Tag Archive for: My Thoughts

Estonian E-Residency Makes No Sense

The tiny country of Estonia is selling a new kind of residency… one it calls e-residency or e-citizenship. Here’s the bottom line on why e-residency in Estonia is a waste of time for Americans… and might get you into trouble with the IRS.

The Estonian e-residency program has been written up by the Wall Street Journal and The Guardian, and recommended by Simon Black and International Man. Simon went so far as to suggests it will change the “nation state” as we know it.

What a bunch of BS… here’s the real story.

Let’s start with the pitch: Sign-up for e-residency, turn over your information and biometrics, pay small fee (about $62), appear at one of their embassies and you get a biometric ID card.

What can you do with your Estonian e-residency card? Not a lot.

That card “allows” you to form a company in Estonia online. WIth corporation in hand they  might, just might, allow you to open a bank account in the country. Note that you’ll need a legitimate business purpose and travel to the bank in Estonia to open the account.

The ID card doesn’t make the process of opening an offshore bank account easier or provide any additional privacy. The bank will want all of the usual supporting documents, such as your US passport and reference letters. No, you can’t use the card as your ID to open the bank account and they’ll report your account under FATCA just like any offshore bank.

Sure, e-residency in Estonia sounds hip and cool, but it offers zero value. In fact, it might get you into trouble.

Now, you might be wondering what I’m on about. So what if people want to spend $62 for an online ID card? Most of the headlines cited above are from 2014. Why am I harping on it now?

Because the Estonian e-residency program might cause all kinds of confusion and IRS trouble for Americans.

First, e-residency isn’t a path to citizenship, a second passport, or even traditional residency. It’s only an online identification card… which doesn’t include your photo, so it can’t even be used as an ID or travel document in the normal world.

And here’s my real concern with this program:

I new client came into my office last week looking to prepare his U.S. taxes. Let’s call him Bob.

Bob spent about 240 days out of the U.S. in 2014, operated an online business through an offshore corporation and netted about $100,000.

Bob thought he qualified for the Foreign Earned Income Exclusion because 1) he was out of the US for most of the year and 2) he was an e-resident of Estonia.

Bob was wrong. In order to qualify as a resident of a foreign country under the FEIE you must be living in the country, have legal resident status, and generally “make that country your home.” You should be filing taxes there and it should be your base of operation… the place you return to after traveling.

Estonia’s e-residency program provides none of those things. Sure, you can call yourself a resident, but all you really have is a fancy online ID card.

Had he not been confused, Bob could’ve qualified for the FEIE without putting down roots or paying for a real residency permit. But he should have been out of the U.S. for 330 out of 365 days, not 240.

Had he not been confused by internet sites hyping Estonia’s e-residency program, and had he planned his offshore business structure properly, he could have saved big money in 2014 and again this year.

This confusion cost Bob about $36,000 in US taxes in 2014. He’ll probably pay through the nose again this year. He relied on the e-residency program, and his own research rather than a hiring a professional, and got burned.

Those of us who write about the offshore industry are always looking for the next big thing. What can we do to increase privacy and protect our assets? In the case of Estonian e-residency, I must call BS.

The bottom line is that Estonia e-residency offers little value to the American and is likely to do more harm than good.

You will find many articles on this site on how to legally minimize taxes and protect your assets abroad. If you’re new to this offshore thing, take a read through my Getting Started section.

Don’t be like Bob. Hire a firm experienced in U.S. tax planning to form your offshore structure and plan your offshore adventure.


Offshore Investment

Aged Population to Stress the Economy

Aged populations will be the norm by 2020, placing a great deal of stress on world wide economic systems, especially those founded on government backed treasuries and bonds. Other areas of weakness will be Social Security and Medicare. As our population ages, we can expect higher taxes on our IRA and passive investments. Here’s why the average age of our population matters and how to protect yourself.

Definition: An aged population is a country where 7% or more of the population is 65 or older. A super-aged society has 20% or more of its citizens over 65. We assume people will retire at 65.

