of talent and business to this nation that is vying to be the Singapore of Latin America.

Chile is one of the longest countries on earth, spanning the southern portion of South America. It borders Argentina (primarily), as well as Peru and Bolivia. Its capital city Santiago boasts an ever growing population of 6 million and Chile has a total population of nearly 18 million… which is several times larger than my Panama at around 3 or 4 million depending on who you ask.

Chile is one of South America’s most stable and prosperous nations, leading Latin America in a number of important categories: human development, business and economic competitiveness, income per capita, economic freedom and a low perception of corruption. All of these combine to make Chile a dynamic and business friendly nation.

The two criteria I’d like to focus on are competitiveness and income per capita. As to income, it is just over $20,000 on average and nearly double many nearby nations. While this means labor is not as cheap as it is in, say, Panama, it also means that the work force is better educated, better trained, and more efficient.

Chile is especially competitive in technology start-ups and export. Exports to Asia and the U.S. account for 60% of the nation’s economy and Chile is pushing hard to become the center for tech start-ups in Latin America. For more information on this, please see my previous post on Chilecon Valley.

As a result, the once challenged Republic has become one of the most dynamic nations in the region. They’re now listed as a “high-income economy” and a “developed country” by the World Bank (as of July 2013, so a recent development). It is also the nation with the highest degree of economic freedom in South America, and 7^th world wide.

As I look around the globe, I believe Chile to be one of the best places to form a new internet based business, or any business focused on high quality labor… rather than call centers and repetitive tasks.

And Chile’s economy has prospered, even during the recent downturn. Real GDP growth has been 4% to 5.7% over the last decade and the national debt is only 3.9% of GDP. It seems like many of Chile’s northern neighbors could learn a thing or two about how to run a country.

Driving this growth is a business friendly tax system which is compatible with the U.S. code and the Foreign Earned Income Exclusion. Basically, you can set up a business and operate tax free for 3 to 6 years before needing to deal with the local tax authorities.

First, Chile taxes local source income at 30%, where local means products and services sold in Chile. If you sell to customers outside of Chile (in the U.S., for example), this is foreign sourced income to Chile and not taxable in certain cases.

* For U.S. tax purposes, it doesn’t matter where your customers are located (in the U.S., for example), only where you and your business are based.

Next, wages you take out of a Chilean corporation are taxed at 0% to 40%, with the higher rate applying to a salary of $12,500 per month. Though, you are allowed to be a resident of Chile and draw a salary from a foreign corporation, which would not be taxed by Chile.

So, if your income and sales are made through a Belize offshore corporation, you draw a salary of $99,200 per person from that company, and qualify for the U.S. Foreign Earned Income Exclusion, you won’t pay any tax in Chile or the United States. You’re allowed by both the U.S. and Chile to retain earnings in excess of this amount in the offshore corporation and will only be taxed when you take a distribution.

I have assumed you are familiar with the FEIE. If this is new to you, or you are wondering what I am on about, please take a few minutes to read one of my more detailed posts on the topic.

As I said above, foreigners in Chile are taxed on international income after they have been tax residents for 3 or 6 years (the standard period of 3 years can be extended to 6 by filing a few forms.). During this time, the FEIE model works no matter how much you earn in salary, capital gains, or from any other source outside of Chile.

Once your 3 or 6 year honeymoon period is over, then you will pay tax in Chile if your foreign salary (from a Belize company) is over $153,000. So, the U.S. FEIE gives you $99,200 in 2014 and the equivalent Chilean tax tool gets you $153,000, tax free. This is why I say the tax code in Chile is designed to work seamlessly with the U.S. system.

Here are a few more tax benefits of living, working and doing business in Chile. For some of you, they may greatly outweigh the FEIE.

– Gaines from the sale of shares in a Chilean company held for more than 1 year are tax free.

– Gains from publicly traded companies are tax free.

– The sale of real estate is tax free (no capital gains, but VAT will apply).

– Reimbursements from housing, travel and all other expenses paid by your employer are tax free. Allocations from you employer are taxable as local salary, so some planning is advised.

If you are operating a business through a Chilean corporation, and have local profits, your corporate tax rate is 20%. Distributions to you are taxed at 35%, but you get a credit for the 20% tax paid by the entity… which should net to about a 15% personal income rate on corporate distributions. In the U.S., this would be 30% at the corporate level and then 40% + your state’s tax at the personal level.

Those of you who follow my columns know that Premier is based in Panama City and San Diego. If I were starting over, or about to launch a new division (which we are doing right now), I’d give serious consideration to doing that in Chile.

The climate of Chile is quite similar to California, if not the mirror opposite in terms of season. With everything from a dominant Pacific coast to some of the world’s driest desserts, Chile has just about all of the ecological diversity as did California 75 years ago. Chile’s summer is from December to February, autumn is March to May, winter, June to August and spring, September to November. Temperatures in the valley surrounding Santiago can get up there, but nothing compared to California’s Central Valley or El Centro areas (temperatures in parts of CA can be 115°F several times a year, and I’ve had the joy of 120°F on occasion).

When thinking about where to place a business, you need English speaking talent and telecommunications infrastructure. Chile has the most advanced telecom system in South America with an advanced microwave radio relay facility and its own satellite system that includes 3 earth stations. That is all to say that Chile’s telecom system doesn’t rely on the U.S. (NSA).

As of 2012, there were 3.3 million land lines and 24 million cellular phones, with all of the latest and best technologies available in Chile. According to the International Telecommunications Union, 62% of the population uses the internet, making Chile the country with the highest internet percentage in South America.

So, from my previous article, we know that Chile has the people and government sponsored programs to support your business. They also have an efficient tax system and the telecom infrastructure you require. Add to this the fact that Chile is focused on freedom and privacy, and I’m sold. Chile is not a banking center like Panama, and thus not as beholding to the U.S. and its push to control the world’s financial transactions.

* For more information on nations dependent on U.S banking and the dollar, see my posts on France and Russia’s attempt to replace the U.S. dollar and America’s $9 billion attack on BNP Paribas and FACTA.

