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Why Puerto Rico Banks are in the Pandora Papers

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In this post, I’ll look at why international banks in Puerto Rico are in the Pandora Papers. While the left-leaning journalists try to spin these banks as somehow sinister, the truth is much more mundane. Here’s what you need to know about why Puerto Rico banks are in the Pandora Papers.

The Pandora Papers dwarf the Panama Papers and include more than 11.9 million records for a total of 2.97 terabytes of data. These records were stolen from 14 different incorporation firms, with the largest being Trident Trust. These files provided information on people from 200 countries, including more than 330 politicians and 130 Forbes billionaires, and several celebrities. 

The Pandora Papers included information on only a few international banks in Puerto Rico. Though, I can tell you that most of the banks in Puerto Rico were structured using an offshore holding company. They may also have an offshore broker-dealer, EMI license, or some other international processing company or payment rail. So, basically, all international banks in Puerto Rico could have been in the Pandora Papers.

There are a few reasons why banks in Puerto Rico must use offshore companies when setting up. The first is for the payment of dividends to non-US shareholders. The second is because many of these banks offer cross-border payments or non-USD accounts, so need access to foreign payment rails.

 

Puerto Rico Banks in Pandora Papers – Holding Companies

International banks in Puerto Rico with IBE licenses pay 0% tax and those with IFE licenses pay 4% in tax. There is no withholding tax on dividends paid to non-US persons or offshore holding companies. Dividends paid to US persons are taxable in the United States. 

  • IBE licenses were issued between 1989 and 2012 and the first IFE licenses were issued in 2013. The IFE law replaced the IBE law, increasing the tax rate to 4%.

IFEs and IBEs in Puerto Rico with non-US shareholders, or those that want to court foreign shareholders, require an offshore corporation. The international bank pays 4% tax on its net profits and pays out a tax-free dividend to the offshore holding company. Those dividends are held at the holding company or paid out to the shareholders per their wishes and in a tax-efficient manner.

There is no tax benefit to US shareholders in using an offshore holding company. US persons pay tax on dividends when they are distributed. Therefore, US shareholders prefer profits to be retained in the bank tax-deferred while foreign shareholders prefer that dividends are paid out as soon as possible. 

Of course, dividend payments are governed by the capital requirements and operational requirements of the IFE or IBE. For more on this topic, see: Puerto Rico Bank Capital Requirements.

For more on the topic of tax planning for an international bank in Puerto Rico for US shareholders, see: Puerto Rico Tax Incentives for Bank Owners.

 

Puerto Rico Banks in Pandora Papers – Payment Rails

Most international banks in Puerto Rico focus on international customers. Others focus on US clients with international transactions. For this reason, IFEs and IBEs need access to international payment rails. Most banks in Puerto Rico offer FX services along with accounts in USD, GBP, CHF, and other currencies. 

Also, many of these Fintech banks are looking to provide cost-effective cross-border payment services. This requires multiple correspondent accounts and other licensed or unlicensed structures which are typically held in an offshore company. 

For more information on setting up a bank in Puerto Rico, see: Start a Bank in Puerto Rico in 10 Steps

For information on purchasing a bank in Puerto Rico, see: Process to Purchase a Bank in Puerto Rico

 

Puerto Rico Banks in Pandora Papers – Broker-Dealer License

Again, banks in Puerto Rico typically focus on international clients. IFEs and IBEs provide banking and custody services to people from China, Latin American, and around the world. For more on custody services, see: International Banks in Puerto Rico May Provide Global Custody Services

Also, banks in the United States and Puerto Rico are prohibited from providing brokerage services. They are allowed to provide custody services, but can’t execute the trades. For this reason, banks in Puerto Rico will set up a separate broker-dealer in a jurisdiction such as the British Virgin Islands. 

Why don’t they set up the BD in the United States? First, the costs of operation are much higher in the US. Second, most clients are not US persons, so a US BD is not going to accept them as clients and will not be an efficient option.

For more on how to structure an international bank in Puerto Rico, see: How to Set up an Offshore Bank in 2022.

 

Puerto Rico Banks in Pandora Papers – Client Companies

The article below, which inspired this post, identified various non-US persons with offshore companies and accounts at various international banks in Puerto Rico. In fact, many non-US persons form offshore companies in order to open business accounts at banks in Puerto Rico.

While US persons are taxed on our worldwide income, most other persons and companies are not. There are many legitimate tax and business reasons a non-US person would form an offshore company and open an account in Puerto Rico. Also, there are several legitimate business reasons US persons might do the same.

For example, if a US person wants to invest in a foreign or offshore fund, they’ll need an offshore structure. Also, if a US person is selling into foreign countries, they will need an offshore company to facilitate that business. This would include using the bank in Puerto Rico for their cross-border payments for salaries, purchases, shipping, etc.

 

Why Target Puerto Rico Banks in the Pandora Papers?


So, why are banks in Puerto Rico the target of journalists writing on the Pandora Papers? Because they can get great headlines that make it appear that these banks are doing something nefarious. In fact, international banks in Puerto Rico are required to use offshore structures, but none of these “investigators” bother to mention that. Anyone associated with the offshore industry is guilty until proven innocent. 

The bottom line is that these Pandora Paper articles get clicks for the author. It doesn’t matter if the use of an offshore structure is 100% legitimate. It’s easy to cast anything with the word “offshore” in the name in a disparaging light. 

When you read these articles about Puerto Rico banks in the Pandora Papers, keep in mind that these are the most regulated international banks in the world. Yes, the regulator in Puerto Rico has just a few employees but uses a network of external auditors and banking experts (see the article below). 

Next, many banks in Puerto Rico are regulated by the US Federal Reserve Bank. This is the toughest regulator there is, and these Puerto Rico banks follow all the same reporting and compliance requirements of the largest national banks. 

Finally, all shareholders, investors, officers, directors, and key personnel of these banks go through stringent due diligence. They must provide three years of audited financial statements and complete a very rigorous background check which costs $6,500 to $15,000 per person depending on their nationality and other factors.

And the same is true for any corporation that’s a shareholder of the bank. These offshore corporations must either be newly formed or provide 3 years of US GAAP compliant audited financial statements. Any offshore company that appears in the Pandora papers has been fully vetted by regulators and a third-party due diligence provider such as Kroll or Berkeley Research.

When the Pandora Papers attack a shareholder of a bank in Puerto Rico because he was accused of wrongdoing in years past, you can be assured that this claim was thoroughly checked out by regulators and various investigative agencies. If he was allowed to become a shareholder, he was clean (see the article below). 

As someone in this industry since 2003, I can tell you that no high net-worth person actively involved in a business is without his or her detractors. As the expression goes, you haven’t made it until someone sues you (until you have enough money for someone to bother trying to take it from you). 