Over the next 6 years, the number of super-aged societies will increase from 3 to 20. According to an August 6th report from Moody’s, this nearly seven fold increase will place a great deal of stress on our economy and the United States dollar.

Here’s Why Aged Population Matters

Studies have shown that, as a population ages, the demand for treasuries and bonds increase. The higher the average age, the higher the reliance on fixed income government backed instruments. The bottom line is that pensioners go for fixed income instruments as “safer” than stocks and real estate.

Large changes in behavior move markets. Higher demand for fixed income investments will push prices down. But, the U.S. is now returning about 2%, and 45% of the world markets are returning 1% or less on their government backed fixed income instruments. There’s just no where for these markets to go.

But I’m getting ahead of myself. Let me take a step back and explain.

Of the developed nations, most of the European Union is aged. Also, the United States, Canada, and Australia have aged populations. The super-aged nations are Germany (with returns on bonds of 1% or less), Italy, and Japan. Japan has the oldest average population in the world.

By 2015, Finland and Greece (a model of financial stability) will join the group of super-aged nations. The Netherlands, Portugal, Slovenia and Sweden will arrive at the party by 2020. Eleven more countries will pile on by 2025.

Of the developing nations, or the BRICS, Russia, Brazil, and China are all aged. None are at risk of becoming super-aged.

These changes have a profound effect on our economy. For example, Moodys found that world savings declines by .5% to 1.2% for each 1% increase in the aged population. That is to say, for every 1% increase in those 65 or older, we see a .5% to 1.2% decrease in total savings.

As retirees begin to deplete their IRA accounts, and live on their savings rather than saving and spending their salaries, the average level of savings decreases. When countries become aged or super-aged, the result can stress the market.

When you combine this with lower returns on treasures and fixed income instruments (bonds for example), we can expect the level of savings to decrease at a faster rate. As returns decrease, retirees will need to reduce their expenses (quality of life) and increase their rate of withdrawal.

Let’s look at another statistic…yes, I’m in a numbered state of mind today.

The “support ratio” is the number of eligible adults expected to be working. These working adults are paying in to the system and keeping the system afloat. As the average age of the population increases, the number of workers paying in to the system decreases, further straining an already dire situation.

The lowest support ratio is found in Japan. This country has 48.7 persons aged 65 or over for every 100 eligible worker in the 15 to 65 age range. By 2020 the burden of 1 retiree will be carried by only 2 workers. A ratio that many believe to be unsustainable.

Thirteen European countries, including Sweden and Germany, will have ratios between 2.7 to 1 and 3.3 to 1 by 2020. Canada is currently at 3.6 to 1 and the United States is at 3.9 to 1. In Asia, South Korea is 4.6 to 1 and China is 6:1.

Note that these numbers count eligible workers, not the actual number of people in the workforce. The higher a country’s unemployment rate, the greater the threat.

Nations in current financial crisis with extremely high unemployment rates are under more immediate pressure than those with lower unemployment. Greece and Portugal have more pressing concerns with their aged populations than does Germany or Japan.

The United States is hiding the truth in its unemployment  statistics. While the rate seems to be improving, we don’t know how many workers have simply stopped looking for work and therefore are no longer considered unemployed. We do know the U.S. has a 62% labor participation rate. If applied to our support ratio, it could move from 3.9 to 1 to 2.2 to 1 (though, this is a mixed bag and like comparing apples to mangos).

What does all this mean to you?

  • We can expect even higher taxes on capital gains and retirement account distributions.
  • The nationalizing of the retirement account system to cover debts from Social Security becomes more likely.
  • The age of retirement may be increased.
  • The assets within your IRA will become targets of the IRS and other cash strapped agencies. Remember that the IRS may seize your retirement account and State laws, such as homestead exemptions, don’t protect you.
  • As the government continues to focus on controlling capital, limitations on IRAs will increase. Most believe the right to take your IRA offshore will be eliminated.

The bottom line is that retirees will be required to make even greater sacrifices to keep the U.S. financial system afloat. It will fall upon you to keep the economy together. We don’t know exactly what form these forced contributions will take, but we know they are coming.