If your business model requires the lowest cost labor available, such as a call center, then Chile might not be for you. If you need higher caliber tech oriented employees, strong IT and telecom systems, and a larger market than is available in Panama, you should consider a look at Chilecon Valley. If you’re looking to diversify out of the U.S., Panama and Chile are both strong contenders… but Chile is several more steps removed from Uncle Sam in terms of financial and personal freedom when compared to Panama.

I hope you have found this series on Chile interesting. For additional information on moving your business out of the United States, please give me a call or send an email to info@premieroffshore.com. We will be happy to work with you to structure your affairs in an efficient and U.S. tax compliant manner. All consultations are confidential.

IRA Gold Rules

10/23/2014/in Articles/by Christian Reeves

Yes, you can take your IRA offshore and buy IRA gold… so long as you follow the rules and buy the right kind of gold. If you will invest in IRA gold, this brief post is a must read.

Here are the basics of buying IRA Gold:

First, if you wish to hold IRA gold outside of the United States, you should form an Offshore LLC, invest your retirement account in to that structure, and then make your investments. This give you control of your retirement account(s) and you are the only signor on that foreign bank/investment account.

Next, you must follow all of the same rules as an onshore IRA manager. Luckily, the rules for IRA gold are quite simple.

Your offshore IRA may invest in physical gold. This means, you can buy gold bullion, nuggets, or any other type of precious metal allocation you like. IRA GOLD DOES NOT INCLUDE COLLECTIBLE GOLD COINS!

If you buy IRA gold, you must buy physical gold that is valued on its gold content. You may not buy coins that have value over and above their gold content. IRA gold does not include collectibles.

The only gold coins that I am aware of which you can purchase in an IRA are American Golden Eagles. These are priced at around $140 for their gold content and have no value as a collectible.

Of course, my recommendation is to hold physical gold, not coins, in an offshore vault in Panama or Switzerland. I also suggest you avoid paper gold, which provides very little protection (hedge) against catastrophic events.

I hope this post on IRA Gold is helpful. We do not sell gold, but will be happy to direct you to offshore experts. For more information, please send me an email to info@premieroffshore.com.

Should I buy the Alibaba IPO?

10/22/2014/in Articles/by Christian Reeves

The largest IPO in the history of the market is coming. Alibaba, a Chinese company, is set to go public on the U.S. exchange. The transaction will break all volume and valuation records. Alibaba is a combination of Google, eBay and Amazon, and dominates the Chinese market.

The question is, should you jump on the bandwagon and buy the Alibaba IPO? I say no way. Here’s why… all without citing one number, statistic, or ratio.

I believe you should buy what you know. I also suggest you buy only where and when you have an advantage. I bet that most of my readers have no advantage in the Alibaba IPO. Therefore, none of you should buy the Alibaba IPO.

First, let’s talk about buying what you know. Do you have any special or unique knowledge about Alibaba? Do you have a better understanding of their products, financials and future than the other buyers, sellers, or those going short? I suspect not. When an IPO is as hyped as Alibaba, no average investor has a chance of standing out from the crowd.

More interesting is to buy only when you have an advantage. I assume you’re not a founder of Alibaba. Therefore, the only advantage you might have is being issued some of the original IPO stock.

If your broker gives you an opportunity to buy Alibaba at its issue price, by all means, jump on it! Based on similar IPOs, such as Google, you’ll receive a 10% premium/returns. (Oops, sorry about that. A percentage snuck in to this post).

But, will you get any of the original issuance? Probably not. Big time IPOs are taken up by the brokerage firms. They allow only their best (read, highest commission paying) clients to buy the stock and then flip it to the rest of us. Unless you’ve been paying in to your brokerage firm’s coffers for years, you aren’t going to see a single share of original issue IPO stock from Alibaba. Me and my e*trade account won’t even get a sniff.

And that gets me to buy where you know. I assume you have not been living in China and don’t have a solid understanding of the market, culture, and business opportunities in that market. Because you have no experience in China, you shouldn’t be investing in China. If you have no competitive advantage, you’re just following the sheep and hoping for the scraps that the pros have left.

It’s this idea of buying where you know that drives all of my investments. I’ve spent years in South and Central America, and have a good understanding of small pockets of a few cities in these regions. Particularly, I have found deals in Panama City, Panama; Ambergris Cape, Belize; Santiago, Chile; Quito, Ecuador; and Medellin, Colombia.

Don’t get me wrong. I am not saying that all of these cities offer deals. I am suggesting that local knowledge will allow you to find deals in certain communities within these cities.

You may find your way in a different part of the world. Maybe Puket, Thailand or somewhere in the Philippines will speak to you. No matter where you search out your opportunity, we will all share one important component: We will be investing where we know, which is usually an area we enjoy. A place where we are happy to spend the time to learn the nuances and culture.

So, should you buy the Alibaba IPO? Only if you have special knowledge or access to an original issue. Otherwise, focus your efforts in a niche outside of the United States that’s small enough for you to build relationships and learn the region.

Panama Foundation IRA Tax Review

10/13/2014/in Articles, Asset Protection/by Christian Reeves

The Panama Foundation has been approved as the “owner” of a U.S. retirement account in Panama. This means that, those who want to invest in Panama, have access to banks or brokerage services in Panama, or hold their retirement account n the most advanced asset protection and estate planning tool available, may now move their IRA to a Panama Foundation.

This article is a review of the U.S. and Panama tax laws as applicable to holding an IRA in a Panama Foundation. I’ve included cites for those who want to delve in to the U.S. tax code or the ERISA statutes.

I begin by noting that the U.S. code sections that allow you to move your U.S. retirement account in to a domestic or foreign LLC are the same ones used to support the Panama Foundation. The Foundation is conveyed in to a disregarded entity for U.S. tax purposes, just like an LLC, but retains its estate planning and asset protection components in Panama.

The Panama Foundation IRA structure we have created is designed around the U.S. domestic business trust IRA and the offshore IRA LLC. In a business trust, the IRA makes an investment in to the trust by acquiring the “beneficial interest” of the trust. Often the IRA will purchase 100% of the “beneficial interests” of the trust, much like it will acquire 100% of the “membership interest” of a limited liability company or shares of a corporation. Essentially, the term “beneficial interest” is the title for “equity interests” in the business trust.