I’ve seen dozens of background reports, some over 100 pages long. I can tell you from experience that every successful person has a history of litigation and has some battle scars. 

In fact, I’ve only seen one perfectly clean background report. And, as it turned out, that was an American who was fronting for some foreign investors. He was quickly found out and the bank purchase didn’t get past first base… but, my point is, if the report is perfectly clean, that’s when you need to be suspicious.

For more on how to structure an international bank in Puerto Rico, see: How to Set up an Offshore Bank in 2022.

 

Conclusion

I hope you’ve found this article on why Puerto Rico banks are in the Pandora Papers to be helpful. If you’re interested in forming an IFE in Puerto Rico or purchasing an existing bank in the territory, please contact me at info@premieroffshore.com. I will personally prepare your business plan and handle your license application.

 

Translation of Article on Puerto Rico Banks in the Pandora Papers

The following is a translation of the Spanish language article that inspired this post. For the original version, click here.  

Note that this is an unofficial translation. Any grammatical issues, run-on sentences, poor or unclear writing, typos, or any other errors are mine. Any translations that I’m unsure of are in [brackets], as are my comments.

I’ve also deleted the names of the banks in the article and replaced them with XXXX. I don’t see any reason they need to be named here.

 

 

SMALL INTERNATIONAL BANKS FROM PUERTO RICO IN THE PANDORA PAPERS

The international research in the Pandora Papers allows access to documents that show how some of these entities facilitate the opaque businesses of foreign millionaires, known as offshore companies.

 

From an office in San Juan, XXXX International Bank provides “Swiss expertise” to its clients. It offers banking services to foreigners who are not residents of Puerto Rico: receive deposits, open offshore bank accounts, and carry out transactions in any type of currency.

Their website highlights that they are discreet. It also says that they comply with the law and are committed to a culture of compliance. That is, they verify the identity of their clients and question the origin of the money, “when appropriate.”

The owner of XXXX International Holding LLC – the bank’s parent company – is XXXX, a French banker who lives in Miami. His LinkedIn mentions that he chairs the Board of Directors of International Rollet Capital and ExPAM Capital, founded a bank in Dubai called La Trésorerie, and worked at Goldman Sachs. He doesn’t mention XXXX.

XXXX’s contact person in Puerto Rico is Rafael Blanco Latorre, former commissioner of the Office of the Commissioner of Financial Institutions (OCIF) from 2012 to 2016. Blanco Latorre told the Center for Investigative Journalism (CPI) that he is an external legal consultant and that he chairs the Board of Directors of one of the International Financial Institutions (IFE), although he did not want to mention the name. In October 2016, two months before ending his duties as commissioner, he signed the license that allows XXXX to operate in Puerto Rico.

Blanco Latorre refused to give an interview about his management as a civil servant in the OCIF and about the role he exercises in one of the entities that he supervised while he was in the Government, referring to the fact that he is now a private citizen.

In 2012, under the government of Luis Fortuño, Puerto Rico [created the law which allowed the] island to become an international financial center. The Government offered tax exemptions of up to 45 years to anyone who set up a bank, insurer, subsidiary, or boutique firm dedicated to exporting financial services Act 20 [now referred to as Act 60]. The story is [standard]: capital would arrive, create thousands of jobs and generate economic development.

Since then, small banks have arrived in Puerto Rico that, by establishing themselves here, can open accounts directly with the Federal Reserve. This gives them direct access to the US market and facilitates transactions in US dollars. The owners of these entities are mostly foreigners and the law prohibits [IFEs and IBEs] from offering services to residents of Puerto Rico

 

Almost ten years later, the balance of this incentive has had a “modest” economic impact, less than 1,000 direct jobs according to OCIF, attracting the attention of federal and international authorities for money laundering and tax evasion cases, and a reputation as a [tax] paradise. These entities, whose owners often remain behind the scenes, can serve to hide assets from tax authorities or, in the worst case, money laundering and other illegal transactions.

Some of the directors, owners, and clients of these banks and international financial entities established in Puerto Rico appear in documents examined by the CPI are part of the Pandora Papers, a new delivery of 11.9 million documents from offshore companies obtained by the Consortium Investigative Journalists International (ICIJ). The leaked documents – most dated between 1996 and 2020 – come from 14 firms dedicated to incorporating and managing this type of business in tax havens. These include the Alemán, Cordero, Galindo & Lee (Alcogal) law firm, and the Overseas Management Corp. (OMC) law firm, both from Panama. In reaction to the ICIJ investigation, both companies stated that they are committed to compliance and that they act in accordance with laws and regulations.

The Pandora Papers reveal the financial secrets of 35 heads and former heads of state, more than 330 officials in more than 91 countries and territories, as well as fugitives, con artists, and murderers from around the world. It is the largest journalistic collaboration in history, with a team of more than 600 journalists from 150 media, led by ICIJ and including the CPI.

The leaked documents show how offshore entities have used some of these banking institutions to open accounts or transfer money.

Are these banks used in Puerto Rico to facilitate transactions between offshores, tax evasion or money laundering? The CPI asked Natalia Zequeira, Commissioner of Financial Institutions since January of this year.

“Doing business with‘ offshore ’companies is not illegal in itself. The vast majority of these companies are formed for legitimate purposes, among others, to hold shares or assets of other commercial entities, as well as to facilitate the transfers of assets and currencies ”, answered the lawyer.

She added that all financial entities in Puerto Rico are subject to different laws and regulations that include the obligation to report any suspicious transaction or activity that they identify. Failure to do so exposes the entity to sanctions and other penalties, Zequeira said.

 

Banks on Pandora Papers

In the case of XXXX, the CPI identified in the Pandora Papers Alcogal law firm documents related to the opening of accounts in this bank for the benefit of at least three offshore companies. XXXX did not respond to questions about their clients.

Another that appears in the Pandora Papers is XXXX, owned by Marcelino Bellosta Varady and Alejandra Bellosta Perea, according to a document presented to the Puerto Rico State Department.

Venezuelan businessman Carlos Marcelino José Bellosta Pallarés – Marcelino’s father – appears as a beneficiary of several offshore entities registered in the British Virgin Islands (BVI). At least three of them have bank accounts at XXXX, the leaked documents reveal.

According to the incorporator’s forms for registering companies, more than a dozen offshore entities, mostly from BVI, have bank accounts with XXXX.

XXXX assured the CPI that it is regulated by the OCIF and that it complies with all the laws and regulations that apply against money laundering and terrorism, among others. He said that he is continually working to improve his internal controls and that he has a bank officer who is dedicated exclusively to the compliance area.

XXXX did not answer questions from the CPI about the services it provides to the Venezuelan Bellosta family.