I hope you have found this post on our aged population thought provoking. For information on how to take your IRA offshore, or for questions on any article on this site, please send an email at info@premieroffshore.com

IRS Criminal Investigation

IRS Criminal Investigations on the Rise

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Will Anyone Stand Up?

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

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

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

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

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

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

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

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

U.S. Passport

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

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

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

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

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

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

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

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


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


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

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

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

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

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

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

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

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

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

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

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

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

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

Dollar Will Fail

Why the Dollar Will Fail

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When to Hold

When to Hold and When to Fold

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retire Abroad

Retire abroad with Maximum Privacy

If you are thinking about retiring abroad, here is how to maximize your privacy. We start with the premise that the U.S. government wants you to disclose all assets, holdings, transactions, and investments. We then look for exceptions to those rules to find the legal loopholes that will allow you to retire with maximum privacy.

As you know, U.S. persons must pay tax on their worldwide income no matter where they live. Even if you retire outside of America, the IRS wants theirs. To enforce these laws, the U.S. requires you to disclose your assets each and every year on the Foreign Bank Account Report form and the Foreign Asset Report. Both of these force you to tell the U.S. what you have and where they can find it.

Well, there are a few … and I mean a very few … exceptions to these reporting requirements. In this article, I will describe each to give you an idea on how to retire abroad with maximum privacy.

My favorite tool to maximize privacy offshore is physical gold held in your name. You are not required to report physical gold on the FBAR or the Foreign Asset statement. Physical gold is gold bars or bullion, and not gold stocks. Paper gold must be reported while physical gold is exempt.

So, you may hold gold in Panama or Switzerland, in a vault in your name, and you are not required to report it to the U.S. I suggest gold is an excellent hedge if you have any concerns about the U.S. economic system or the USD.

Two quick sidebars:

  1. When I say something is held in your name, I mean that you are the owner. If gold is held in a corporation, trust, or foundation, you need to report the entity on the appropriate form and the asset on that entity’s balance sheet. If no structure is used to hold the exempted asset, then no reporting is required.
  2. I am talking about living abroad with maximum privacy, not reducing or eliminating U.S. tax. I will leave that topic for another day. Suffice it to say, if you buy physical gold, you are not required to report its existence. However, when you sell that gold, it is a capital gain, taxable on your U.S. return unless it is inside a U.S. compliant retirement account.

The next best way to retire overseas with maximum privacy is to invest in foreign real estate and hold that property in your name … again, not an offshore company. So long as you live in it, or it is vacant, you have no reporting obligations on foreign real estate.

If you decide to rent it out, then it is reported on your IRS Form 1040, Schedule E, just as a U.S. property. Though, there is nothing that necessarily denotes it as an offshore property. If it is your primary or vacation home, there is no reporting until you sell it. Then it goes on Form 1040, Schedule D as a capital gain. Because you will probably pay significant tax on the sale in the country where the property is located, you usually don’t have any tax due to the U.S. You will find several detailed articles on this site discussing offshore real estate transactions.

The best way around the FBAR form is to open your offshore bank accounts in the name of an offshore IRA LLC. The LLC is owned by your U.S. compliant retirement account and thus exempt from the various reporting requirements. While all savings accounts must be reported if you have more than $10,000 offshore, a bank account owned by your retirement account is excluded.

And if you think about it, that makes sense (a rare convergence of law and logic). When you take your IRA offshore, it is the IRA that owns the offshore LLC, and you act as the manager or fiduciary of that structure. Because the account is owned by an IRA, and not a person, it would be confusing at best to require an FBAR.

If you have questions on this, or would like proof of my claim, search FBAR at IRS.gov. You will see that accounts held by an IRA are exempt.

The same goes for an IRA account inside of a Panama Foundation. This structure allows for maximum asset protection, as well as offshore estate planning, and remains exempt from the FBAR form. Please see my recent posts on the Panama Foundation IRA structure for more information.

Another option for avoiding the FBAR is to invest in an offshore life insurance. If it’s a U.S. compliant policy, a single pay policy will usually allow your income to grow tax free and won’t be reported.