Using IRC § 4975 (e)(2)(G) and ERISA Reg 2510.3-101(b)(1), we have applied these rules to the Panama Foundation, which is a hybrid trust and corporate entity. In the case of the Panama Foundation, the IRA account is the trustor or settler of the Foundation (i.e., the party who transferred assets to the Foundation) and the beneficiary (the party that holds the beneficial interest of the Panama Foundation). Therefore, the IRA account is both the trustor/settlor and the only beneficiary of the Panama Foundation.

Limitations!

In a traditional asset protection structure, we don’t usually recommend the Founder be the same “person” as the beneficiary. In the case of a Panama Foundation IRA, this is required to maintain the tax preferred status of the retirement account under U.S. law.

Also, the Panama Foundation IRA we have created may not act as both the owner of your retirement account and as an asset protection trust for your after tax (non – IRA) money. You may not mix after tax cash with your retirement savings.

U.S. Tax Classification of a Panama Foundation IRA

When you take your retirement account offshore, the objective is to (legally) eliminate all Federal and States filing obligations. To accomplish this, the Panama Foundation IRA must have only one member/founder and be considered a disregarded entity for U.S. tax purposes. This is quite different than a typical trust used for estate planning purposes or a Panama Foundation used for asset protection.

Specifically, a typical U.S. trust is governed under Subchapter J of the U.S. tax code § 641. The Panama Foundation’s tax status is determined under the “check-the-box” Treasury Regulations.

Under Treasury Reg. 301.7701-4(b), a foreign entity is treated as a business entity and classified for under Treasury Reg. 301.7701-2. Under this section, a business entity with two or more members is classified as either a corporation or a partnership. A corporation is then defined to mean a business entity organized under a state or international statute which refers to the entity as “incorporated” or as a “corporation.” For example, a Panama corporation is by default a foreign corporation, and not a partnership or trust, because it is “incorporated” under the relevant Panama code sections. Likewise, any entity ending in Inc., A.G., Corp., Ltd., or a similar designation is assured to be a corporation for U.S. tax purposes.

Now that your Panama Foundation is classified as a disregarded entity, because it has only one owner of the beneficial interests and/or submitted the form to be classified as a disregarded entity, it will not have to file federal or state income tax returns.

State tax: For example, every corporation doing business in California is subject to the minimum franchise tax of $800. The same goes for any LLC formed in California. But other entities, such as trusts formed outside of the State, are not required to pay this tax. For more information, see the California Revenue and Taxation code and related regulations (§ 23038 and CA Admin Code Title 18 § 23038(a), (b)-1 and (b)-2. As to the disregarded entity status in California, see Rev and Tax Code § 17942(a) and (b).

Plan Asset Rule

Once your retirement account has been moved to a Panama Foundation, and you are the manager of that Foundation, you’ll be required to follow the various Plan Assest Rules as defined in the ERISA Regulations at 2510.3-101(a)(2). As the plan manager, you become a fiduciary of the IRA and must always act in the best interest of the account and the Panama Foundation IRA.

As a fiduciary, you are prohibited from borrowing from the plan, using the funds for your personal benefit, making certain prohibited investments, and engaging in any transaction at less than fair market value. Basically, you are to manage the Panama Foundation for the benefit of the retirement account as a professional investment advisor would. You should act as if the funds belong to someone other than you… which, in fact, they do… cash belongs to the IRA.

I would like to point out here that these rules apply to Panama Foundations and LLCs that hold a U.S. retirement account. They are not applicable to a Panama Foundation used to protect after tax money (personal savings).

For more information on your rights and responsibilities, as well as a discussion of what you may and may not invest in, please see my Self Directed IRA page (top right of the menu).

Documents of the Panama Foundation

Where a typical Panama Foundation consists of a Foundation Charter and a Letter of Wishes, a Panama Foundation IRA is built upon a similar Charter and an Operating Agreement. The Charter sets forth the purpose of the Foundation in general terms and the Operating Agreement (which is a private document not filed with the government) describes the IRA structure in detail.

The Foundation Charter is public record and filed in Panama. The Operating Agreement is essentially a contract between you and the U.S. custodian detailing each party’s rights and obligations with regards to the IRA Foundation. Collectively, these are referred to as the Foundation documents.

The Foundation documents work together to set forth the purpose of the Foundation, which is to make appropriate investments and manage the IRA funds it controls. As such, these documents give the manager (you) the authority to open bank and brokerage accounts, purchase property, and spend money to improve or add to that property.

It is the Foundation Charter that gives the Founder the ability to enter in to the Operating Agreement with the retirement account administrator. Then it is these documents together that allow you, the beneficial owner of the retirement account, to be appointed as the manager.

As the manager of the Panama Foundation IRA, you have the right to make investment decisions, as well as any changes to the Foundation Charter and Operating Agreement. As such, you are taking the right and responsibility to make decisions away from the U.S. administrator.

The administrator agrees to transfer this authority to you, and you agree to indemnify him from any actions you take as the manager of the Panama Foundation. In other words, the Operating Agreements says you must follow all applicable rules (such as the plan asset rule), and can make any permitted investment you like. If you lose money, or break a rule and the IRA is penalized by the IRS, that’s on you… the administrator has no liability. His job is to 1) invest the IRA in to the Panama Foundation and 2) file annual forms with the IRS. For this, he will charge a few hundred dollars a year. He doesn’t get to charge a fee or make a commission on any of your investments and has no liability if you make a bad deal.

As such, you will be the only signatory on the bank accounts. The U.S. administrator will have no right to force the assets of the Panama Foundation be returned to the United States. If you come under attack (litigation), then you decide how to handle those offshore accounts.

Finally, you are not required to seek the administrator’s permission for any investment. You have total control over the check book of the Panama Foundation… and that’s how the administrator wants it.

Active Business in a Panama Foundation IRA

The Panama Foundation, as defined in Law No 25, Private Interest Foundations, issued on June 25, 1995, may not operate an active business. So, while it is legal for a U.S. IRA to operate a business, it is not possible to do so if you move the retirement account in to a Panama Foundation.

However, I don’t see this as much of a drawback… an offshore IRA should not be operating a business anyway. Any business owned and operated by a retirement account will generate Unrelated Business Income in the United States, which will be taxed at 35%. That’s right, active business income earned in a retirement account is taxable.