Marcelino has two brothers, Carlos José and Juan Manuel. Carlos José has had a decree of Act 22 since 2017 [now referred to as Act 60] and is listed as an official of Venequip Puerto Rico LLC, a supplier of equipment related to the energy industry. Juan Manuel manages several companies in Puerto Rico, including CH4 Systems, a technology provider with a decree of Act 20 since 2016 [now referred to as Act 60].

All these companies are registered at the same address as XXXX: Galería San Patricio B5 Calle Tabonuco, Suite 207-A, Guaynabo.

The Pandora Papers also mention Venezuelan Joan Manuel Fereira Rosillo, a businessman who received $2.2 million from the Brazilian company Odebrecht through his company Rote Energie, according to the multinational investigation into corruption Lava Jato.

According to a bank document on file with OMC, Fereira Rosillo maintains an account with XXXX Bank, a Puerto Rican IFE. [note that this is the third bank in Puerto Rico referenced in this article and not the same bank referenced above]

Agustín García Castilla serves as president of XXXX Bank, according to the bank’s website. García Castilla coincides with Fereira Rosillo in different companies in Florida and Panama, including one called XXXX Asset Holdings.

The CPI asked XXXX Bank if, according to the documents, it provides services to Fereira and if it owns the institution, but received no response. Fereira Rosillo, who also worked for the oil company PDVSA, is also listed with offshore companies in Aruba and the BVI.

[The section below refers to South Bank, which was closed by regulators in 2019. For more on this, click here (Spanish language only). For a list of current IFEs, click here. For a list of current IBEs, click here.] 

Another bank featured in the leak is South Bank International. According to a reference letter prepared by the Alcogal law firm, one of South Bank’s clients was Tag Bank S.A., an investment bank registered in Panama. This entity is in the process of voluntary liquidation according to its website. Last August, the Brazilian Eduardo Plass, president of TAG Bank, was accused and arrested in Brazil for tax evasion, in relation to Lava Jato.

In 2019, the FBI raided the offices of South Bank International in Guaynabo after a federal judge found probable cause for fraud and money laundering crimes. The OCIF canceled his license that same year, after the intervention.

 

The offshore dilemma

Owning offshore assets or using paper entities to do cross-border business is not illegal.

“There is a distinction to be made between reducing the payment of taxes and avoiding taxes. Reducing the payment of taxes is a goal of everyone who pays taxes. There are thousands of ways to reduce taxes legally. What should not be done is to evade taxes, “said Eduardo Colón, president of the Association of International Banks of Puerto Rico.

But many use this system to manage, move and often hide their fortunes, proof that not all people play by the same rules when complying with their tax liability. Governments lose more than $800 billion a year due to offshore business, according to the International Monetary Fund. They are also used for crimes such as tax evasion and money laundering, and it is a mechanism generally used by the rich and powerful.

Colón recalled the Panama Papers, the ICIJ investigation published in 2016 that exposed the complex and dark offshore financial system.

“One of the important things about world-class financial centers is that they have a strong structure from a regulatory point of view and are well regulated because if not, they can collapse very easily, as happened with Panama and the Panama Papers”, Colón told the CPI.

In Puerto Rico, international banks and financial entities are subject to US federal laws and regulations such as the Bank Secrecy Act, the USA Patriot Act, and the Know Your Customer rule, an international standard for obtaining detailed information about customers. Regulations of the Office of Foreign Assets Control (OFAC) also apply.

But what different offshore forums and some of the banks themselves promote is the Common Reporting Standard, or CRS, of the Organization for Economic Cooperation and Development, which requires participating countries to share tax information from their clients.

This also makes Puerto Rico an attractive option for those seeking privacy in their businesses.

 

Trouble with the law

In February 2019, the European Commission added Puerto Rico to a list of countries highly prone to tax crimes, but it was later removed at the request of the US Treasury Department.

The CPI identified half a dozen cases of international banks whose shareholders, directors or clients have faced problems with the law or have been singled out in journalistic investigations for irregularities in their businesses.

Uruguayan bankers Marcelo Gutiérrez and Juan Ignacio Cabrera established the XXXX in Puerto Rico in 2015. They obtained an account with the FED, which facilitated transactions in US dollars. Three years later, in 2018, Gutiérrez was accused by the Florida Federal Prosecutor’s Office along with a group of businessmen of laundering $1.2 billion from PDVSA through a bank in Puerto Rico.

Later, a group of Chinese investors acquired XXXX Bank in 2018 and changed their name to XXXX International Bank. The new owners of the IFE said in 2019 that they have nothing to do with XXXX’s operations or with Gutiérrez or Venezuela.

In 2019, the Federal Reserve System (FED) stopped the opening of accounts from these Puerto Rican banks due to their use as intermediaries for Venezuelan businessmen connected to the Government of that country. That same year, the offices of two international banks – XXXX and South Bank – were raided by the FBI as part of investigations related to money laundering.

Regarding the latter, Colón said that there are few cases like these on the island, that crimes occur even in the largest banks and it means that the sector works as it should.

He also recognized that “the worst thing that can happen to a financial center is that one or more of those that are operating, are operating on the fringes or outside the law and that is found.”

The Commissioner for Financial Institutions, Natalia Zequeira, said that the FED has already lifted the restriction on international banks, which are in the process of complying with a new guide from the federal agency.

In an interview with the CPI, she revealed that the OCIF currently audits 100% of the entities with Venezuelan capital in Puerto Rico.

Since she came to the office in January of this year, she said that she seeks a “culture of compliance.”

“I want people who know the system, not people who take their license and start playing at the bank here. I am not saying that it has happened, but simply that under this administration, there is no space for that, ” said Zequeira.

For her, Puerto Rico is not a tax haven either. But she acknowledges that initially there was a trend of small banks and financial entities with few assets or no banking experience.

“Before it was seen a lot that there was a person who maybe had a banking history in another jurisdiction, decided to set up a bank from scratch and what he had was a parent company with very few assets or an affiliate that were other personal assets of that individual. And little by little it became a bank for their family and friends, to have an account in dollars, because perhaps in an American bank they did not know how to open the account in dollars, or they could not because they did not have a passport or a Social Security number, among other things. Well, there was a [need or demand] for that type of institution, ” she said.

This type of entity is no longer endorsed, according to the commissioner. 

[In addition, the capital requirements have been greatly increased, pushing out small and undercapitalized banks. See: Puerto Rico Bank Capital Requirements.]

 

They ask to increase the tax rate

There are two corporate models for establishing these banks. Although they provide the same banking services and work the same when handling deposits, international banking entities (IBE) and international financial entities (IFE) are different in some areas. IBEs are 100% tax-exempt, while IFEs only pay 4% in income taxes and 0% in CRIM and other municipal taxes.

[The IBE law was in place from 1989 to 2012 and the IFE law replaced the IBE law in 2012. The first IFE banks became operational in 2013.]