Though, there are many variations of offshore life insurance. I suggest you talk with your insurance provider and confirm that the structure you are considering does not require you to report the account on the FBAR and is exempt from all other U.S. filing obligations.

The last option I will offer on how to retire abroad and maximize privacy is to hold any business interests or projects in joint venture structures where your partner is not a U.S. person. If the other owner of the offshore company is neither a U.S. citizen nor a U.S. resident, you will have a lot more freedom.

For example, if you own and/or control 50% or less of an offshore company, then you need only report the formation of the structure on IRS Form 5471. You are not required to report the company each year … just when you incorporate it and when you sell it.

Likewise, if you are not a signatory on the offshore company’s bank account, you will not need to file the FBAR. In that situation, you could be a partner in an investment company for decades and have no U.S. reporting obligations until the company is sold.

I hope you have found this article on how to retire abroad with maximum privacy helpful. Please call or send an email to info@premieroffshore.com for additional information. We will be happy to work with you to structure your retirement abroad to keep you compliant with the IRS.

Attack on Your Retirement

Attack on Your Retirement

The U.S. Government has launched an all-out attack on its retirees, crushing their investment returns with low interest rates. Be it intentional, or ignorance, the government is artificially pushing down returns, which does the most harm to our nation’s seniors.

As the United States attempts to stimulate its economy with cheap money, it’s the seniors, who need safe U.S. investments, that will suffer. Just when you should be invested in boring, stable, and guaranteed, the returns on U.S. treasuries are miserable. Adding to this mess, the U.S. economy is the epitome of risk, but returns are lower. When treasury returns should be higher to compensate for this risk, you are lucky to net .5% after an adjustment of 2% for inflation.

* That is to say the yield to maturity on a 20 year treasury is 3% and inflation is 2%. At least you’re not retiring in Europe, where returns are 1% … and my see .5% this year (before inflation).

This all means that America’s seniors are left with two choices: 1) stick with treasuries and reduce your lifestyle, or 2) diversify out of the United States. I suggest there are equal or lower risk investments available offshore that are paying for better returns.

But, first, let me talk about my premise that America’s seniors are under attack from their own government. The Federal Reserve has been pushing law rates for the last six years. This has resulted in miserable returns for those who stuck with treasuries. Obviously, it’s Seniors and Retirees who most often look to protect their nest egg with conservative investments and are thus hardest hit by this policy.

As you’ve read in my previous posts, returns on treasuries are about half of what one would expect from the market. These low rates are the result of Obamanomics. Lower returns mean you have less to live on or that you must take on more risk … a Hobson’s choice for a retiree living on a fixed income.

Next, let’s talk about my claim of 2% inflation over the next decade. I extract this from the yield to maturity of 20 year U.S. treasuries at 3% (going to 2.5%). U.S. the yield to maturity of inflation protected treasuries, which is about .6%. The spread between these is the break-even inflation rate of 2.4%.

Some of this 2.4% represents a bonus for taking a risk on the inflation adjusted treasury (called a TIPS). When you buy a treasury, you get a “guaranteed” return. When you buy a TIPS, you get a return fixed to inflation. If it goes higher than expected, you make more. If it goes lower, you earn less … thus, TIPS include a bonus for taking that risk.

Most financial analysts agree that this risk is worth .4%. Therefore, the expected inflation is 2%. Of course, expectations are often wrong, but that’s the rationale behind TIPS and how we get to a 2% inflation number.

And this can bring you, my valued reader, to why holding U.S. dollars in your retirement account results in a net return of -2% per year. If you hold your account in cash, its value is going down by the rate of inflation.

All of this is based on the assumption that the United States dollar, and treasury, are the world’s safest investments. I believe this is a deeply flawed assumption. Now, I’m not a doomsayer, but I do think that America and the dollar face significant risks and that these risk are not priced in the market.

