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International Financial Entities Licenses in Puerto Rico

04/14/2017/0 Comments/in Articles, Banking Offshore, International Business, Offshore Bank License, Puerto Rico Tax Incentives/by Christian Reeves

An International Financial Entities licensed in Puerto Rico under Act 273 is one of the most powerful international banking and financial services structures available. As the rules continue to tighten around offshore transactions, offshore tax benefits are reduced under President Trump, and the US increases FATCA and other regulations, expect more financial services companies to move to an International Financial Entities license in Puerto Rico.

This International Financial Entities in Puerto Rico can offer all manner of international banking, brokerage, investment management, and financial services from Puerto Rico to clients outside of Puerto Rico. Below I will detail all of the services which may be provided by this structure.

In order to qualify as an IFE in Puerto Rico under Act 273, you must hire 4 employees on the island (I usually advise clients hire 5). Then you set up an office, submit a very detailed business plan to the banking regulator, and negotiate the terms of your license.

Once approved, you will be eligible for a 20 year tax holiday on all income earned by your International Financial Entity in Puerto Rico. You will pay a 4% tax rate on all corporate profits earned by the business.

That is to say, the corporate tax rate on Puerto Rico sourced income in your IFE will be 4%.

You will also get full property and municipal licenses tax exemptions and a 6% income tax rate on distributions to PR residents. Dividends to non-PR residents will be tax free. Likewise, dividends paid to residents of Puerto Rico who qualify under Act 22 are tax free to the IFE and to the receiving party.

An IFE in Puerto Rico must be capitalized with a minimum of $550,000. Of this, $300,000 is placed on deposit with a local bank as a surety. The balance of $250,000 is your minimum corporate capital. Total authorized shares of your International Financial Entities in Puerto Rico must be $5 million (but only $250,000 of this is paid-in).

The largest firms structured under Act 273 as a International Financial Entities in Puerto Rico are international banks. For an article on this topic, see: Lowest Cost Offshore Bank License is Puerto Rico

The IFE license not limited to international banks. Family offices, insurance companies, investment advisors, hedge fund operators, currency traders, and others all operate under Act 273 as an International Financial Entities in Puerto Rico. For this reason, Act 273 is the most powerful financial services license available today.

Here’s a list of the services an Act 273 International Financial Entity licensed in Puerto Rico can offer:

Accept deposits, including demand deposits and interbank deposits (or otherwise borrow from banks outside of PR and other IFEs)

Place deposits with banks outside of PR and other IFEs.

Make, procure, place, guarantee, syndicate, or service loans.

Issue, confirm, give notice, negotiate or refinance letters of credit provided both the client and the beneficiary requesting the letter of credit are not residents of Puerto Rico.

Discount, rediscount, deal or otherwise trade in money orders, bills of exchange, and similar instruments, provided that neither side of the transaction is a resident of Puerto Rico.

Engage in any banking transaction permitted by Act 273 in the currency of any country, or in gold or silver, and participate in foreign currency trades.

Underwrite, distribute, and otherwise trade in securities, notes, debt instruments, drafts and bills of exchange issued by a firm outside of Puerto Rico and purchased by a client of the IFE who is not a PR resident.

Engage in any activity of a financial nature outside of Puerto Rico which would be permissible for a bank licensed in the United States.

If the International Financial Entity licensed in Puerto Rico gets an additional license, it may act as a fiduciary, executor, administrator, registrar of stocks and bonds, property custodian, assignee, trustee, attorney-in-fact, agent, or in any other fiduciary capacity.

Acquire and lease personal property.

Buy and sell securities outside of Puerto Rico.

Provide investment advice to persons outside of Puerto Rico.

Act as a clearinghouse in relation to financial contracts or instruments of persons who are not residents of Puerto Rico.

Organize, manage, and provide management services to international financial entities such as investment companies and mutual funds. This is the section of the law used by hedge funds to manage master / feeder structures set up in Cayman with feeders in the US and Cayman.

Dedicate itself to provide the following Services:

Asset management,
Management of activities related to the investment of private capital,
Management of hedge funds and high-risk funds,
Management of pools of capital,
Administration of trusts utilized for converting different types of assets into securities (such as REITs),
Management of Escrowed fund for persons who are not residents of Puerto Rico.

Engage in any other activities approved by the Commissioner.

With the Commissioner’s prior approval, establish branches outside of Puerto Rico. This includes the United States and foreign countries.

Section 15 above is commonly used by family offices. The clause “dedicated to” means you may only engage in these activities and will thereby be subject to reduced compliance.

For more on operating an investment fund from Puerto Rico, see: How to operate an investment fund tax free from Puerto Rico

Note that an International Financial Entities in Puerto Rico is prohibited from doing business with persons or businesses in Puerto Rico. Therefore, all of the above are limited to persons outside of Puerto Rico. An Act 273 IFE can do business with Puerto Rico’s Development Bank and its Economic Development Bank.

I hope you’ve found this article on the International Financial Entities of Puerto Rico licensed under Act 273 to be helpful. For more information on setting up an IFE in Puerto Rico, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

You might also find my articles Puerto Rico’s Act 20 to be helpful, as well as a comparison between offshore tax planning and Act 20.

For more on Puerto Rico’s Act 273 vs a traditional offshore banking license, see: Top 5 Offshore Bank License Jurisdictions for 2017. For my post on the offshore FinTech, see: Offshore FinTech Bank License.

For more of my articles on the offshore bank licensing and operations, see:

Top 5 Offshore Bank Licenses for 2017
Lowest Cost Offshore Bank License is Puerto Rico
Offshore Bank Advertising Rules (a review of Reg. S)
Offshore Banking Licenses (on lowtax.net)
Capital Reserve Requirements (on lowtax.net)
Correspondent Accounts for Offshore Banks (on escapeartist.com)
Best Offshore Banking Jurisdictions

Here’s how to take your IRA offshore in 6 steps

04/13/2017/0 Comments/in Articles, Banking Offshore, Offshore Bank Accounts, Offshore IRA/by Christian Reeves

In this article I’ll list the steps necessary to take your US retirement account offshore. Whether you’re looking for asset protection, privacy, or investment diversification, here’s how to take your IRA offshore in 6 steps.

Step 1: Determine if your IRA is eligible to go offshore

Before you can move your cash, you must determine which of your retirement accounts are eligible to go offshore. Only accounts that are vested can be moved out of the United States.

A vested account is one that’s under your control. In most cases, an account vests when you leave your employer and take the IRA with you. So, a vested account is typically a retirement account from a previous employer.

It’s possible that a portion of your account with a current employer has vested. If you’ve been working at the same company for 10+ years, you might be able to move a portion of the account offshore. You should speak with HR to see if any of your IRA has vested.

You can also take certain defined benefit plans offshore. If the plan can be converted into an IRA, and in doing so becomes vested, you can move that plan offshore. Eligibility will depend on your defined benefit plan documents. You’ll need to check with your administrator.

Step 2: Move your IRA to a custodian that allows for offshore transfers

Once you know which accounts are eligible to go offshore, you’ll most likely need to move them to a different custodian. Most US firms make money selling you investments. They earn a commission managing your IRA account and don’t want you to move it out from under their control.

There are a few custodians that allow for offshore IRA LLCs. They charge a fixed annual fee of $400 to $600 rather than making money selling investments.