 

 

Regarding the public policy of encouraging these international banks, the study commissioned by the Government of Puerto Rico recommends increasing the tax rate of these entities from 4% to 10%. Also the minimum number of jobs required by law, from four new jobs to 10.

James Hickman has had an IFE since 2017 called XXXX Bank. A “safe, transparent, and responsible” entity, according to his website. The former US military and investor also has a decree of Law 22 [now Act 60]. He shares his time between Puerto Rico and Chile, where he has an agricultural company of blueberries and walnuts. He writes under the pseudonym Simon Black and his articles talk about obtaining passports in tax havens and “optimizing” the payment of contributions. He also discussed how to move to Puerto Rico and receive tax benefits as he did.

In a podcast, Hickman cautions that this type of business is not for everyone. The person concerned must have “a substantial level of wealth,” he says. Having a bank on the island requires more than half a million dollars in capital to operate. Still, Puerto Rico is one of the cheapest and most attractive jurisdictions to do so. 

[$5 million is more realistic in 2021 and going forward].

At one point, Hickman recalls that a federal agency asked for changes to its corporate structure to be in compliance. But still, having a bank in Puerto Rico has been beneficial for him and his business, he says.

“I was actually pleasantly surprised at the amount of business that started coming to me just because people found out that I had a bank. People were saying, ‘Oh, now James has a bank. We’re going to call him and see if he wants to do this business, ‘” he said.

According to a document in the Puerto Rico Registry of Corporations, the XXXX Bank Board of Directors includes Gligor Tashkovich, former Minister of Foreign Investments of Macedonia. In 2020, in a lawsuit filed by the New York City Attorney’s Office against a supplier of anti-COVID masks, Tashkovich was named in a fraudulent sale to New York City. His attorney told The New York Times that his client did not participate in any fraudulent scheme and that he cooperated with authorities.

Carmen Szendrey, chief executive of XXXX Bank, told the CPI that the bank is subject to independent audits and that it invests money to ensure that “our institution does not serve as an instrument for criminal entities.”

On Tashkovich, she indicated that he is a “valued member of our Board” and that he has never been charged with any crime.

The executive did not answer whether Hickman continues to own the institution.

 

Eight OCIF employees to supervise 85 banks

OCIF’s 70 employees sit on the sixth floor of the Centro Europa building. The glossy dark wood furniture, the gold frames with black and white photos, the wine-colored cushioned chairs, take the mind back to the 80s. The most technological thing that there is at first glance is the machine that takes the temperature in times of COVID. From here the banks are audited.

“This year we requested an additional $1.2 million [of the operational budget] they granted us. That additional $1.2 million was divided into two priority projects that the Office has. One of them is a new system for the registry of securities because the operating systems of this office are from the 90s,” said Zequeira.

The second project he is proposing to do with the $1.2 million is to recruit more examiners. Currently, only eight OCIF employees are in charge of supervising the 85 financial institutions in Puerto Rico.

“While my examiners are with the FDIC seeing First Bank or Banco Popular with the Federal Reserve, at the same time they are running parallel on four or five exams to international institutions,” said Zequeira.

These people’s pay also stayed in the 1990s. Each examiner earns $24,000 annually and is required to have a bachelor’s degree in accounting or finance. It is not difficult to conclude that it’s an uphill battle for OCIF to ensure that all of these entities comply with the standards and the law.

The agency has never revoked a license after it was issued. Prior to 2017, there is no evidence of a single sanction issued against any IFE in Puerto Rico. Since then, OCIF has imposed 63 fines totaling $439,400. 

[What? This article notes that South Bank’s license was revoked in 2019. I’m aware of two other licenses that were revoked and the chart above shows canceled licenses by year. Also, when a bank is in trouble, regulators will force them to sell and only cancel the license as a last resort. For a list of current IFEs, click here. For a list of current IBEs, click here.]

 

Financial and banking entities of all colors

The main banks with a historical presence on the Island have had IBE subsidiaries, including Banco Popular, Firstbank, Citi, Oriental, and UBS. But in addition to these financial institutions, there are other lesser-known faces in this industry. The multinationals General Electric (1996-present), GlaxoSmithKline (1998-2008), and Wyeth (2004-2010) have had IBEs in Puerto Rico, according to OCIF data. General Electric is the only one that still has an active IBE. OCIF indicated that it provides financing services for the purchase of household goods from people outside of Puerto Rico.

In the case of IFEs, the law allows them to do much more than an international bank. The list of activities allowed under IFE is extensive and flexible: investment management, financial advisory, real estate, metal buying, and selling, usurious loans [what??], insurance, and cryptocurrencies.

The first two IFEs established in Puerto Rico – PR Asset Portfolio 2013-1 International, LLC and PR Asset Portfolio Servicing International, LLC – are dedicated to the sale of delinquent loans in the real estate sector. Both belong to the same company, Caribbean Property Group (CPG), one of the main investors in Dorado Beach Ritz Reserve and Paseo Caribe. It also has three hotels and a corporate complex in Costa Rica.

Other IFEs in the same line of business include Blackheath, a subsidiary of the Blackstone Group, who owned the Ritz Carlton hotel in Isla Verde, VRM, owned by businessman Rafael Rojo Montilla, and Blue Water, registered under Jim Taubenfeld, owner of Me Salvé.

Between 2013 and 2018, OCIF issued 58 IFE licenses. And in just two years, 2017 and 2018, it approved 24 applications. Then the volume fell dramatically: in the last two years, only four licenses have been granted.

“I have seen a change in OCIF and the first specific change is the rigor they apply to applications for an IFE. At one point, many licenses were approved in a short period of time, ”said Colón.

Zequeira attributed the decrease to recent changes in tax rates that came into effect under the new 2019 Incentive Code and that apply prospectively.

In nearly 10 years, OCIF has only denied eight IFE requests, according to data provided by the agency. [Because they give unworthy applicants the choice to withdraw their application.]

There are also those who, despite obtaining their license, gave up on the idea.

In February 2014, Venezuelan David Brillembourg Capriles registered an international bank in Puerto Rico under the name Brilla Bank International LLC. It never complied with the annual reporting requirement and the State Department canceled the entity in December 2018. IFE’s license was canceled in 2016.

Brilla Bank also obtained a license on the island of Dominica, but it was revoked in 2017.

Asked by the CPI, Brillembourg Capriles said that he intended to open an investment bank in Puerto Rico, but that he never operated. Since 2018, he has a decree of Law 22 that exempts foreigners residing on the Island from contributions. He is also the developer of Loopland, a tourist-residential project for millennials in the old Roosevelt Roads naval base in Fajardo.

The Pandora Papers place the businessman as director of STG SA, a public limited company in Panama. Although the entity remains in force and appoints him as president, Brillembourg Capriles assured that he has not maintained any business in Panama for more than 10 years.