To eliminate this tax, an offshore IRA structure may form a UBIT blocker corporation to hold the business. Then, the corporation passes interest and dividends up to the Foundation/IRA. This converts the UBI in to traditional investment income and avoids the UBIT.

For more information on UBIT and blocker structures, please see my various posts on this topic. Suffice it to say, any active business owned by the Panama Foundation IRA should be in a Panama corporation.

I hope you have found this review of the Panama Foundation IRA structure helpful. For more information, please call us or send an email to info@permieroffshore.com. We will be happy to work with you and answer any questions you may have.

Note that we are the creators of the Panama Foundation IRA structure. As such, we are uniquely qualified to help you move your retirement account to Panama.

Move Your IRA to Panama

10/10/2014/in Articles, Asset Protection/by Christian Reeves

We have been working for months with lawyers, banks, and government agencies in Panama and are finally ready to announce some great news for those seeking asset protection. You may now move your IRA or other retirement account to Panama and in to the best protection and estate planning tool available… the Panama Private Interest Foundation.

This represents the culmination of a great deal of negotiation and a titanic shift in the offshore IRA industry. While you were previously required to form an offshore LLC, you may now utilize a U.S. compliant Panama Foundation to hold your retirement account. This means you have access to all of the investment service providers, banks, and investment opportunities in Panama without being required to add a Panama corporation to your offshore LLC or getting your LLC licensed to do business in Panama… which is a major hassle costing thousands of dollars to complete.

This also means your IRA is in a Category III entity, which is much more advantageous for larger accounts and gives you access to a wider range of jurisdictions.

Let me explain. Before we created the Panama Foundation IRA, you were required to place your IRA in to an offshore LLC. This is because you needed to move it in to a disregarded entity for U.S. tax purposes to maintain the tax benefits of being a U.S. compliant retirement account. If you wanted to invest in a country that doesn’t have an LLC statute, you needed to create a subsidiary corporation under your offshore LLC. This increased the formation costs and maintenance, as well as the U.S. compliance required to move your IRA offshore. Most notably, the offshore corporation is required to file a U.S. tax return, IRS Form 5471, which creates too many headaches to list here.

* The only countries offering compatible offshore LLCs are Anguilla, Nevis, Belize, and the Cook Islands. Obviously, this limits your investment options unless you form an offshore corporation owned by the LLC.

Being what is referred to as a Category III entity, the Panama Foundation may open accounts and make investments in Panama (obviously) and other countries that have agreements with Panama. This includes Hong Kong and Cayman Islands. Cayman is universally regarded as the most advanced offshore banking jurisdictions for larger investors, but has no LLC statute. Structures from Anguilla, Belize, Nevis and Cook Islands are (basically) prohibited from opening accounts in Cayman, but a Panama Foundation has the same legal standing as a domestic entity… which is a major advantage.

* For more on Cayman, please see my article on this topic.

Also, when designing an offshore IRA structure, you want to ensure you are not required to file any U.S. tax forms. Eliminating filing requirements will save you thousands in compliance costs and greatly reduce the probability of being audited.

Moving your IRA in to the Panama Foundation structure we have created eliminates all U.S. filing obligations. Both an offshore LLC and our Panama Foundation structure are classified as disregarded entities for U.S. tax purposes and therefore not required to file a return… again, unless you add a corporation to the structure.

* There are times when a corporation and filing Form 5471 can be a major advantage. See my articles on UBIT blockers for more information.

I also note that the Foreign Bank Account Report (FBAR) is not required for a bank or brokerage account owned by a retirement account.

The above description covers just the basics of moving your retirement account in to a Panama Foundation. I will be releasing a detailed analysis of the structure and its legal basis in the U.S. in the next few days.

Please understand that the Panama Foundation IRA has a different objective than our typical asset protection structure. As this Foundation must meet all U.S. requirements for a retirement account, and we wish to prevent the need to file U.S. returns, it uses a different legal system than a Panama Foundation for protecting after tax income. That is to say, not all my comments and articles on the Panama Foundation apply to a Foundation which holds an IRA.

Basically, what we have done is take those aspects of the Panama Foundation that maximize asset protection and estate planning for U.S. persons, and convert them in to a structure that can support your retirement account. Once the account is inside the Panama Foundation, you are the manager and have complete control over the investments and the checkbook of the Foundation.

As the manager of the Foundation, and the fiduciary of the retirement account, it’s your job to manage the assets of the Foundation for the benefit of the retirement account, and not for your own gain. I will address this in more detail in my next post.

Our design also incorporates legal components from the U.S. business trust (which is quite different from a U.S. grantor trust) and the offshore LLC structures we have offered for the last several years.

The Panama Foundation IRA may hold any investment permitted under the U.S. IRA statutes. This includes physical gold, bank and brokerage accounts, and real estate. In fact, the Panama Foundation may hold land or other property to be improved by the Foundation, or a rental where the Foundation is to collect rents and pay expenses.

So, moving your IRA in to a Panama Foundation rather than an offshore LLC, will allow you to invest in and open accounts in Panama without a corporation or other expensive maneuvers. If Panama is where you would like to keep your investments, or you need access to other advanced markets (such as Cayman), you should consider forming a Panama Foundation IRA.

Please send an email to info@premieroffshore.com for additional information. We will be happy to review this unique structure with you.

Stay tuned for my tax and legal analysis of the Panama Foundation IRA…

The Foreign Pension Tax Trap

10/08/2014/in Articles, Taxation/by Christian Reeves

If you’re working abroad for a foreign company, watch out for the foreign pension tax trap. If you get caught, you might be paying double tax on your retirement income… once when earned by the U.S. and once at distribution in your country of residence.

First, let me say that this is not meant as a definitive guide on foreign pensions. A proper analysis would review every tax treaty out there and thus be longer than War and Peace. My intent is to identify the issues faced by U.S. expats with a foreign pension so that you may go to your local tax person, or Human Resources department, to discuss how to avoid the foreign pension trap.

Second, these issues do not concern expat entrepreneurs or business owners. Presumably, you would utilize a U.S. qualified pension plan or defined benefit plan for yourself and avoid these problems.

Of course, if you are operating a small business, and your income is less than the Foreign Earned Income Exclusion ($99,200 in 2014), you don’t need to be concerned with a pension, be it foreign or domestic.