Note that this move must be done as a transfer and not a rollover. If you have multiple accounts, recent changes to the IRS rules make the rollover a problem. However, you can make an unlimited number of transfer of your retirement account (moving it from one custodian to another). Remember that a transfer is not a rollover.

We’ll be happy to introduce you to a custodian that supports offshore accounts.

Step 3: Setup an offshore IRA LLC owned by the IRA

Once you have an account number at your new custodian you can form an offshore IRA LLC. The owner of this account will be your IRA… not you personally and not the custodian.

For example, if your custodian is Midland IRA, the owner of the IRA LLC might be as follows: “Midland IRA, Inc. FBO John Smith #55-5555555” with the number representing your account at Midland. FBO = for the benefit of.

The offshore LLC must be formed in a zero tax jurisdiction, one that allows for single member limited liability companies. The single member of your IRA LLC is your IRA account.

We also focus on countries with strong asset protection laws. For this reason, I like the Cook Islands, Nevis and Belize. The final selection will depend on your banking needs and other factors.

If you’re very concerned about asset protection, you might read the following on using the Cook Islands for maximum protection: Protect Your IRA by Converting it into an Offshore Trust

Step 4: Draft a custom operating agreement establishing you as the manager of the offshore IRA LLC

Now we need to establish you (the beneficial owner of the IRA account) as the manager of the offshore IRA LLC. This is done by drafting a custom operating agreement which lists in great detail your rights and responsibilities.

The bottom line is that you must manage the money in the IRA LLC just as a professional investment advisor would. You should make decisions based on what will maximize returns to the IRA… and those decisions should not benefit you personally.

For example, you can’t borrow from the IRA LLC, can’t use it to buy a home to live in it (even if you pay fair market rent), and can’t use the funds to pay personal expenses

Likewise, you can’t guarantee any of the investments of the IRA. This means you can’t guarantee a loan made to your IRA LLC. All loans taken out by the LLC must be non-recourse secured only by IRA money without a personal guarantee from the beneficial owner.

Step 5: Open an offshore bank account for your IRA LLC

Your IRA is sitting with a custodian that allows for offshore investments, your IRA LLC is incorporated in a secure offshore jurisdiction, and you have a detailed operating agreement giving you control of that LLC. Now it’s time to open an offshore bank account.

The bank selected will depend on the size of the account. If you plan to invest in real estate, and will thus maintain a minimum balance in your offshore account, I recommend Caye Bank in Belize. This bank has high fees but low minimum balances. For more, see: http://www.cayebank.bz/

For accounts of $20,000 and up I recommend Capital Security bank in the Cook Islands (https://www.capitalsecuritybank.com).

Because CSB does not have branches in the U.S., they have a good handle on FATCA, focus on U.S. clients, and offer a wide range of investment options, I often suggest clients plant their first flag offshore with these banks and then open brokerage accounts or diversify from there.
Another benefit of Cook Islands is that you do not need to travel there to open the account. All of the recommendations below require you visit the bank in person.
Finally, CSB is unique in that they don’t lend against client funds. See CSB Low Risk Profile.

In Panama, I recommend Banistmo (https://www.banistmo.com/en), Uni Bank (https://www.unibank.com.pa/en/index.html), and Multibank (https://www.multibank.com.pa/en/default.html). I also suggest Banco General (which is our bank), Santander, Banesco, if you have a local office.

For private vault storage, I recommend Best Safety Boxes in Panama. See http://bestsafetyboxes.com/

For managed accounts over $2m, I recommend Andbanc in Androa or their branch in Panama (http://www.andbanc.com/).

If you prefer a financial advisor and bank in Europe, I recommend Swiss Partners in Geneva. Their website is http://swisspartners-advisors.com. The minimum account size is about $2.5 million.

Step 6: Transfer your IRA cash from the custodian to your offshore bank account

Once you’re account is opened, the custodian will send a wire from their bank to yours. This will move some or all of your cash out of the United States and into an international account that’s under your control.

You can chose to move all or a portion of your IRA offshore. You can leave some cash with the custodian if you want to make US investments or are new to international banking and want take it slow.

As the manager of the LLC, and the only signatory to the offshore bank account, all investment decisions rest with you. You’re the only person who can send a wire or write a check… which is why we call this an Offshore Checkbook IRA LLC.

This also means that it’s your responsibility to follow the various rules of IRA management. Here are a few articles you might find useful:

If you have a Defined Benefit Plan that you might want to convert to an IRA, see: Maximum Asset Protection for a Defined Benefit Plan

You will also find that there are many tax benefits for sophisticated IRA investors which are only available offshore. For example, the ability to use a UBIT blocker to eliminate US tax in your IRA from leveraged investments. Also the ability to own a portion of an active business, which is operated outside of the United States, whereby the income from the business flows into your IRA tax free.

Of course the main reasons clients take their retirement accounts offshore is to diversify out of the United States, invest in higher returning opportunities, and protect their assets from civil creditors and uncertain times. These are the core principals of the offshore IRA model and goals we can assist you to achieve.

I hope this article on how to take your IRA offshore in 6 steps has been helpful. For more information, please contact us at info@premieroffshore.com or call (619) 483-1708. We’ll be happy to assist to structure your affairs abroad.

Offshore Bank Accounts, Foreign Residency, and Asset Protection from South Africa

04/11/2017/0 Comments/in Articles, Asset Protection, Asset Protection Trust, Banking Offshore, offshore asset protection, Offshore Bank Accounts, Offshore Banking, Offshore Company, Offshore Trust/by Christian Reeves

High net worth South Africans are under attack from all sides… again. This time it may turn into a full blown civil war. At the very least, your assets and safety are at risk. Here’s how to move you and your cash out of South Africa and to negotiate a second residency.

A passport from South Africa is still a great business and banking tool. You don’t have the tax reporting problems we Americans do and you’re not on any of the restricted or prohibited country lists. You can open accounts at most offshore banks relatively easily.

For a list of restricted and prohibited countries, see: Opening an offshore bank account from a restricted country

This means you can qualify for just about every second passport and foreign residency program, as well as open accounts around the world. We have been working with citizens from South Africa for years and will be happy to assist you.

Before I get into what you’ll need to do to open an offshore account as a citizen of South Africa, let me point out that your status might change.

The demand for offshore bank accounts and second residencies has spiked in the last couple of weeks. Where we used to get 1 or 2 inquiries a month from South Africa, we’re now getting 10 or 12 per day.

The problem with this is that countries and banks will begin to put a cap on transactions. They don’t want to get over exposed to any one country. And, whenever world events creates a rush to the exit, some will block movement for political reasons.

If you want to be sure to be approved for residency or an offshore bank account from South Africa, you need to be at the front of the line. There are sure to be some who are unable to get through the que… some will certainly be left behind.

With that said, here’s how to open an offshore bank account, get residency in a foreign country, and build an asset protection structure for citizens of South Africa.

Let me start with an offshore bank account. Because you have a solid passport (for banking anyway), you can open an international bank account in a number of jurisdictions. In most cases, the country will depend on the size of the account.

For example, to open in Switzerland or Andorra, you’ll need $2.5 million or more. These are managed investment accounts where a Swiss investment advisor manages the account per your instructions.

For smaller accounts, you can open in Cook Islands with a deposit of $20,000. In Belize, the minimum is $5,000. However, the fee structure in Belize makes it difficult to open an account with less than $10,000.