Brillembourg Capriles is also listed with offshore companies in Barbados, according to the Paradise Papers investigation. In 2017, he was sued by Luis Benshimol, who alleged that he created an “elaborate shell game” by using money from a hotel sale for his personal benefit. Brillembourg Capriles denied the complaint and the claim was dismissed for lack of jurisdiction.

22

Pandora Papers from an Offshore Expert’s Point of View

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The Pandora Papers are all over the news these days. But, how about a fair review of the Pandora Papers by someone who actually understands the offshore industry? Here is a summary of the Pandora Papers by an offshore expert.

The Pandora Papers is a trove of stolen documents that include Trident Trust’s USA group, as well as several different offshore providers. The largest of these again is Trident Trust with well over 3 million records being released. 

The Pandora Papers include more than 11.9 million records for a total of 2.97 terabytes of data from 14 different incorporation firms. These files provided information on people from 200 countries including more than 330 politicians and 130 Forbes billionaires, and several celebrities. 

The documents included information on the beneficial owners of offshore and onshore structures as well as their nominees, agents, shareholders, directors, and officers. Most of the structures were from the BVI, Cyprus, Seychelles, Hong Kong, Belize, Panama, and South Dakota. 

While there were some files going back to the 1970s (from the Panama law firm of Alemán, Cordero, Galindo & Lee), most of the documents were from 1996 to 2020. They cover the formation of all types of structures, including holding companies, corporations, LLCs, trusts, and foundations.

As those of us in the industry know, many of the trusts and tax shelters are held right here in the United States. 81 of the largest trusts were in the Trident Trust offices in South Dakota. In addition, there were 37 trusts in Florida, 35 in Delaware, 24 in Texas, and 14 in Nevada. 

Tying the Pandora Papers back to the Panama Papers, it was found that over 500 BVI companies and 130 Panama structures left the embattled law firm of Mossack Fonseca. These companies, and probably many others, changed their registered agent or moved jurisdictions. 

The problem with the Pandora Papers and all “investigations” of this type, is that they are being conducted by left-leaning journalists and are incredibly biased. They see crime and tax fraud simply because someone wanted privacy in their financial dealings. They have no idea what these people reported on their tax forms, or what is legal or illegal in the 200 countries represented in this data dump.

These reporters assume someone is guilty until proven innocent… and this allows them to publish stolen information, causing financial and other harm without cause. And, along the same lines, what happened to not using the fruit of a poisoned tree? 

We see their intent in this quote from senior ICIJ reporter Will Fitzgibbon on NPR. “These are secretive, confidential documents from offshore tax havens and offshore specialists who work to help rich, powerful, and sometimes criminal individuals create shell companies or trusts in a way that often helps either obscure assets or in some cases even help avoid paying taxes.” 

This is an obvious attempt to paint the offshore industry as sinister tax cheats. We all have “confidential” documents we don’t want to be released, such as our tax returns. And there are many legitimate reasons to set up an offshore structure. 

Ok, I will get off my soapbox and attempt to be a little more professional (not my strong suit). It would be easier if these “investigators” approached the Pandora Papers with the assumption of innocence rather than an assumption of guilt. Isn’t that a founding principle of this country?

One article from the Pandora Papers was on Trident Trust’s activity in the United States. Those of us in the offshore industry have said for years that the US is the greatest offshore tax shelter in the world for everyone but Americans. Have a read through: Suspect foreign money flows into booming American tax havens on promise of eternal secrecy. But, again, read with an eye on how biased the verbiage is. 

My experience is in helping American’s set up compliant structures offshore. I’ll leave the foreign nationals coming into the United States to the large law firms that specialize in this area. 

There are many legitimate uses of offshore companies, LLCs, trusts, foundations, and other structures by United States persons. So long as you file the necessary forms and pay your taxes, there’s nothing wrong or nefarious with privacy, asset protection, and investing abroad. 

In fact, the most popular offshore structure for 2021 is focused on investing abroad. The Offshore IRA LLC is the number one seller in most offshore experts’ basket of products. This is also the most compliant and low-risk way to go offshore.

Americans have a significant portion of their savings in an IRA, Roth IRA, or defined benefit plan. Many are content to invest that in US stocks, treasuries, and/or in a managed portfolio. But, thousands are looking to take this cash out of the United States and invest in real estate or just about anything they wish abroad. This is especially true of Americans who spend all of their time, or some of their time, living in a foreign country. 

Then there are the offshore trusts which can help an American protect his or her assets from future creditors. If you’re in a high-risk industry or business, you might wish to put some cash aside in case things go sideways. So long as you do this well in advance of having an issue, and file all necessary IRS forms, your structure will be respected. 

And, finally, there are many reasons why a US person might need an offshore company. For example, if they are to invest in certain foreign funds, or own a business operated abroad. You might do this through a BVI company or some other tax-efficient jurisdiction. At the end of the day, these offshore companies don’t usually provide a US tax benefit, but they are still required for the investment or business opportunity. They are formed in a zero-tax jurisdiction such as the BVI because you don’t want to pay taxes in your country of incorporation. 

I hope this article has been helpful. For more information on forming a compliant offshore company, IRA LLC, or trust, please contact me at info@premieroffshore.com. I’ll be happy to assist you to set up in a legal manner. 

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Puerto Rico Bank Capital Requirements

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In this post, I’ll review the Tier 1 capital you should have at the ready before filing an application for a new bank license, or before attempting to purchase a bank, in the US territory of Puerto Rico. That is, I will consider the Puerto Rico bank capital requirements for 2022 and not the misinformation floating around the internet. 

The reason I’m writing this article is that there is a great deal of false information on the web and many scammers promoting banks in Puerto Rico and elsewhere that have no idea what they’re doing. Agents promising low capital requirements and quick approvals are everywhere online and are giving the industry a bad name with their BS. 

The reality is very different from the hype. The market in Puerto Rico is competitive. Only the best capitalized and the best equipped to operate a compliant bank will be approved for a bank license in Puerto Rico. 

There was a time when it was easy to get a bank license in Puerto Rico. And, when that was the case, I wrote articles such as Lowest Cost Offshore Bank License is Puerto Rico. This was true in 2016 and before. But, this is absolutely not the case today and in 2022. Puerto Rico is the most difficult of the offshore bank licenses to get. 

Back in the day, you could set up a bank with only $550,000 in Tier 1 capital, the lowest in the industry and the minimum amount written into the law (Act 273). Several banks were licensed in Puerto Rico with this level of capital. 