Now that I’ve buried the lead in the 5^th paragraph, let’s talk about the foreign pension tax trap. If you work for a foreign company, and have the option of taking a foreign pension, you need to understand the general rules (described here), the foreign tax credits available, timing issues, and specific tax treaty provisions between your country of employment and the United States, before agreeing to put cash in to a retirement program.

The reason a foreign pension can become a tax trap for the American expat is:

1) some foreign pensions are not compatible with the U.S. tax codes, 2) no treaty applies, and 3) your income is taxed in the U.S. as earned and taxed at distribution in your country of residence, which means the foreign tax credit may not be available.

So, while the foreign pension may appear to give you better tax treatment in your country of employment, if may result in double taxation. Here’s why:

The general rule is that a foreign pension is not a qualified retirement plan (QRP) for U.S. tax purposes. Therefore, contributions are not deductible on your U.S. tax return.

Because you are taxed on your worldwide income as earned, and because the income which flows in to the nonqualified plan is not deductible, it is included in your U.S. adjusted gross income and taxable here.

So, if you are earning $50,000 in salary and 15,000 in retirement benefits in France, the income reported on your U.S. tax return is $65,000. You might have foreign tax credits to offset the $50,000, but no credits to cover the $15,000.

Then, when you withdraw that $15,000 from your account in France, you pay tax on it there. Well, more than three years has likely passed and you are no longer able to amend your U.S. personal income tax returns to claim this credit. So, you were taxed once in the U.S. when earned and then again in France when distributed.

That is to say, these general rules require a U.S. expat in a foreign pension plan to include in income the amount of the contributions made by him or her, as well as any contributions made by the employer to the extent vested. Because you will probably need to pay tax in the foreign country when you take a distribution from the plan, it is possible that the contribution will be double taxed… but at different times. This timing issue creates a mismatch of income and the availability of the foreign tax credit in the United States.

Relief may be available to some U.S. expats, but not all. Several U.S. tax treaties cover foreign pension plans and, at least, eliminate double taxation. You should discuss the availability of a tax treaty with your pension coordinator before signing up and getting caught in the foreign pension tax trap.

And, even if these treaty provisions exist, they will be limited to U.S. IRA amounts. That is to say, they are limited to U.S. QRP levels of contribution from you and your employer, AGI limitations, and will have distribution requirements. If your foreign pension is more generous, or has terms that are significantly different than a U.S. IRA, you are in for a very complex tax situation.

If you’re really lucky, you’re working in a country with an advanced pension treaty. These exclude contributions to a foreign pension plan from your U.S. income, just as if the plan were in the United States. Though, such treaties are typically with countries that offer retirement plans on terms similar to those found in the U.S., and whose tax rate is higher or about the same as in America.

At the time of this post, the countries with advanced pension provisions in their tax treaties are the U.K., Germany, the Netherlands and Belgium.

Another area of concern with a foreign pension is whether a withholding tax will be levied on you by your country of employment. As an expat worker in a foreign land, it is likely the government will want to ensure your compliance by withholding any taxes payable… especially if you have returned to the U.S. after retiring or completing your work contract.

In many cases, the default rate of withholding is 30%. If a tax treaty applies, this might be reduced to 15% (such as in the U.S. – Canada treaty). There are even some treaties that eliminate the withholding tax all together, so be sure to discuss this issue with your representative.

The last consideration facing expats with foreign pensions are your U.S. reporting obligations. It is possible you will need to file a foreign trust return (IRS Form 3520 and 3520 – A) to report the existence of the foreign pension. If you have signature authority over the account, you probably need to report it on your Foreign Bank Account Report. In some cases, IRS Forms 8938 and 8606 may apply. Your filing obligations on your country’s applicable treaty and how your foreign pension is structured. All I can tell you with certainty is that you should look carefully before getting in to a foreign pension arrangement and seek out the counsel of a qualified representative.

As you can see, tax planning for a foreign pension or foreign retirement plan is a complex business. We at Premier do not offer foreign pension plans. We can help the U.S. entrepreneur to form his own U.S. QRP or defined benefit plan and maximize the value of being offshore.

Likewise, if you already have a U.S. retirement plan, and are moving or investing offshore, we can help get your IRA out of the United States. This is usually done by forming an offshore LLC or Panama Foundation and investing your U.S. IRA in to that structure. Once this is complete, you’ll have checkbook control over the account and your investments. Though, you are required to follow U.S. rules governing investments, act as the fiduciary of the account, and on distribution.

If you would like more information on taking a U.S. IRA offshore, pleas see my Self Directed IRA page (upper right menu of this site). If you would like to set up an offshore corporation, or create a QRP for your international business, and you qualify for the Foreign Earned Income Exclusion (are a U.S. expat), we will be happy to work with you. Please give us a call or send an email to info@premieroffshore.com.

Why the Dollar Will Fail

10/06/2014/in Articles/by Christian Reeves

With Russia and France working hard to push the U.S. dollar from its perch as the world’s currency, there is the risk of a major revolution of the dollar. While it might not result in a total collapse, most experts agree that the U.S. dollar will be devalued by 11% to 45%. Here’s why the dollar will fail and take your retirement account down with it.

First, let’s talk about France. The U.S. has pushed this nation, and the European Union, way too far. We’ll pay for this impudence soon. Here’s why America recently levied a $9 billion dollar fine on France’s BNP Paribas bank for engaging in transactions with the country of Sudan while the United States had issued sanctions against that country.

While you might think, ok, they paid a fine because they violated the law by doing business with Sudan, that’s what they get. Well, France and the EU had no sanctions or problems with Sudan. It was only the United States who had that country on its hit list. Also, the transactions that BNP Paribas did with Sudan had no connection to the United States. No U.S. goods were sold or transferred, no U.S. persons were involved, and no business was transacted through an office or branch in the United States. The trades involved were between a bank in France and the country of Sudan… again, there were no limitations in France or the EU on doing business with Sudan… only the U.S. had these regulations.

So, why did the U.S. claim authority over the transactions and the bank? What gave Uncle Sam the right to fine a bank for something that had no connection to the United States? What made America the ultimate arbiter of ethics and business practices?