These accounts can be in your name or in the name of an offshore structure. For basic asset protection I recommend a Nevis LLC for citizens of South Africa because this is the easiest jurisdiction to deal with from your country.

For larger accounts, and to cover both estate planning and asset protection, I recommend a Cook Island trust. This structure provides maximum protection and the Cook Islands has a lot of experience in dealing with South African clients.

Now on to second residencies. By far the best option for citizens of South Africa is Panama’s friendly nations reforestation program. Because of the passport you hold, you can get residency in Panama with an investment of only $20,000. Those from nations that don’t have an agreement with Panama pay about $110,000 for the same residency permit.

Residency allows you to live, operate a business, and bank in Panama. As a resident, you can buy and rent property and will have access to all the banks in the country. Panama is a world class economic hub and this residency is very valuable for citizens of South Africa.

After 5 years of residency in Panama you can apply for a citizenship and a second passport. Your South African passport gives you visa free travel to 98 countries and doesn’t include the Schengen Region of the European Union.

Panama gives you visa free to 128, including the EU and makes it easy to get a 10 year visa to the United States. Panama is a major upgrade to your South African passport.

If you can’t wait the 5 years for a Panama passport, take a look at Nicaragua. This program requires an investment of $35,000 and you can apply for citizenship after two years. For more, see: The Best Second Residency Program in 2017.

Finally, if you can’t even wait the two years for Nicaragua, and you have about $135,000 to spend, you can buy a passport from St. Lucia. This country is very experienced in handling cases from South Africa and you should have your passport in hand about 90 days.

For more on St. Lucia, see: Changes to the St. Lucia Second Passport Program in 2017

I hope you’ve found this article on how to open an offshore bank account, get residency in a foreign country, and build an asset protection structure for citizens of South Africa to be helpful. For more information, please contact us at info@premieroffshore.com or call (619) 483-1708.

International Tax Planning for Payday Lenders

03/29/2017/0 Comments/in Articles, Banking Offshore, International Business, Offshore Bank License, Offshore Company Taxation, Puerto Rico Tax Incentives/by Christian Reeves

The US tax costs for Payday lenders in the United States is harsh. The interest component of your income is taxed where the borrower is located. This means you get to file returns is every state and deal with a web of complex tax laws.

Then, the portion of your income which is not considered interest, is taxable where you and your business is located. This must be in the United States, so you’re paying 35% corporate tax plus up to 12% in state tax on net profits.

What if I tell you that you can operate in the United States and pay only 4% on the majority of your net profits? That you can get a banking license and operate the business through this entity while still maintaining your 4% corporate tax rate?

That’s exactly what I’m saying. You can setup a fully licensed credit union in US territory Puerto Rico and make loans throughout the United States. Then you structure an Act 20 company in Puerto Rico to service the loans, which is taxed at 4%. The credit union breaks-even or makes a small profit for its members, but the bulk of the income moves to the Act 20 company.

This structure will allow a large payday lender to exchange their 40% US tax rate on corporate profits for a 4% tax rate in Puerto Rico.

Puerto Rico is the ONLY jurisdiction such a tax deal can be had. If you set up offshore, US Federal tax laws apply to your US owned business. Plus, it’s nearly impossible to make loans into the United States from abroad.

Puerto Rico is unique. It’s a US territory, so US Federal laws apply. This means that forming a payday loan company in Puerto Rico is equivalent to forming the company in any US state… with one major exception… taxes.

Section 933 of the US tax code exempts any income earned in Puerto Rico from US taxes. A business operating from Puerto Rico pays only Puerto Rican taxes, not US Federal income taxes.

For this reason, Puerto Rico can offer payday lenders a deal. Setup your company here, negotiate an Act 20 business license, hire at least 5 employees on the island, and your Puerto Rico sourced income will be taxed at 4%.

To clarify: You will still pay US income tax on the interest component. It’s the business component of your corporate profits that are taxable in Puerto Rico at 4%. To qualify for this 4% rate, the work to generate those corporate profits must be done from Puerto Rico.

Here’s how you might allocate income between interest income / US source income and corporate income / Puerto Rico sourced income taxable at 4%:

Some tax experts take the position that the interest component of payday loans should be about the same as that of a junk bond. That’s a rate of around 6% to 10% per year.

However, payday loans often have an effective cost to the borrower of 200% to 600% per year. The average cost of a payday loan that rolls over a few times is 400%.

Thus it can be argued that US source income taxable where the borrower is located is 10% while the balance, 390% is Puerto Rico sourced income.

In very rough numbers, a payday lender might be able to move 98% of their income out of the Federal tax system and into the more favorable Puerto Rico tax regime. This will reduce your tax rate from 40% to 4% on any Puerto Rico sourced income.

Now for the kicker: if you’re willing to move to Puerto Rico, and qualify under Act 22, you can withdraw the profits of your Act 20 company tax free.

Also, any capital gains earned on personal investments you make after becoming a resident of Puerto Rico are taxed at zero. That’s right, your personal income tax rate on capital gains is 0% as a resident of Puerto Rico.

To be considered a resident of Puerto Rico, you must spend at least 183 days a year on the island and buy a home there. Basically, you must give up your home base in the United States and move your life to Puerto Rico.

I’ll conclude with a quick note on Act 273 banks.

Those who follow my blog know that I’m a big proponent of Puerto Rico’s offshore bank license, referred to as an Act 273 bank license. This is an excellent option for those looking to setup an offshore bank that doesn’t accept US clients or doesn’t make loans.

The reason Act 273 doesn’t fit the payday loan model is because such a bank would require FDIC insurance and all manner of Federal regulations would apply. Any US bank, even a 273 bank in Puerto Rico, that takes deposits, makes loans, and accepts US clients, must apply for FDIC. This is impossible for most payday lending banks.

A credit union in Puerto Rico is not obligated to apply for FDIC. This is why I recommend the credit union combined with an Act 20 management company for a payday lender looking to redomicile their business to a low tax jurisdiction.

I hope you’ve found this post on international tax planning for payday lenders to be helpful. For more information, please contact us at info@premieroffshore.com or call us at (619) 483-17083.

You might also find this article interesting: How to operate an investment fund tax free from Puerto Rico

The above is a very general summation of complex tax issue and the related sourcing rules. Each payday loan company will have a different taxable rate. I strongly recommend you research this matter carefully and secure an opinion letter from a top firm before making any decisions.

Low Cost Offshore Bitcoin License

03/27/2017/0 Comments/in Articles, Banking Offshore, International Business, Offshore Company/by Christian Reeves

The best low cost offshore Bitcoin license is from Panama. Specifically, the Panama Financial Services License is the best offshore Bitcoin license available. Here’s why Panama is the best.

When selecting an offshore Bitcoin license, you want to be in a country with a solid banking system which doesn’t regulate Bitcoin companies. You don’t want to be classified as a brokerage or a bank because of the high costs of compliance. Very few, if any, Bitcoin startups can withstand that level of overhead and scrutiny.

There are many countries that don’t regulate Bitcoin. For example, Costa Rica, Belize, Colombia, St. Kitts and Nevis, etc. Only the United States and Mexico (since 2015) in the region have called Bitcoin a “currency” and required licensing.

So, why does Panama offer the best low cost offshore Bitcoin license? Because you can operate a licensed but unregulated offshore Bitcoin brokerage in Panama. You can get a license from the government and not need to provide audited financials, compliance, or any of the other headaches associated with being regulated.