  • Tier 1 capital is the amount of paid-in capital or the amount of money to be deposited into your corporate bank account when the license is issued. It does not include capital to be maintained to support your deposits, which is usually about 8.5% to 20%. 
  • At the time, from 2014 to 2016, the lowest requirement of a competing jurisdiction in the Caribbean was $1m to $1.5m.
  • Competing jurisdictions include the likes of St. Lucia, Dominica, and the Cayman Islands. I don’t include scam jurisdictions like Comoros. For more, see: Scams in the Offshore Bank License Market

And, what happened to many of these undercapitalized banks? They didn’t have enough money to grow the business, to keep up with their compliance obligations, to hire quality staff, etc. So, they were forced to sell or are just sitting around doing nothing. While most have sold,  there are one or two of these banks still holding on hoping for a big valuation or a purchase.

For example, as stated above, a bank must have Tier 2 capital of about 8.5% to 20% (see Section 4 of Act 273). Undercapitalized banks have trouble accepting large deposits because they don’t have sufficient capital to support large clients. Thus, they also have trouble making a profit in an industry with high capital requirements and which relies on high dollar clients to make a profit.

As the industry in Puerto Rico grew, and the demand for these licenses increased, regulators were able to increase the Tier 1 capital requirement (the amount of money you should have ready when you apply for a license). There are about 50 applications pending today, and only the very best of these will be approved. And, keep in mind that the law lists the minimum capital allowed, but regulators can require whatever amount they wish. 

I suggest that a new applicant should have between $2.5m and $5m in Tier 1 capital available when they file for a new banking license in Puerto Rico. The ultimate amount will depend on your business model and how much backup capital you can show to regulators. Of course, the more Tier 1 capital you have available, the better your application will look.

Another way to look at it is: 

1) Regulators want to see enough cash to carry the bank through startup and at least 2 years of operations. That is to say, you should have the amount required to build out the business and cover all expenses, including quality employees, for 24 months. 

2) Regulators also want to see enough available and liquid cash from the investment group to support the Tier 2 capital requirements and cover the bank’s burn rate during an economic downturn. If you don’t hit your numbers, does the owner or owners have enough liquid cash to ensure the continuation of the bank? If you grow, how is your capital ratio?

Note that a great deal of effort will go into proving that the investment group has the capital as described above and the source of those funds. You must prove the origin of the money that goes into the bank and the source can’t be from a loan… the funds must belong free and clear to the investor or investment group.

As stated herein, regulators will focus on liquid assets. They will ignore assets such as real estate and your home, as these can’t be easily converted into cash to support your international bank should it run into issues. They are looking at the capital you have available and which you might add to the project if necessary.

Each investor, shareholder, director, officer, and key person will need to provide 3 years of audited financial statements. These audited reports are meant to show where your wealth came from and that you have enough liquid cash to support the operation of a bank in Puerto Rico.

Likewise, if a corporation is the owner of the bank, both the corporation and the shareholders of that corporation must provide 3 years of US GAAP-compliant audited financial statements. If the company has many shareholders, the top ownership group and the promoter must provide this information.

For more information on applying for a bank license in Puerto Rico, see Start a Bank in Puerto Rico in 10 Steps and How to Set up an Offshore Bank in 2022.

I hope you’ve found this article on the Puerto Rico Bank Capital Requirements to be helpful. If anyone tells you that they can get you a license in the Territory with $550,000, or in less than 12 months, they are lying or have not filed an application in many years. For more information on setting up a bank in Puerto Rico, please contact me at info@premieroffshore.com. 

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Steps to Follow in Order to Buy a House at a Banking Auction in Mexico

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Buying a house at a banking auction in Mexico is fairly easy if you follow the necessary steps in order to complete the process. All you need is a good legal representation and an estimate of how much money you wish to spend. Next, follow these steps to buy a house at a banking auction in Mexico.

1. When a mortgage loan is no longer paid, the banking institution by law can reclaim the property and put it up for auction.

Same as it is in the United States if a person does not pay his mortgage the bank can take away the property from him. This property goes into a list of real estate and properties that are to be auctioned in the near future.

2. The property that enters into legal conflict is placed at the disposal of a court, which will proceed to sell it at a public auction.

What makes the bank auctions in Mexico extremely safe for the buyer is that a state judge oversees all of the action and gives legality to the purchase being done. You don't deal with the owners and the property is yours almost immediately.

3. To participate, those interested must make a deposit in BANSEFI OF 10% of the published value and make an offer privately.

Banking Auctions in Mexico are not done publicly, they are what in the United States they refer to as silent auctions. There is no direct competition between particulars and you never know what the person next to you bid.

4. For security, you must go to the auction with the deposit ticket made in Bansefi.

Bansefi is the government institution in charge of regulating banking auctions. All of the money needs to go through their website. They will do the due diligence and give the okay to the judge that your bid is legitimate.

5. In this auction, the mortgage rights are granted to a third party, who must follow a legal procedure and become the new owner.

If you win the auction, you are automatically granted property rights there on the spot. If you do not wish to go you can give power of attorney to a trusted representative. The best thing about this part is that you become the owner the same day of the auction.

6. After the last step, the property is deeded

In order to complete this step, you will have to go to a Notario in Mexico. The role of a Notario in Mexico and a Notary in the United States is completely different. You have to pay a Notario in Mexico about 800 dollars for him to draft the deed to your new house.

7. The winner of the auction must pay the balance due (the purchase price less the 10% already on deposit ) in the period ordered by the judge through a resolution approving the auction, which ranges from 3 to 5days or from 10 to 15 days.

It is important to know that the payment for the house cannot be done in installments, it needs to be done in one whole payment in the amount of time that the judge determines. This is usually close to the date of the auction so you should have your money ready.

8. The possession of the property is given in a period of 6 to 12 months, assuming that all previous steps have been completed successfully

Times may vary depending on the type of land or real estate you purchased, but it is estimated that you will be living in your newly acquired property in less than a year. This is of course if you have all of your paperwork in order.

Besides the purchase of the property, there are other expenses that you should consider such as lawyer expenses, the Notario, and any and all pending expenses associated with the real estate.

It would be difficult for me to tell you how much this will cost as the cost of the Notaro can vary and how much involvement from a lawyer in Mexico you will need for the purchase. Every house in the banking auction has some sort of pending services and furnishes that need to be done so you should take those costs into consideration when purchasing the property.

Even though you purchased the property legally, you won’t be able to visit the property until everything has been put in order. In most cases, the past tenant will continue to live there until he is legally evicted.

The steps you have to follow in order to purchase property in Mexico through a banking auction are fairly simple. In just over a year you could own a vast amount of real estate in the country at a cost of less than 50 percent of what is estimated to be worth. Call us and we will happily guide
you through the process.

I hope you’ve found this article on buying a house at a banking auction in Mexico to be helpful.

For more information, or for assistance in any legal matter involving Mexico please contact us at info@premieroffshore.com.

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10 Reasons to Move Your Business to Mexico in 2020

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In this post, I’ll look at the top 10 reasons to move your business to Mexico in 2020. The current government is focused on bringing in new jobs and new businesses to the country. If you’re looking to set up a lower-cost international operation, an outsourcing team, call center, financial services or Fintech company, Mexico should be at the top of your list. 