For example:

  • the Federal Reserve is printing money as if it’s going out of style,
  • quantitative easing is artificially propping up the stock market and the dollars,
  • France has begun to move away from the dollar as its transactional currency,
  • Russia wants to denominate all oil and gas contracts in Rubles or Euros, eliminating the petrodollar, and
  • The world’s emerging markets (the BRICS, Brazil, Russia, India, China and South Africa) have united against the IMF and Worldbank in preparation of a concerted effort to push the dollar from dominance.
  • The Fed’s balance sheet is 25% larger than it was just one year ago ($4 trillion – see Grant’s Interest rate observer).

You will find detailed articles on each of these risks on this site. My point here is that these risks exist. It’s up to you to figure out how much they must be protected against.

So, where might you turn for higher secured returns? Most analysts agree that the United States is in for a decade of flat, slow growth. From the Economist to Forbes, everyone is predicting tough times ahead. You can also find an article here explaining why the U.S. stock market, which is at record highs, is likely to be quite average over the next several years.

I believe it’s time for the American retiree, or anyone looking to boast the returns in their retirement account, to invest abroad. I also believe you should be defensively minded as you decide how to diversify your portfolio. Now is not the time to gamble or to play a risky gambit. Focus on safety, security and diversification out of the dollar.

The most basic form of defense, and one I certainly don’t recommend, is to the buy the 10 year U.S. treasury and hope for better by the time it matures. This means your inflation adjusted return over that decade will be around .3% rather than the lofty .6% found in the 20 year.

You can do much better than that offshore. Here is what I recommend.

First, get your retirement account out of the U.S. and out of harm’s way. Form an offshore IRA LLC and move your IRA into that structure. This will give you control over the account and allow you to invest in just about anything you like offshore. For more information, see my page Self Directed IRA at the top right of this site.

Next, consider investing in foreign real estate with your savings or your IRA. This is an asset which has a high ROI compared to the treasury, and you can invest in a country (such as Panama) with a strong history and appreciation curve. I also note that inflation, if it exceeds the 2% anticipated above, is likely to help your returns in Panama rather than hurt them.

I also suggest it is time to acquire a foreign residency in case you want to remove yourself from the United States. While times are good, these residencies are easy to get in countries like Belize, Panama, Colombia, etc. If things don’t go well in the next few years, some of these programs are likely to be eliminated.

My preferred residency program is offered by Panama. If you combine an investment in teak (around $15,000) with the favored nations visa, you can get residency in no time. Considering the minimal commitment, compared to other programs that require real estate purchases in the hundreds of thousands of dollars, this is a very efficient solutions.

Finally, I suggest you buy physical gold and store it outside of the United States. Gold is the best hedge against a system wide collapse and the only guaranteed investment that will increase in value if the dollar declines. If you’re like me, you think a realignment of the dollar and America’s way of life is more likely than a total failure. Even so, you should move some of your portfolio to physical gold as a hedge against this 10% to 35% realignment.

I never recommend paper gold. Stocks, funds, and gold certificates, are of little value in a major crisis. I also avoid the gold documents offered in Australia and the Perth Mint. Those are gold allocations, not physical gold you take possession of.

Note that physical gold (like real estate) need not be reported to the U.S. government. Gold certificates and stocks are subject to the FBAR or Foreign Assets reporting requirements, and thus are not private if you wish to comply with U.S. law … as we all must. Physical gold held in your name is exempt from these forms.

I hope this post has been helpful. If you would like more information on any of these topics, please give us a call or write to info@premieroffshore.com.

* Premier is not a gold dealer and we don’t make a commission on any sales. These suggestions are meant as a guide. We are happy to introduce you to qualified professionals.

Diversify Your IRA

Proof You Should Diversify Your IRA Offshore Now

A record high stock market in the U.S. exposes the suckers! Don’t be one of them.  Diversify your IRA offshore as soon as possible.  This article offers statistical proof that you should diversify your IRA abroad.  U.S. returns over the next 10 years will wipe out your retirement account.

While everyone is running to dump money in to the stock market, the smart investors are taking their profits and moving to investments with more upside.  When a market is at an all time high, it means run… not invest more!  If you wanted to get in to stocks, you should have been buying in 2009 after the market bottomed out.  Now, you are just going to buy high and sell low.  Even the most optimistic outlook is for slow U.S. growth.  You will do far better to diversify your IRA in to foreign real estate or markets with significant growth potential.