The contracts between the bank and Sudan used the United States dollar as the transactional currency. That’s right, the only connection between the U.S. and the trades at issue was that the price was listed in USD. The United States claims it has the authority to regulate any transaction completed or denominated in USD, and therefore has the right to fine BNP Paribas for entering in to a contract with a prohibited country.

Of course, the country of France has come out strongly against this attack on their financial sovereignty by the United States. They issued a number of regulations and press releases pushing to remove the United States dollar as the transactional currency in their banking and international trades.

Such a change, especially if adopted by the entire EU, could result in the U.S. dollar failing. Removing trillions in demand for dollars from the system will send our currency spiraling. Even if the results aren’t catastrophic, they certainly will mean a realignment of the U.S. dollar and a significant devaluation of your investments, retirement accounts, and other assets held in dollars.

* For more on this story, please check out www.premieroffshore.com or The Financial Times.

Before moving on to Russia, I would like to say that, you don’t need to believe in a catastrophic system failure to think that the dollar will fail or slip. It is possible that the system will continue on without our dollars, but will look very different.

If you are like me, and believe that a significant realignment is (at least) possible, then you should consider diversifying out of the United States and out of the U.S. dollar. This might mean moving your IRA offshore, holding currencies other than the dollar, buying real estate or other assets, and purchasing gold as a hedge against inflation or devaluation.

Ok, now on to Russia who is really pushing against the U.S. dollar (petrodollar). Here’s why Russia could threaten your retirement in 2015. If you follow world events, you know the path Russia is on. I don’t think it will surprise anyone that, with the dollar on the ropes, Russia will be happy to push it over and is leading the effort to replace it as the world’s reserve currency.

Let’s start by noting that the economic power of the United States is based on its being the reserve currency of the world. This status is largely due to its being the ONLY currency with which oil trades may be conducted in… which is why we call it the petrodollar.

* Many claim the primary reason for the Iraq war was that Iraq began denominating its oil transactions in euros. I don’t know about that, but it was just a few months later that the U.S. went in.

In to this landscape comes a reinvigorated Russia. They are demanding to denominate their natural gas contracts with Europe in a petroruble or petroeuro. Today, all gas contacts are priced in dollars.

If successful, Russia will effectively decouple all of its trade from the dollar… which again amounts to trillions in demand. For example, trade in hydrocarbons alone is $1 trillion. Removing Russia from the petrodollar, and thus the dollar, will reduce the demand for dollars and, once countries like France see weakness in America and its control over world transactions, you can be assured that they will follow.

And such a decoupling doesn’t need the EU to succeed. If Russia and its group of nations (BRICS) dumped the dollar, it would completely cripple our currency. These countries currently account for tens of trillions of dollars of demand and could start a major revaluation.

You can take steps to protect yourself from a major devaluation… or just a loss of value through realignment. I don’t know how this will all play out, but I do know that there is significant risk out there and that we need to protect against it.

For thousands of years, currencies have failed while gold has stood strong. Today is no different. I suggest that some of your holdings should be in physical gold. We can arrange this for you in Panama or Switzerland and physical gold may be owned by your retirement account or in a Panama Foundation.

We can help you move your retirement account or other savings offshore and invest in gold… or just hold a currency other than dollars. Feel free to phone or email me at info@premieroffshore.com for additional information. I have many posts on this topic at www.premieroffshore.com.

The Panama Foundation Scam

10/03/2014/in Articles, Asset Protection/by Christian Reeves

Just about every week someone calls asking about using a Panama Foundation as a charity. This is known in tax circles as the Panama Foundation scam and the internet is filled with it. Avoid the Panama Foundation scam at all costs. It will lead you down a very bad path with the IRS.

Here’s how the call goes: “Hey there, I’ve been reading on the internet and came across your site. What I’d like to do is…”

By this time I already know what’s coming, but let them proceed anyway. Just about any call which is prefaced by, “I was reading on the internet” is leading nowhere good. There are very few sites that provide both asset protection or formation services and U.S. tax compliance. If a company is based offshore, they can tell you whatever they want to make a sale. If they are in the U.S. and have U.S. licensed professionals, then they follow the law first and look to make the sale second.

Ok, enough pontificating. Back to the Panama Foundation scam.

“I want to form a Panama Foundation and operate it like a charity. I want to make donations to this charity and deduct them on my U.S. taxes…” or something like that.

Here’s the bottom line on the Panama Foundation scam: The Panama Foundation is not a charitable entity and can’t be turned in to a charity. All of the websites and marketing brochures talking about this are scammers… or, worse, they believe the cr*p they are selling and are tax protestors.

The U.S. tax code is very clear. Only donations to a U.S. licensed charity may be deducted on your personal income tax return. That is to say, only donations to a charitable organization licensed under 501 (c) (3) of the U.S. Tax Code are deductible. Your Panama Foundation won’t get a 501 (c) (3) license, so you can’t deduct transfers to it. If you were to spend the time, money and effort to get a license, there would be no reason to use a Panama structure… you would incorporate in the U.S.

Even if you wanted to donate to a church or legitimate charity in Panama or elsewhere, such a donation is only deductible if that entity is licensed in the U.S. Of course, you are free to give to anyone or any organization you like. You just don’t get to deduct that payment on tax returns.

For example, the Red Cross is incorporated in Switzerland, as are most of the major charities. These organizations then form corporations in the United States and apply for charitable status before taking donations.

Sometimes the Panama Foundation scam relies on the private interest foundation tax rules rather than the charity code section. A private foundation in the U.S. allows you to donate property (usually appreciated assets) to your personal foundation. You get to deduct the fair market value of the donation in the year given (which is why appreciated property is recommended) and then transfer a small percentage of that property to a licensed charity over a number of years. This allows you to maintain control over the property, manage it for the benefit of a charity, and give up only a portion over time.

So, the Panama Foundation scam often takes verbiage and rules from the private interest foundation sections and applies them to the Panama Foundation. Unfortunately, there is nothing legitimate to this analysis. The Panama Foundation is not a private interest foundation as defined in the U.S. code and this is just a scam to sell Panamanian entities to those looking for a tax loophole.

Just last week I came across someone who took the Panama Foundation scam to a new level. He would form the Foundation and file the charitable tax return in the United States for that entity. This was done with the intent of confusing the U.S. IRS computers into thinking it was a legitimate charity.