By way of background, I have operated this business from Panama, San Diego, CA, and Tijuana Mexico. We now have offices in Puerto Rico and Mexico City (in addition to TJ). I’ve been in the offshore industry since 2003 and can tell you from experience that Mexico has become a top tier offshore business jurisdiction. 

If you ignore the political hype between the US and Mexico, you’ll find that the new President is pro-business and cutting red tape right and left to facilitate business in Mexico. This is especially true in Baja California, the state where Tijuana is located and where I chose as my home base. I like to say that we’re on the hard-working and fun side of Trump’s wall. 

Here are the 10 reasons to move your business to Mexico in 2020

Cheap Cost of Labor

Mexico is a top tier business jurisdiction because of the availability of cheap labor. Costs are a fraction of the United States and English is readily available, especially in Baja California. The further south you go, the more difficult it becomes to find low-cost English speakers. 

Note that I say, “low-cost” English speakers are more available in Baja. This is because English is common in the border region. However, if you’re looking for high-level English speakers, such as engineers and PhDs, they are more likely to live in Mexico City and Monterrey than Tijuana. 

The average annual salary for an engineer in the United States is $85,663 dollars. The average annual salary for a mechanical engineer in Mexico is $298,500 pesos or the equivalent of $15,514 US dollars. 

This means that an engineer without a specialty makes almost five times more than an engineer with a specialty degree in Mexico. This is just one of the many professions were salaries are substantially lower. 

You can save a lot of money if you move your business from the United States to Mexico, and thanks to the excellent universities that they have in the country you won’t struggle in finding quality employees for your business. 

Cheap Cost of Living

Living in the United States has become increasingly expensive in the past few years, especially in California. Americans are dropping their dreams of living in a big house with a big garden for living in a small crowded apartment. 

Mexico is a very cheap country to live in. The cost of rent in Mexico is nothing compared to one you can find in the United States. You can live in an excellent apartment for less than $800 dollars a month. I am talking about a two bed and two bathroom place. 

For this reason, it might come as no surprise that many Americans are choosing to live in Mexico, bringing their portable businesses with them or commuting to the United States as necessary. In fact, thousands of Americans live in Mexico and commute to the United States every day. 

This is what I do… live in Tijuana and drive into San Diego or Los Angeles for meetings. If you have a Sentri pass, border wait will be about 15 minutes. If you don’t have Senri, the wait will be hours if you drive. But, you can walk across and take a trolly into the city in a few minutes. 

You’ll find that the number of Americans in Mexico has pushed up the costs of living in cities like Tijuana, but it remains a fraction of San Diego. If you don’t need to commute to the US, the cost of housing and the quality of life is better further south. 

Strength of the US Dollar in the Country 

As I mentioned before, Mexico offers American entrepreneurs the cheap cost of labor, living, and rent, and all of this is very accessible to American entrepreneurs because the US Dollar has been going upwards in the country. 

One US Dollar equals approximately 18.50 pesos and this is probably going to go up. Because of the proximity between both countries, and the economic relationship, movement in the dollar has an impact on the peso. 

Luckily, the American economy has been doing great, meaning that the US Dollar has been very stable in Mexico. The US Dollar is accepted in most businesses around the country and sometimes they will even set their prices in dollars. 

Investing using American currency in Mexico is a great benefit that you won’t be able to find in many countries. What better way to manage your portfolio than to do so with the currency of your own country.

Entry into the Latin American Market 

Mexico is the largest Spanish speaking country in the world and the second biggest country in Latin America. By investing in Mexico you building a base from which you can sell into the Latin American market. 

There are many different treaties between Mexico and many countries in Latin America that are not shared by the United States. If you decide to open a company in Mexico you can use those treaties to your advantage. 

Latin America is a large and great place for an American to expand their portfolio. There are so many opportunities in that market that you won’t be able to find in the United States such as the vast natural resources found here among many other things. 

Similarities Between the US and Mexico

Culturally, Mexico and the United States could not be more different. Despite this, the way that business is done in Mexico is very similar to how it works in the United States as Mexico adopted many of its practices from the American economy.

It is a blessing for many American investors when they come to Mexico and realize that they do not have to make any changes in their business plan as the business and market strategy tend to be the same. 

The Mexican stock market also works quite similar to how the American does. Even to the point where if there is a drastic drop in Wall Street the whole Mexican stock market will feel the impact. 

Vast Natural Resources

One of the many attractive things about investing in Mexico that you will find is that there are a huge number of vast natural resources in the country. Meaning that you can establish a company in Mexico with the sole purpose of exporting natural resources back to the United States or anywhere else in the world. 

Thousands of American companies are already doing this and are thriving in great ways by doing so. Mexico might have a big number of natural resources, but they lack the machinery to exploit all of these. 

American investment is widely accepted because of this reason, as the country and the company benefit hugely. Just like in the United States a good proposal needs to be approved in order for you to continue operating in the country. 

There are 31 states in Mexico and every one of them has something different to offer depending on your needs. I would recommend a great deal of research before you decide to invest in Mexico’s vast natural resources. 

Promising New Presidency

Two years ago Mexico had a very polarizing presidential election, quite similar to the one that happened in the United States. A great number of Mexicans support the new president and hail him as a hero of change, and others loathe him and consider him the worst thing to happen to the country. As I said, very similar to the United States. 

Mexico’s new president is promoting innovation and the creation of new jobs in the country by cutting red tape and inviting foreign investors to consider Mexico. This has not had the quick reaction that his political party might have hoped for, but it is slowly gaining traction.

Many of the changes will apply to small businesses, new and more efficient structures, and great opportunities for FinTech businesses under the Mexican SOFOM. In my opinion, the best changes are related to financial services, crypto exchanges, money transfer and remittance businesses, etc. 

His presidency is still very young and we will have to wait to see if he fulfills his promises, but right now things are looking bright. His political party does not want to be a one-trick pony so they are doing whatever it takes to please the people of Mexico. Creating new jobs through foreign investment is a great way to have voters on your side. 

Growing Economy

Mexico’s economy continues to grow despite its change in the presidency and the impact that the American economy has on the country. Mexico has been growing at a rate of 0.3% for the past decade. 

That number might seem small, but it gives an insight into what is happening in the country. Small nonrisk investments govern the market at this moment and will continue to do so in the long run. 

Financial institutions all over the country have benefited greatly over the growth of their sector and will continue to do so. If your idea is to start a financial institution outside of the United States I recommend doing it so in Mexico. 

Proximity to the United States

The main reason why you are probably considering to invest in Mexico is because of its location. Mexico is attached to the southern part of the United States share one of the biggest borders in the world. 