Bitcoin operators will find the right to say they are licensed as a plus in marketing campaigns. For example, the Panama Financial Services License allows you to make the following claim on your website: Bitcoin Capital Corp is a financial institution licensed by Ministerio de Comercio e Industrias – Republic of Panamá (MICI) in Panama as a Financial Institution and a member of the SWIFT/BIC Network Code: BTCAPAP1

Bitcoin Capital Corp is a fictional company for illustrative purposes only.

It’s important to note that you can’t say you’re regulated by MICI. You may only claim to be licensed by this agency.

So, you can’t use the word regulated in your marketing campaign. In addition, you can’t use the terms bank, brokerage, securities, savings and loan, trust (as in trust company, fiduciary or trustee), cash transfer, or money transfer. Each of these requires a different license… and are fully regulated.

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

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

If you have a bank license from another jurisdiction, a Panama Financial Services Company can provide services to that bank. It may not offer services to the clients of the bank, only to the bank.

Above I said that an offshore bitcoin broker in Panama is not regulated, which is true. There is no audit requirement or government oversight. Of course, your banking and brokerage partners will impose rules. Also, the laws of Panama apply to you, just as they do to all businesses operating in the country.

This means your firm will need to follow the Anti Money Laundering, Know Your Client and Suspicious Activity laws. Also, your banking partner will demand you keep records to maintain a correspondent account.

It also means that FinTech firms without correspondent bank accounts will have reduced compliance requirements compared to traditional brokerages. For example, a Bitcoin operator sending transfers across the network, outside of the banking system, will have lower compliance costs. Those who deploy an open, neutral protocol (Interledger Protocol or ILP) to send payments across different ledgers and networks will see added efficiency operating through a licensed but unregulated entity.

Another benefit of Panama is that an offshore Bitcoin licensed Financial Services Company has no minimum capital requirements. You can form your Bitcoin brokerage with any amount of capital you choose.

Of course, your transnational partners and correspondent banks will have account minimums. It would be a challenge for a company incorporated with $5,000 in capital to get the accounts and relationships it needs. The point here is that a Panama Financial Services Company operating as an offshore Bitcoin firm is free to set its capital as it feels appropriate without interference from a government regulator.

The average cost for a licensed offshore Bitcoin firm in Panama is $35,500. This includes opening a business account, assisting you to find office space or a virtual office, and 12 months of tax and business consulting to ensure the structure operates as intended. Annual fees are about $1,500 per year thereafter.

The time to form an offshore Bitcoin company is usually 7 days to setup the corporation and 15 days to receive the license after all of the documents are received by the governments and all of their questions are answered.

I hope you’ve found this article on the best offshore Bitcoin license to be helpful. For more information, please contact me at info@premieroffshore.com or call us at (619) 483-1708.

Foreign trusts can give you access to top offshore bank accounts

01/27/2017/0 Comments/in Articles, Asset Protection, Asset Protection Trust, Banking Offshore, offshore asset protection, Offshore Bank Accounts, Offshore Banking, Offshore Trust/by Christian Reeves

Most top offshore banks are closed to Americans. In fact, 95% of the best foreign banks have shut their doors to us because of the costly reporting now required by the IRS. The only way you can get into the best banks in 2017 is through the back door.

Here’s how to gain access to top tier offshore banks, currency traders, and brokerage firms when you hold a US passport…

If you, a US citizen living in America, were to walk into a top bank in Switzerland, Germany, or Andorra, and ask open an account, one of two things would happen. If you’re in Switzerland, they’ll politely apologize and say no (that’s just their nature). Anywhere else and they might laugh at you and escort you to the door.

We Americans have a big scarlet letter A across our chests. The US IRS has fined top banks billions of dollars and turned bank tellers into unpaid agents required to report all transaction involving US persons.

In addition, the Foreign Account Tax Compliance Act now requires banks to spend hundreds of millions on computer systems to generate annual reports that go to the IRS. Foreign banks have stricter compliance and US reporting requirements than US banks do!

The bottom line is that no top tier bank wants to do business with Americans… at least, not directly.

The back door into these top offshore banks is a foreign trust. You, the US person, are the settlor and owner of the assets in the structure. You then appoint a foreign trustee, and possibly a “protector.” These people are responsible for protecting the trust assets for the benefit of your heirs. They’re also responsible for making investment altercations and selecting a custodian.

Next, the trustee or protector hires an investment advisor, usually one based in Switzerland. This person has master accounts at the largest investment banks and can get you in without all the scrutiny.

This multilevel approach gets you into the bank you want and increases the asset protection provided by your trust.

For asset protection purposes, you’re two or three levels removed from the management of your foreign trust. This will be a big plus and provide the strongest level of protection should a creditor file a claim against your structure.

It’s also possible to create this structure for a large IRAs or retirement plans. When you form an offshore IRA LLC, that company is owned by your account, not you personally. You can elect to become the manager of that LLC or you can appoint a foreign investment manager. For maximum protection and access to top tier banks, go with the independent investment adviser.

When you appoint a foreign investment manager, and draft an operating agreement with much of the asset protection verbiage found in offshore trust agreements, you can add a significant layer of security to your retirement account. Also, the foreign manager can give you access to top offshore banks, just as he does for a foreign trust.

Most of these managed accounts, be they for an IRA or foreign trust, will require an opening deposit of $500,000 to $2.5 million. There are only a few well connected advisors that will open an account at a top tier bank with a deposit of $500,000. There are several that can work with $2.5 million or more.

Of course, you can take any sized IRA offshore. There are plenty of smaller international banks that will be happy to open an account for your IRA LLC. If less than $500,000, I suggest you be listed as the manager to eliminate management fees.

One last comment on these managed accounts for offshore trusts… it’s possible to create a tax free or tax deferred account for a foreign trust. Basically, you can open a US compliant tax free account, similar to a giant ROTH IRA, without any of the contribution limits or distribution requirements. Here’s how:

Your foreign trust can use its capital to buy a private placement life insurance policy on the settlor (you). Any gains inside this policy, which is owned by the trust, are tax deferred until you liquidate the policy. If you never close the policy, then this money passes to your heirs tax free.

Under current law, your heirs will receive a step-up in basis when property and assets of the life policy are distributed to them. This means that they’ll pay no tax on the gains earned on those assets while in the trust.

This same structure can be used to create generational wealth, where the assets are held by the trust for generations to come and heirs receive monthly or quarterly distributions. For more on this, see: Offshore Dynasty Trusts Explained

I hope you’ve found this article on how foreign trusts can give you access to top offshore bank accounts to be helpful. For more on how to setup a foreign trust, or to move your retirement account or defined benefit plan offshore, please contact us at info@premieroffshore.com or call us at (619) 483-1708.

10 Reasons You Want an Offshore Bank Account in 2017

01/05/2017/0 Comments/in Articles, Banking Offshore, Offshore Bank Accounts, Offshore Banking/by Christian Reeves

An offshore bank account can open up new investment, privacy, and protection options. An international account gives you access to a new world of possibilities and higher returning investments not available in the United States. Here are my top 10 reasons you want an offshore bank account in 2017.

Each of our clients has their own reasons for putting some of their wealth in an offshore bank account. You may want to plant that first flag offshore, diversify out of the United States, or protect your cash from civil creditors. You might want a secure financial haven from political or economic uncertainty or the advanced offshore tax and financial planning options only available offshore.