He would then sell this “licensed” foundation for many thousands of dollars to someone who fell for the scam and thought they were getting a charity or private interest foundation. Of course, the sham will be discovered some day and all the donations will be reversed. This will mean big time tax, interest and penalties will be assessed against the buyer… and criminal charges brought against the scammer… if he can be found on the day of reckoning.

Don’t fall for the Panama Foundation scam. The Panama Foundation is not a charitable organization as defined by any section of the U.S. tax code. This is one of the many reasons you should only form offshore structures with a firm that provides U.S. tax compliance.

Physical Gold is the Ultimate Investment

10/01/2014/in Articles, Asset Protection/by Christian Reeves

Physical gold has served as the universal currency for 5,000 years and will continue to do so long after We the People, and this nation of ours, have ceased to exist.

Physical gold is also the only reliable hedge against political instability, government debt, and inflation. It is a borderless currency whose value comes from supply and demand, not how ever much the government decides to print. It’s not based on a government promise or regulation, but is a physical precious metal.

Need proof? Physical gold has the highest liquidity value in the world. You can exchange it for cash in any major city in the world, and at just about any time of day. If you hold your gold outside of the reach of Uncle Sam, you can access it at any time, and exchange it for local currency, or goods and services, with minimal effort and at a guaranteed rate.

And gold thrives during inflationary times. Not if, but when, the United States and the U.S. dollar go through a revaluation, it will be physical gold that soars and where everyone is rushing to. Don’t be the sheep. Invest outside of the U.S. in physical gold now, while prices are low and access is assured.

* Note that I write about physical gold because I believe in its value and the need to diversify abroad. Premier doesn’t sell gold and we are not investment advisors. We can introduce you to firms in Panama and Switzerland that can assist you, but we earn no commissions or other income from these transactions. My advice here is independent and without financial motive.

More importantly, the price of physical gold is not dependent on investors or the markets. In fact, investors accounted for only 16% of the gold supply in 2013 (World Gold Council). The largest mover was consumer demand at 51%, then reserve banks at 17% and industry use at 12%.

If you’re like me, you start your day by watching the financial channels (I go with CNBC). The news is often hostile to gold and gold ownership as an investment class. They are too busy pushing viewers towards the U.S. stock market… it is at all time highs don’t you know! That means it’s time to buy!!

Well, regardless of this BS, and the industry news you get from the brokerage firms, the investment in physical gold (not paper gold), remains strong. I suggest that physical gold is one of the most important elements in your onshore or offshore portfolio.

The demand for physical gold has never been higher. TV viewers would be shocked to learn that investment in 2013 was up 28% from 2012… some people must know something the talking heads on TV don’t.

This represents about 44% of the total gold market of $170 billion and compares favorably to the paper gold market for exchange traded funds, which saw a loss of $40 billion. That’s to say, $40 billion moved out of paper gold and in to physical gold in 2013. There is now more money in physical gold than in ETFs by a factor of 8 to 1 (the last two paragraphs are according to the World Gold Council).

What you will find in the industry is that paper gold and hypothecation of gold is manipulating the price… pushing it down. If these are eliminated from the market, such as during a realignment of the dollar or demand in gold because of hyper inflation, the price of physical gold will skyrocket.

* This is because gold doesn’t correlate to any investment class. It went up in value during the 2008 recession.

You will also see that those who invest in physical gold take the long view. They recognize it as the ultimate hedge. Buyers see it as a superior asset allocation… not just seeking to buy low and sell high, as is attempted in the EFT market. Investors in physical gold buy to provide support for their other investments. The price they buy in at should be of little consequence. Yes, it’s low today, but if it were to double in the next few months, my advice would be the same: buy physical gold and hold it outside of the United States.

That’s right, you can buy physical gold offshore. It can be held in a vault or you can take possession. We work with a number of offshore providers and will be happy to make introductions.

You can even purchase physical gold in your IRA. You first form an offshore LLC in a country like Belize, or a Panama Foundation, and move your retirement account in to that structure. From there, you can write the checks and make any permitted investment you like… which means you can buy physical gold in Panama and hold it in a vault.

* You can buy gold in an onshore or offshore IRA LLC structure, though we only offer international formations.

Once you have physical gold in your IRA, you can take required distributions in gold, rather than cash… keeping the investment in gold without the need to convert to cash. If any tax is due (traditional IRA rather than a ROTH), you will need to make those payments with good ole American greenbacks.

In fact, about 50% to 60% of our clients now take distributions in physical gold rather than USD. This is becoming one of the most interesting uses of offshore IRA LLCs, and one of the highest demands, in the industry.

Physical gold will also allow you to maximize privacy and asset protection. Gold held in a vault outside of the U.S., and outside the reach of the U.S. courts, has little risk of being seized by an aggressive creditor. More importantly, you are not required to report physical gold held in your name.

While you have probably heard much of the new IRS laws that require just about anything you have offshore to be reported to the U.S. government, physical gold is exempt. You may hold gold in an offshore vault and are not required to report it to any agency.

From here, you can pass physical gold down to future generations, keep it outside of your U.S. estate, minimize estate taxes, and do as you like without interference from the IRS or creditors.

I hope you have found this post on why physical gold is the ultimate investment interesting. For more information on taking your retirement account offshore, or buying gold in Panama, please give us a call or send an email to info@premieroffshore.com. We will be happy to work with you to structure your affairs in a tax efficient and compliant manner.

I think you will find physical gold to be a unique and valuable addition to your international portfolio. I also believe the price is set to jump. Quantitative easing, and other factors, have been holding down the price of gold since 2011, but this is going to change. QE will be stopped this month and a number of forces are coming to bare on the U.S. dollar (take a read through my posts on the USD vs. Russia and France).

When the flooding of markets with cash, the artificial support received by the U.S. stock market, and other fakery ends, we’ll come back to physical gold. It will increase in price and we will all benefit from our offshore portfolios. Remember that physical gold is where the stability lies. It is the one and only hedge against a significant market correction or currency realignment.

Cauți online filme sexy pentru adulți?