Even though the United States has another neighbor, Canada, Mexico is very different in many respects to both of those countries to make it a very interesting and promising option for investment. 

All of the major American Airlines have direct flights to Mexico City so you can be in the country in less than 5 hours, depending on your location. Also, thanks to its proximity to the United States residents of Mexico already know how business is done in America so you will not have to alter your business plan in the slightest. 

From my office in Tijuana, I can walk to the border and be across in 15 minutes. The wait time and the pedestrian crossing is less than 5 minutes on weekdays and less than 30 minutes on weekends. The line to drive across is a different story unless you have a Sentri pass. 

The proximity is a great advantage as you can take care of your business without leaving the United States. It’s also excellent for nearshore outsourcing and those, like me, who need to go to meetings in San Diego and Los Angeles regularly. 

Complete Control 

The tenth reason to do business in Mexico is that you can now have complete control over your operations. In most industries (not including banking or financial services), you no longer need a Mexican partner. Likewise, you don’t need a “bankers trust’ fideicomiso to hold real estate investments. 

For Fintechs and financial services companies operating through a SOFOM, all you need is a local representative. You give them a few non-voting shares and give up no control. This is a great improvement from when a Mexican person had to own 25% to 50% of these businesses. 

It’s become much easier to set up and control businesses in the country. Back in the day, doing business in this country was a real challenge. Ease of business has improved greatly in the last two years and every sign is that this will continue throughout 2020. 

For more on setting up a company in Mexico, see Step by Step Guide to Incorporating a Business in Mexico

For these reasons, and improved quality of life, I have chosen Mexico for my business. I plan to continue to expand and invest in Mexico. I highly recommend this country as an efficient option for international expansion. 

I hope you’ve found this article on reasons to move your business to Mexico to be helpful. For more information, or for assistance on investing in Mexico, contact us at info@premieroffshore.com or call us at (619) 483-1708

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Itemized Deductions for 2020

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Itemized deductions are expenses on specific products, services, or contributions, that can be used to reduce your tax bill. These itemized deductions are only allowed if the taxpayer does not use the standard deduction to reduce the amount of taxes.

Some of the most popular types of itemized tax deductions used by taxpayers include charitable donations, child tax credit, adoption credit, mortgage interest, earned income tax credit, and medical expenses among many others.

You should not confuse itemized tax deductions with tax credits. Tax credits are a much simpler fiscal concept than tax deductions. With tax credits, you just subtract the number of tax credits to what you pay on yearly taxes, while tax deductions take into consideration many things such as what tax bracket you belong to.

There are many itemized deductions that you can include in your tax report, the list is quite extensive. You must do your research and make sure which deductions apply and which not, the following are some of the most popular itemized deductions for 2020.

By far one of the most popular items used to deduct taxes is by adding medical and dental expenses on your tax report. This includes payments done to doctors, dentists, surgeons, chiropractors, psychiatrists, psychologists, etcetera.

Deductions using medical and dental expenses will remain the same percentage as in 2019 for 2020 which is 10%. Meaning that you will only be able to deduct those expenses that exceed 10% of your adjusted gross income. 

Taxpayers who reduce taxes through itemized deductions on federal income tax returns are permitted to reduce state and local real estate and personal property taxes including income taxes or general sales tax. 

These deductions done to state and local taxes are limited to a total of $10,000 dollars. Married taxpayers who file their taxes separately is $5,000 for each. These deductions are some of the most popular and it is quite easy to apply for them. 

Home Mortgage Interests may only be deducted on acquisition indebtedness interests such as your mortgage being used to buy, build, and/or repair your home. The amount that is allowed to do this can reach up to $750,000 or half which is $375,000 for those married taxpayers who file their taxes separately. 

Even though they have been a number of controversies involving charitable donations as a means to deduct taxes, these itemized deductions are still going strong. Although they are being scrutinized more than ever before and some changes were made for taxpayers who make charitable donations and then report them. 

Due to these changes and tax reforms the limit of cash donations allowed for public charities made an increase from 50% to 60% in 2020 and it will remain that percentage for the rest of the year. 

One of the major changes for itemized tax deductions in 2020 is for casualty and theft losses. Casualty and theft losses have been removed from the list except for the losses that can be proved in a federal disaster area.

Another major change on itemized deductions is the ones for job expenses and miscellaneous deductions which in 2019 were subject to a 2% deduction on Adjusted Gross Income. They have all been eliminated. 

The child tax credit had an extension of $2,000 for every child that qualifies that is refundable by up to $1,400. The $1,400 are subject to phaseouts and reviews by the corresponding fiscal authorities.

Adopting a child with special needs gives you as a taxpayer a credit of $14,300. The maximum credit that is allowed for any additional expenses is also $14,300. The amount fluctuates for taxpayers with an income that equals more than $214,520.

Student loan interest deduction for 2020 remains the same as it was in 2019 at $2,500. If you pay more than $85,000 you do not qualify for this deduction. This is one of the most sought after deductions, currently, there are a number of proposed reforms to make this number higher. 

Having a Medical Savings Account can be very beneficial for your tax plan. For individual taxpayers who are only covered by the Medical Savings Account, there is an annual deductible that is no less than $2,350 but no more than $3,550.

Shared individual responsibility payment has been eliminated for a variety of reasons, also the Pease Limitations for 2020 have been shut down. For Americans living outside of the country, the Foreign Earned Income Exclusion for 2020 is $107,600.  

I hope you’ve found this article on changes to the itemized deductions for 2020 to be helpful. For more information, or for assistance with international tax matters contact us at info@premieroffshore.com or call us at (619) 483-1708

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Where to Start a Cryptocurrency Exchange – Crypto Friendly Countries

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In this article, I will focus on where to start a cryptocurrency exchange in 2018. That is, where to incorporate a new cryptocurrency exchange. Which countries are friendly to startup cryptocurrency exchanges and why you should consider each based on your business model. Countries are not listed in any particular order. You should select your […]

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What can I buy with Bitcoin?

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The list of items you can buy with Bitcoin hasn’t changed much since 2014. Yes, there are some good websites in the group of 100,000+ that accept Bitcoin, and there are restaurants that accept crypto, but there have been very few large transactions done in Bitcoin… until now. To date, Bitcoin has been a buy […]

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Top two max privacy options to plant your flag offshore

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The last few months have seen a striking increase in demand for offshore residencies and investments. Americans are looking to diversify out of the dollar, move their assets abroad, and to plant as many foreign flags as possible before the year end. Here are the top two max privacy options for 2018. Because of the […]

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The best EU residency visa in 2018

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The best EU residency visa in 2018 is Portugal. Portugal is the most efficient and lowest cost residency program in the EU. Portugal is also the best second passport option by investment in the European Union. Here’s why you want a residency visa from Portugal in 2018 and how to get one. Let me preface […]