Whatever your reasons, we can assist you to open an offshore bank account that’s designed to help you manage, protect and grow your wealth. We work with a number of banks around the world and can introduce you to the one that best fits your needs.

We also offer a wide range of company formation and international asset protection structures. We can place your offshore bank account behind the impenetrable walls of an asset protection trust or set up a basic offshore LLC or corporation. If you’re operating a business, we also offer business bank accounts and offshore business planning.

No matter your situation, we have a custom offshore banking solution.

So, without any more adue, here are the 10 reasons you want an offshore bank account in 2017.

1. Plant your first flag offshore

The first step in building a life abroad is to open an offshore bank account. It’s the first of many international flags you should plant to prepare your exit plan.

And an offshore bank account is the lowest cost flag. If you search out a bank and open the account on your own, you will pay nothing. If you hire a banking expert to open the account on your behalf, it might cost a few hundred dollars.

Major flags, like an offshore company cost thousands of dollars. The biggest flag, a second passport, might cost hundreds of thousands. So, start with a personal offshore bank account, get your bearings, and then devise a long term international diversification strategy.

An offshore bank account is the first step in moving you and/or your assets abroad. Spend the time to do it right. Find professionals you feel comfortable with and a bank that fits your investment and transactional needs.

2. Asset protection

The most basic form of asset protection is moving some cash into an offshore bank account and away from future creditors.

And an offshore bank account might prevent litigation. Most civil cases are taken by lawyers on contingency… they get paid a percentage of they they take from you.

Before beginning a case, the lawyer will search for your assets. If you’re a soft target, he’ll attack. If he finds no assets, or that collecting on a judgment will be a long and costly battle, he might not bring the case… he’ll move on to an easier payday.

Again, an offshore account is the most basic form of asset protection. You might decide to increase that with an LLC, corporation, foundation, or an offshore asset protection trust.

3. Take some of your capital off the table and out of play

U.S. stocks are riding high and investors are excited about the prospects of a Donald Trump presidency. We expect taxes to decrease, business to expand, and America to “win again.”

Well, what if things don’t go as planned? What if there are bumps along the way? What if there are growing pains on the road to making America great again? Are you diversified internationally as a hedge against risk at home?

According to Oxford Economics, President Donald Trump will either be a disaster or the best thing ever for the global economy. No matter your political beliefs, you must perceive some level of risk in what will happen when the establishment begins to fight back.

I can’t tell you how to assess this risk, I can only identify the fact that it exists. You might assign a probability of 5%, 15%, 30%, 50%, etc.

Use this risk ratio and place a corresponding amount of your capital into an offshore bank account. Take some of your cash off the table. Leave what you like on red in the United States and fund a nest egg offshore with the rest in case things don’t go exactly as planned.

4. Security from the IRS

If you owe money to the IRS, they can levy your U.S. bank account. The government can also seize your offshore bank account if your bank has a branch in the United States.

An IRS levy doesn’t require any type of court action or special notice. Any IRS agent can empty your account with a few keystrokes if they know where it is… and it’s tied into the U.S. system.

Thus, an offshore plan should focus on offshore banks without U.S. ties.

This is especially true for U.S. expats. If you forget to file your tax returns for a few years, the IRS is likely to prepare them for you based on whatever information is in their computers. The penalties for expats who get out of compliance are very severe… many times larger than those for U.S. residents who make a mistake.

Of course, you must file your U.S. forms and report your accounts. But, if you chose the correct offshore bank, the IRS can’t seize your account. They will know where it is but, so long as you are in compliance, there is nothing they can do to take it away from you.

Warning: the IRS can now revoke your U.S. passport. If you want to open an offshore bank account, you need to act before the government takes away your passport.

5. Get your IRA offshore

An offshore bank account can be used to hold business income, personal savings, and IRA / retirement money. When structured properly, you can move your IRA offshore and maintain the tax benefits of that retirement account.

To do this, you’ll need an offshore IRA LLC and an offshore bank account. The IRA owns the LLC and you are the manager of that LLC and of the bank account.

You’ll have checkbook control over your retirement account and can make whatever investment you like.

6. Currency diversification

As I said, the most basic form of asset protection is an offshore bank account. The most basic hedge against country risk is to hold your cash in multiple currencies.

Many international banks allow you to open accounts in multiple currencies. For example, Capital Security Bank in the Cook Islands gives you 11 currencies with a basic account and 15 more if you invest in a CD.

If you’re looking to diversify your cash or IRA out of the U.S. dollar, the first step is an offshore bank account.

7. Access to higher returning investments

If you’re tired of the miserable returns in your home country, go offshore. An international bank or brokerage account will give you access to significantly higher returning investments than those available in the United States.

Whether you’re trading the foreign markets, buying real estate, or looking for in non-traditional investments, offshore is where the profits are.

For example, the top real estate markets in 2016 were all outside the United States. My favorites are Colombia and Panama, but Singapore, UAE, and Philippines were also hot.

As for non-traditional long horizon investments, our clients have focused on hardwoods.

Since 2014, timber has been where it’s at for the uber rich. According to CNN Money, the 1% are putting hundreds of millions into trees and reforestation products. They’re moving away from the markets in favor of hardwoods.

Some of the foreign tree farms are returning 15% or more. I like Panama and Nicaragua teak, but there are many hardwood programs around the world.

Three reasons I like Panama’s reforestation program are:

If you’re from a top 50 country, you can get residency for free with an investment of $20,000 in teak.
You can use your IRA to buy teak in Panama.
You can buy into an existing farm with 6 or 7 years to go before harvest. The usual teak holding period is 25 years.

8. Build a nest egg offshore for your heirs

Combine an offshore bank account with a foreign trust and you have an excellent asset protection and estate planning tool. These two work together allow you to build a nest egg offshore, away from your creditors, for the benefit of your heirs.

A trust is intended for those who want to put some money offshore to be invested by a foreign wealth manager. You should be giving up control and the capital should be held for the benefit of your heirs.

This nest egg can be passed on tax free if you use your gift tax credits to move it outside of your U.S. estate. It can grow tax free if you add a life insurance policy to the trust. And, unlike a U.S. trust, an offshore trust can last for generations if structured as a dynasty trust.

For these reasons, an offshore trust is by far the most powerful international asset protection tool. A trust is cost effective for those who will hold $2 million or more offshore.

If you don’t want to give up control, you can get many of these same benefits with a Panama Foundation and bank account in Panama.

9. Receive payments from customers who don’t want to wire to the United States

If you’re working as a consultant, or running a business with foreign clients, you’ll find that many don’t want to send payments to the United States. Their banks ask too many questions and they don’t want the headache of dealing with FATCA and other impediments to business our government has created.

The solution is simple: open an offshore bank account in your name or the name of your company. Move the reporting requirements to your side of the ledger, making it easier for your clients to do business with you, with an offshore bank account.

An offshore bank account will improve your sales and help you close deals with those hesitant to interact with the United States.

10. Maximize your freedom of movement and privacy

Pay your international expenses with a debit card linked to your offshore bank account. Use this card for all foreign purchases to maximize your privacy while abroad. Set up a travel account with a foreign airline, such as Copa.com, to keep this data off of U.S. servers.