10/01/2014/in Articles/by design

Dacă îți plac filmele pentru adulți, sunt șanse să te fi lăsat la un moment dat să vizionezi niște videoclipuri cu sex. Poate le-ați închiriat de la magazinul video sau le-ați achiziționat de pe internet. Dacă da, atunci cel mai probabil aveți o copie a filmului preferat stocată pe computer și/sau pe playerul DVD de acasă. Lucrul grozav este că puteți viziona o copie oricând doriți. Cu toate acestea, este important să vă dați seama că există unele riscuri asociate cu filmele sexuale.

Când vedeți pentru prima dată https://filmexxx18.com , câteva cuvinte de avertizare ar trebui probabil să clipească pe ecranul dvs.: conținutul creează extrem de dependență. Pentru cei dintre voi care nu l-ați văzut, probabil că nu veți rezista nici o oră înainte de a începe să vă gândiți cum îl puteți adăuga la colecția voastră. De aceea este esențial să găsești un brand care să ofere conținut original. Deși puteți găsi cele mai multe dintre cele mai populare filme pe site-urile web ale mărcii, nu vă veți bucura să vizionați ceva de genul Sex Video XXX.

Nu vă fie teamă să faceți niște cercetări de fundal asupra companiei de la care urmează să cumpărați. Ar trebui să cumpărați doar de la o marcă de încredere și respectabilă. Mulți oameni fac greșeala de a cumpăra de la o marcă necunoscută și adesea devin descurajați de achiziția lor pe linie. Amintiți-vă, cumpărarea de videoclipuri sexuale legitime nu înseamnă cheltuirea unei sume exorbitante de bani. Puteți cheltui cu ușurință câțiva dolari pe un film DVD de marcă și să rămâneți în continuare în bugetul dvs.

Deși există o serie de companii legitime care produc și vând filme pentru adulți, este posibil să doriți să stați departe de site-urile conduse de brokeri sau agenți de vânzări. Vrei să găsești un brand care să ofere conținut original și să nu încarce un braț și un picior. Din păcate, deseori întâlniți această problemă când faceți cumpărături pentru un site bun. Unele companii încearcă să vă vândă filme fără a vă oferi vreodată opțiunea de a le descărca pe computer.

Odată ce găsiți o companie de renume care oferă conținut original, verificați selecția acestora. Vrei să alegi un site care oferă toate tipurile diferite de filme pentru adulți. Deși nu este nimic în neregulă cu filmele clasice, este posibil să doriți să optați și pentru alte selecții. Dacă un site oferă doar filme mainstream, poate doriți să căutați în altă parte.

O modalitate bună de a afla ce cred alți clienți despre site este să accesați site-urile de revizuire și să vedeți ce au de spus. Deși nu ar trebui să considerați tot ce spune un site ca fiind Evanghelie, îl puteți folosi pentru a vă ajuta să determinați dacă compania are o reputație pozitivă. Dacă descoperiți că un procent mare dintre oamenii care au cumpărat de pe site nu sunt mulțumiți de achiziția lor, probabil că cel mai bine este să continuați să căutați.

Există multe motive pentru care oamenii pot alege să cumpere videoclipuri porno online. Fie că doar cauți ceva de urmărit acasă, la birou sau alături de partenerul tău, este important să alegi un site care să ofere conținut original. Deși selecția va fi mai mică decât dacă ați merge la un magazin video, veți obține ceea ce plătiți. Unele site-uri oferă închirieri gratuite de DVD-uri, dar acestea sunt de obicei filme de masă pe care majoritatea consumatorilor nu le-au văzut niciodată.

Pentru a vă asigura că obțineți exact ceea ce căutați și a evita să fiți înșelat, asigurați-vă că cumpărați de pe site-uri web legitime care oferă filme pentru adulți de calitate. Când vrei să vizionezi ceva provocator, de ce să nu alegi dintr-o selecție largă de filme erotice de calitate? Cu aceste informații, ar trebui să puteți găsi exact ceea ce căutați în intimitatea propriei case. Dacă doriți să aflați mai multe despre siguranța filmelor pentru adulți online, nu uitați să citiți blogul meu astăzi!

When to Hold and When to Fold

09/29/2014/in Articles, My Thoughts/by Christian Reeves

With the U.S. market at historic highs, how do you know when to hold and when to fold? Here’s the best investment advice I’ve seen:

“Buy at the point of maximum pessimism; sell at the point of maximum optimism.” Sir John Templeton (1912 to 2008), known as the great contrarian.

I have always taken this to mean that, if you buy the same securities and at the same time as everyone else, you will get the same results as everyone else… which is to say, you will be average.

With the U.S. markets at historic highs, and logic (and simple math) telling us that returns over the next decade will be lower than the prior, we should be looking to move money in more dynamic markets. Of course, most ignore what’s right in front of their face and are now dumping cash in the U.S. stock market after being on the sidelines for the last few years. This makes no sense, but most buy on emotion and momentum rather then with their brains.

The investing masses expect the most from the market when the prospects are the worst and the least when things are at their best (prices at or near the bottom). You can do better. Don’t be a sucker who’s enthusiastic when stocks are expensive. Be that guy or gal who knows value, diversifies out of a bad market, and move your assets and investments to safety.

Want proof of what I am going on about? When the market was at its height in 2000, inflows were $288 billion. When stocks were cheap in 2002, inflows were a mere $13 billion. Don’t follow the herd, make your own way.

I’ll leave you with a bit of history on John Templeton.

At the outbreak of WWII, he bought nearly every NYSE listed company trading at $1 or less… and made money on just about every single one. It was a simple plan: identify weakness in the market and take advantage.

If the market is at a high, do the inverse, get the heck out.

Mr. Templeton was one of the first U.S. investors to see the benefits of diversifying out of America. As a result, $10,000 in to his flagship international fund in 1954 was worth $2 million by the time he retired in 1992.

The Templeton growth fund continues this strategy and has averaged an 18.3% return over the last 5 years.

If you’re considering investing offshore, we can help. We can set up an offshore foundation or offshore company, move your IRA to an offshore LLC and introduce you to quality banks and investors around the world.

If you want to get some of your assets out of the U.S., start by planting that first flag offshore in the form of an offshore company, foundation, and/or bank account.

We will be happy to work with you and we are the only experts providing both international formations AND U.S. tax compliance. We will ensure you are structured as efficiently as possible and keep you in compliance with the U.S. tax code. Feel free to phone or send an email to info@premieroffshore.com with any questions and for a free confidential consultation.