So long as your offshore account(s) never hold more than $10,000, you will not be required to file a U.S. Foreign Bank Account Report. Stay below this threshold and you need not inform the U.S. government of your offshore bank account.

Note that this $10,000 limit is for all offshore bank accounts combined. If you have 3 foreign accounts, each with $5,000, your total is $15,000 and you must file an FBAR. Also, it’s your highest balance during the year. Even if you have $10,000 in a foriegn account for only one day, you must file an FBAR for that year.

The work-around is to hold a “cash equivalent” offshore, rather than cash. You can avoid the FBAR by purchasing gold offshore. You can buy and hold as much physical gold in your name outside of the United States as you like without filing any kind of report.

Conclusion

I hope you’ve found this article on the 10 reasons you want an offshore bank account in 2017 to be helpful. Please contact me at info@premieroffshore.com or call us at (619) 483-1708 for a consultation. We can setup a U.S. compliant structure or introduce you to a number of international banks.

Trump is Good for Most Offshore Businesses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Top 5 Offshore Bank License Jurisdictions for 2017

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

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

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

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

1. Dominica

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

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

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

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

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

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

2. Puerto Rico

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

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

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

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

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

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

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

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

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

3. Cayman Islands

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

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

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

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

4. Belize

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

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

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

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

5. Panama

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How to get an Offshore Bank License in Dominica

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Asset Protection for a Puerto Rico Act 20 Business

07/12/2016/0 Comments/in Articles, Asset Protection, Banking Offshore, International Business, Offshore Company, Offshore Company Taxation, Puerto Rico Tax Incentives, Taxation/by Christian Reeves

Once you have your Act 20 business in Puerto Rico up and running, you need to think about protecting its retained earnings or distributed profits. Asset protection for a Puerto Act 20 business becomes urgent because of the amount of capital held in the company tax deferred.

There are two levels of asset protection for Puerto Rico Act 20 companies. The first is retained earnings within the Puerto Rico LLC or corporation and the second is asset protection of dividends taken out under Act 22.

When you operate an Act 20 business based in Puerto Rico from your home in the United States, you get tax deferral at 4%. That is to say, if the business owner is living in the US, you can hold Puerto Rico sourced profits in the corporation tax deferred.

You will pay 4% tax on the net profits earned from work done in Puerto Rico. This cash must stay within the Puerto Rico corporate structure to continue to be tax deferred year after year. When you distribute those profits as a dividends to the US based owner, you will pay US tax on the qualified dividend at 20% to 23.5% + your state.

If you’re operating a business in Puerto Rico under Act 20, and living in Puerto Rico while qualifying for Act 22, then you can withdraw the corporate profits from the corporation each year. This is because residents of Puerto Rico pay zero tax on dividends from an Act 20 Puerto Rican business.

For more on maximizing the tax savings of Puerto Rico, see How to Maximize the Tax Benefits of Puerto Rico

When it comes to protecting the assets of your company, remember that Puerto Rico is a US jurisdiction. Any US judgement will be enforceable in Puerto Rico just as it is in any other State. As a result, you must take steps to protect your cash without changing its status as tax deferred “offshore” profits.

The best asset protection for Puerto Rico Act 20 businesses is to move your cash out of Puerto Rico and into a safe and secure bank. We have relationships with a number of banks in Switzerland, Germany and Austria that will open accounts for your Act 20 company and allow you to hold retained earnings offshore and out of reach of civil creditors.

The next level of asset protection for a Puerto Rico Act 20 company is incorporating offshore subsidiaries. This is done to put a layer of insulation between the Puerto Rico company and the assets held offshore. We can form a corporation in Panama, Cook Islands, Cayman Islands, or any other solid asset protection jurisdiction to manage your corporate capital.

In order to maintain the tax benefits of tax deferral, these offshore companies must be wholly owned subsidiaries of the Puerto Rico Act 20 company. For example, we form a Panama Corporation owned by the Puerto Rico company. This gets us access to all of the banks and asset protection benefits of Panama and allows us to maintain our tax deferral status.

For this reason, we can’t use other more advanced techniques. It would not be possible for the owner of the Act 20 business to create a Cook Island Trust and fund the trust with retained earnings. Once those profits moved from the Puerto Rico company to the Cook Island Trust, they would become taxable in the United States as a distribution.

This limitation applies only to retained earnings. Residents of Puerto Rico operating under Act 22 may use any means necessary to protect their personal after tax assets from future civil creditors. Remember that, unlike a business based offshore, once you have paid your 4% corporate tax and withdrawn the dividends tax free, this is “after tax” money. You can invest and do with it whatever you like, just as you can with money taken from a US business after paying 40% in taxes.

If you’re new to the Puerto Rico tax holiday, and would like to compare it to traditional offshore tax plans, see Puerto Rico Tax Deal vs Foreign Earned Income Exclusion and Move Your Internet Business to Cayman Islands Tax Free

One of the best asset protection systems is to have capital paid directly to a Cook Island Trust. This will maximize the asset protection afforded your dividend distribution and keep it out of the reach of any civil creditor.

We can make arrangements for the dividends to pass directly to the Trust and bypassing any risk of a civil creditor reaching them. We can also setup a subsidiary of the Puerto Rico company in the Cook Islands to facilitate this transfer and the related cash management.

Another offshore asset protection strategy for Puerto Rico Act 20 business will allow you to carry forward the tax benefits of Puerto Rico once you move away from the island and no longer qualify for Act 22.

Let’s say you’ve been operating your Act 20 business for 5 years and have been living in Puerto Rico all of this time. You’ve taken out $10 million in tax free dividends, with the only tax paid being 4% to the government of Puerto Rico.

You’ve had enough of island life, your business has run its course, and are want to return to the United States. Once you make the move, all capital gains, dividends and passive income earned on that $10 million will become taxable by the IRS and your State.

One option is to invest this money into an offshore single pay premium life insurance policy. Money held in the policy will be protected from future civil creditors as well as the US taxing authorities.

This is because capital gains earned within the US compliant offshore life insurance policy are tax deferred. You only pay US tax on the gains if you close out the policy or otherwise remove the cash. Of course, you are free to borrow against the life policy with no tax cost.

If you hold the policy until your death, then the total value will transfer to your heirs tax free (or with a step-up in basis). If you put in $10 million, and it’s grown to $20 million, you’re heirs get $20 million tax free… and the only tax you ever paid on any of that cash is the 4% to Puerto Rico. Quite an amazing tax play.

I hope you’ve found this article on asset protection for a Puerto Rico Act 20 business helpful. Please contact me at info@premieroffshore.com or call (619) 483-1708 for more information on setting up your business in Puerto Rico or on protecting your retained earnings within that structure.

Lowest Cost Offshore Bank License is Puerto Rico

05/13/2016/0 Comments/in Articles, Banking Offshore, International Business, Offshore Banking, Puerto Rico Tax Incentives/by Christian Reeves

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

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

Let me first clarify two terms.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Anti Money Laundering Guide for India

10/21/2015/in Articles, Banking Offshore/by Christian Reeves

Here is a link to a 97 page report on Money Laundering in India. We are providing this downloadable PDF for two reasons:

1. Money laundering is commonly misunderstood and misused term. It has come to be a catch-all in the United States for any movement of currency that the government can’t track or control. This report gives you the history and proper definition of money laundering, along with some food for though.

2. We have a number of international business clients based in India. The second half of this report will detail the issues you face in business, banking, finance, and money transfer.

Money Laundering Guide for India

This report was prepared by Priyanka Ghosh, LLM. She is an attorney licensed to practice law in India working out of our offices in San Diego, California. She specializes in assisting clients from India setup offshore and negotiate residency / second passports from a variety of jurisdictions.

You can reach Priyanka directly at pghosh@premieroffshore.com.

Offshore Banks Begin Reporting Under FATCA

03/20/2015/in Articles, Banking Offshore/by Christian Reeves

The Foreign Account Tax Compliance Act is now live and pulling in data about Americans around the globe. The FATCA international data exchange gateway opened on March 2nd and data began flowing on March 14, 2015.

The FATCA gateway connects nearly all international banks in to the IRS network. Banks will report all accounts owned and/or controlled by US persons… even large companies with one or two US shareholders are being caught up in the net.

FATCA turns offshore bankers in to unpaid IRS agents. They must now investigate all new and old accounts and, should they find an American in the mix, report all transactions to Uncle Sam. If they are uncertain, they will either report or kick you out of the bank. Fines for crossing the IRS are severe, so you can be sure you will be on the losing end of any disagreement.

Of course, this has been tough on those with American parents who’ve been living abroad for decades. These Americans by birth are being kicked out of banks, brokerages and businesses because of their heritage. For example, check out my recent post on the Mayor of London who recently got into a war of words with the IRS… he was born in the US but hasn’t been here since a he was a child.

And the same goes for Americans with bank accounts or investments abroad. We’ve had our options reduced by nearly 80%. And, when we do find a bank that will take us on, we’re hit with all kinds of fees and conditions.

How Does FATCA Affect Me?

If you’re new to the offshore game – planting your first flags abroad this year – then FATCA won’t directly affect you. It might have limited your banking options and cost you money but it does not require you to do anything…. it places no affirmative duty on you which was not there before the law was enacted.

So long as your tax person files the right forms and keeps you in compliance, FATCA is a non-issue. You were always required to report and FATCA is now there to ensure you tow the line. FATCA requires banks to report their US account holders and transactions. It does not require you to file any new or additional forms for 2015.

Think of it as a 1099 from your brokerage account. So long as what you report on your tax return matches up with what’s reported to the IRS, you have no problems.

Here’s to hoping your offshore bank understand FATCA and reports your transactions properly. If they make a major error, (calculate interest incorrectly or add a zero or two to the value of your account) you can expect a knock on your door from the IRS.

Who Should Be Afraid of FATCA?

If you have an unreported offshore account, then you should be very afraid of FATCA. Expect your bank to begin sending information to the IRS about you any day now and get ready for the fall out.

You will need a solid plan on how to report these accounts and should contact a tax attorney or other professional experienced in international tax matters as soon as possible.

And no, the solution is not to begin filing this year and hope no one looks at prior years. Expect IRS computers to identify those with previously unreported accounts… maybe by analyzing interest payments… maybe by auditing those who didn’t file last year but who had accounts as of January of this year… or maybe there’s a prior year check built in to the system we don’t know about.

Bottom line is that you can no longer bury your head in the sand and hope for the best. If you have unreported offshore accounts, the 2014 Offshore Voluntary Disclosure Program might be your ticket out of trouble. If not, now is the time to get right with our government… before the flood of reports through FATCA can be analyzed and the audits begin.

If you have any questions on the OVDI, or would like a referral to a tax attorney or enrolled agent, please contact us at info@premieroffshore.com. Inquires are confidential and I will direct you to a licensed professional who will understand your situation.

International Money Lending License

02/15/2015/in Articles, Banking Offshore/by Christian Reeves

The international money lending license came into its own in 2010 when the US began pushing out payday and other lenders of last resort. A number of offshore jurisdictions welcomed them with open arms and the battle with American regulators was on.

By 2012, many of these lenders moved from offshore licenses to those issued by US Indian tribes. For example, Integrity Payday Loans got in trouble with a few US states operating as a Nevis company. They became “ a tribal lending entity wholly owned by the Flandreau Santee Sioux Tribe, a federally recognized Indian tribe that operates and makes loans within the Tribe’s reservation. All loans are subject exclusively to the laws and jurisdiction of the Flandreau Santee Sioux Tribe.”

With high risk lenders fleeing for greener pastures, offshore lending, like offshore banking post FATCA, has gone mainstream. These licenses are now used by everyone from multinationals to green energy companies, such as solar loan and lease providers to fund operations and manage their worldwide tax obligations. Where payday lenders were looking to hide, the new trend is towards those looking to operate more efficiently, make use of their offshore retained earnings, bring in foreign investors, and comply with US tax reporting obligations.

Offshore Licensing Options

There are only a few ways to accomplish these goals. You can form an international bank, a captive bank, a Panama financial services company, or operate under an international money lending license.

A international money lending license is also an alternative to a fulling licensed bank. An offshore banking license is a major undertaking requiring significant capital and backend compliance. A Panama financial services company has it’s uses, but it may not offer loans. An offshore lending license is the most efficient option for a company looking to make loans within a group of companies, or to the general public (excluding residents of its issuing country), but not offer other traditional banking services (deposit taking, investments, etc.)

A money lender can be setup in a matters of weeks and at a fraction of the cost of an offshore bank. Also, corporate capital, costs of operation, and government oversight are significantly reduced.

For more information on a fully licensed bank, see my 2015 post: Best Offshore Banking License Jurisdictions.

There are several countries offering international money lending licenses. I will focus Belize below, but a proper analysis of your needs, number of investors, number and size of your loans, and your business model, should be undertaken before selecting a jurisdiction.

Belize International Money Lending License

Licenses available in Belize include:

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

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

A company operating under an international lending license in Belize may lend up to $5,000 per transaction and was originally written by politicians for payday lenders. Loans by an international money lender must have an initial repayment period of less than one year and shall not be secured by title to real property, a motor vehicle, tangible personal property, or any other type of collateral other than the Loan Agreement and ACH authorization agreement. Also, loans made under this license shall be made to consumers for household purposes and personal expenses only (and not for commercial purposes).

In other words, you may offer short term unsecured loans of less than $5,000 to individuals, but not businesses.

A Belize international money lending license require capital of $50,000. This amount may be increased by the IFSC depending on your business model and history. Capital reserve ratios and applicable discounts apply. The application process runs about 3 months. A complete business plan with financial projections and a proven track record in your market niche are required.

A Belize money brokering license might be a workaround to the maximum amount and term of the international money lending license. If the money being lent is coming from shareholders / partners in the business, rather than outside investors, Belize might allow you to broker the loans from your partners to your clients.

I say “might” because there are no businesses currently operating in this manner under the money brokering license. In fact, there is only one license currently active in Belize. I suggest such an application should be from a more “traditional” business, such as solar panel loans, rather than a higher risk category like payday advances.

Another, more common use of the money brokering license is to broker loans from Belize banks to your clients, earning a commission on each.

Other Offshore Licensing Jurisdictions

Another alternative to the Belize international money lending license is the British Virgin Islands Financing and Money Services License. This allows you to conduct any size lending business with persons resident in BVI and abroad. There is no maximum loan amount in the BVI statute.

For more information, see: British Virgin Islands Financing and Money Services License

Note that any regulated lending business will need to follow strict capital reserve and ratio requirements. Audited financial statements are due annually, and some jurisdictions require quarterly reporting.

The above describes international lending licenses. I suggest that the best license for an offshore leasing company is the Panama Financial Services License, which I will cover in another post.

Raising Money for an Offshore Lending Business

If you wish to raise capital for your offshore lending business, you will need a master-feeder offshore fund or similar structure. This is because your lending license does not allow you to take deposits from people other than partners in the business. Nor does it allow you to solicit investors.

With an offshore master-feeder fund, accredited or super accredited investors (as defined by the US SEC) may invest in your US entity and non-US persons and US tax exempt investors (IRAs, etc.) may invest in your foreign entity. Both of these feed into the master fund, which in turn invests in to your offshore lending company.

By linking a master-feeder fund to an international lending license, you can raise unlimited amounts of capital while minimizing compliance costs and regulatory oversight. You might find it advantageous to operate a fund in a jurisdiction separate from the lending company. For example, the fund could be in Cayman or Belize with the lender domiciled in BVI.

Raising capital through a fund allows you to earn a commission on the appreciation in the fund and from the primary lending business. Typical master-feeder funds earn 2% of the money under management and 20% of the appreciation after a hurdle rate ( LIBOR+2 or some similar published rate).

Conclusion

In 2015, the world of offshore licensed entities is as complex as it is diverse. Careful consideration of the available licenses and your business model must be undertaken before selecting a jurisdiction. Each country and license type is intended for a specific use and capital ratios and regulations vary widely.

Add to this FATCA, IRS reporting, tax compliance, SEC issues, and anti-money laundering statutes, and you will find that going offshore with a licensed lending company requires the support of a professional experienced in both US and international regulations.

I hope this article has beens helpful. For more information on an international money lending license, an international banking license, or an offshore master-feeder fund, please phone me at (619) 483-1708 or email Christian Reeves at info@premieroffshore.com.

Best Offshore Bank License Jurisdictions

02/11/2015/0 Comments/in Articles, Banking Offshore/by Christian Reeves

The offshore banking license industry was knocked down by FATCA, but it’s back on its feet and carrying on. Below are my best offshore banking license jurisdictions for 2015. You might also like to read my 5 Best Offshore Bank Licenses for 2017.

Please let me start with a little history.

International Banking is Still Alive

From 2012 through 2014, the offshore banking license industry was on life support. To be honest, I pronounced it dead in mid 2012 in an article titled Offshore Bank Licenses Go the Way of the Dodo. Fortunately I was wrong and international banking making a comeback.

Beginning in 2012, the US IRS declared war on offshore banks, shutting the small ones down and extracting millions in tribute from those large enough to pay.

Fines are still being levied on those with unreported US accounts. For example, the US and UK authorities announced plans to hit HSBC Switzerland in February of 2015.

Piling on, the US Congress passed the Foreign Account and Tax Compliance Act (FATCA) that requires all international banks to report US account holders each year. Basically, this law turned offshore bankers in to unpaid IRS agents.

Well, FATCA was delayed for years and no one had any idea how it would be implemented. This uncertainty made it nearly impossible to acquire a new offshore banking license and, if one was granted, you had little chance of getting a correspondent account.

Bottom line, no one was willing to take a chance on a new bank. They were busy cleaning up (or hiding) past sins and did not want to deal with a startup.

Now, in 2015, the war is over, the smoke has cleared, and the bodies of those unable to pay the ransom have been removed from the battlefield. The IRS came out victorious and just about every bank in the world has signed on to FATCA.

With uncertainty behind us, new formations are beginning to pick up. Of course, these new banks will find it a very different world… one where they must be responsible global citizens.

Note: This article is from 2015. You might also like to read my 5 Best Offshore Bank Licenses for 2017.

Best Offshore Banking License Jurisdictions

In my experience, the best offshore banking license jurisdictions are:

Andorra
Anguilla
Bahamas
Barbados
Bermuda
Belize
Cayman
Dominica
Lebanon
Luxembourg
Montserrat
Seychelles
St. Kitts & Nevis
St. Vincent & the Grenadines
Vanuatu (Republic of)

Each of these countries specializes in a different form of international banking license… is focused on a specific target market. Here are a few tips on selecting the best offshore banking jurisdiction.

When I analyze a jurisdiction, and compare it with a client’s objectives, I often start with the reserve capital. Some statutes require $500,000 to $3 million for a captive bank license and $1 million to $7 million in capital is standard for a small international bank. Jurisdictions like Panama and Luxembourg may require $30 million for a general license .

To further narrow down your choices, here are a few things to consider:

Andorra and Luxembourg issue licenses to large private banks.
The Cayman Islands prefers investment advisory and captive banks.
Vanuatu is a common jurisdiction for captives with on European parent companies.
St. Kitts and Dominica licenses link the bank in to the Eastern Caribbean region, which means they operate under a regional central bank.
Belize might be the preferred jurisdiction for a deposit taking bank, but it’s high capital ratios need to be accounted for.
Many international banks are domiciled in Panama because of the lower labor costs, top tier connectivity, availability of executive visas, and the world class reputation.

Types of Offshore Banking Licenses

Captive Bank: A bank with a captive license may only do business with those named in the license. So, each client / owner of the bank must be approved by the central bank. Captive offshore banks are typically used by large family offices, groups of wealthy individuals (say 10 to 15 partners), or multinational corporations, to manage their lending and worldwide tax obligations. A captive bank may not market its services to the general public.

International Bank: The license we most commonly associated with the offshore industry is the international banking license. This allows you to conduct all types of banking business with cutomers outside of your country of issuance. For example, if you operate an international bank in Belize, you may do business with anyone except Belize citizens and residents.

General Bank: A general license allows you to conduct business with both local and international clients. Of course, central banks want to protect their citizens first, thus capital requirements and regulation of generally licensed banks are tighter than international banks.

Purchase of an Existing Offshore Banking License

From time to time, captive and international banking licenses become available. Usually licenses are sold by operators who went through the process and lost their funding somewhere along the way.

I would like to point out that each owner of a bank must be approved by the regulatory authority. That is to say, you don’t just take over a license and begin operating. The new ownership group will need to go through an extensive background check, a new business plan approved, and personal financial statements must be provided. Expect this process to take several months.

To account for this delay and potential risk, you need to run the purchase of an existing offshore banking license through an escrow agent. Condition a portion of the purchase price (usually 25% to 50%) on the approval of the central bank

Services Offered

Note that the usual formation and licensing costs for an international bank are $175,000 to $650,000 depending on the jurisdiction, the quality of your business plan, whether you already have a license from another jurisdiction, and the bonafides of the partners..

To apply, a detailed business plan, KYC and anti money laundering docs, and a well qualified board of directors will be required… all of which we can assist with.

I hope you have found this post on international banking licenses helpful. If you would like assistance in identifying a jurisdiction, searching for a new license, negotiating the takeover of an operating bank, or forming a new offshore bank, please phone me at (619) 483-1708 or send an email to Christian Reeves at info@premieroffshore.com.

My other recent articles on the topic are:

Top 5 Offshore Bank Licenses for 2017
Lowest Cost Offshore Bank License is Puerto Rico
Offshore Bank Advertising Rules (a review of Reg. S)
Offshore Banking Licenses (on lowtax.net)
Capital Reserve Requirements (on lowtax.net)
Correspondent Accounts for Offshore Banks (on escapeartist.com)
Best Offshore Banking Jurisdictions