What Alan Greenspan once called “irrational exuberance,” is back.  I hear smart people… doctors and lawyers and such who’ve sat on the sidelines for the last four years and are all excited about investing in the United States stock market.

Remember, if you follow the herd, you’ll be left holding the bank, when the smart money gets out… and they will get out.  Now is the time to diversify your IRA.

Please don’t get me wrong.  I am not arguing against stocks or the U.S. market in general.  If you have a 10 or 20-year plan, stick with it.  Remember that the 2008 crash didn’t wipe out investor’s retirement accounts, it just delayed their plans.  If you had stayed in the market, you would have made back your losses and then some.

What I’m saying is that now is the time to ignore the financial news and diversify in to international markets.  Studies show that investors who received no news performed better than those who received a constant flow of good and bad news.  Don’t get caught up in the reactionary cycle.

Statistical Proof That You Should Diversify Your IRA Offshore

Yes, the U.S. markets are at record highs.  From here, “basic math suggests that U.S. asset prices have less room to rise.  This means that the long-run outlook is for lower returns ahead.”  This, according to Wade Pfau, Professor of Retirement Studies at American College for Financial Services, a Ph.D. economist, means you should diversify or reduce your IRA distributions.

Conventional wisdom says that you can withdraw 4% to 5% from your retirement account each year and have cash left over at the end of 30 years.  If you are retired more than 30 years, you need to take out less.  It also assumes you are 50% in stocks and 50% in bonds.  This assumes you are earning 3.5% to 4% on your IRA.  If this goes down, your withdrawal rate must also decrease.

Based on Pfau’s recent study of stock and bond returns since 1926, the amount you will be able to take out of your U.S. based retirement account is a function of your return on investment.  Because this return is expected to be lower than the previous decade (because the market is at record highs), you’ll need to adjust your withdrawals or increase your returns.  I suggest you focus on the second option and diversify your IRA out of the U.S.

Specifically, the amount you can safely take out of your retirement account has gone down from 4% or 5% to just 3%.  To support his analysis, Prof. Pfau cites the U.S. Treasury markets.  The historic yield has been 3.5% and is now only 2.6%.  Current 10-year yields generally correlate to the total return you can expect over the next decade.

This, combined with earning ratios on the S&P 500, get you to an average return in the U.S. of 2.2% after inflation over the next decade… less than ½ of the historic average.

Assuming your IRA is $1 million, a 3% drawdown means you have only $30,000 a year to live on.  With Social Security and other income, you’ll be lucky to end up with $40,000 before taxes.  To me, this means I should consider living abroad… as well as investing offshore… where the cost of living can be a fraction of the U.S.

Prof. Pfau’s computer model indicates that pulling an inflation-adjusted amount of $40,000 (4%) per year from a $1 million dollar IRA ran the account dry in 57% of the simulations.  Taking $30,000 in distributions crashed the account only 24% of the time and a 5% withdrawal emptied it 82% of the time within 30 years.

Where to Invest Your IRA

The solution is to use diversification to stretch your cash and extend your retirement.  This is especially urgent when you consider the length of the average retirement.  We are living longer, and our retirement years are more than 30, thus we are outliving our savings.

“Tell your dollars where to go rather than asking them where they went.”  Roger W. Badson, 1875 to 1967

In order to diversify your IRA, the first step is to take control over your account by moving it in to an offshore IRA LLC.  Once that is complete, you can invest in just about anything you like outside of the United States.

So, where might you put your investment dollars?  If you consider only historic highs, most EU countries are well off their averages and a good buy.  The concern is that many perceive currency and other risks because of the nature of the Union.

*To be honest, I’m not an expert on the EU.  I’m focused on south of the U.S. of A.

My favorite countries for diversification are Mexico, Panama and Colombia.  Most of the drug wars have come to an end in Mexico and they’ve rewritten the laws that limited investments in coastal real estate… or required you to use a banker’s trust or other convoluted structure.  So long as you spend the time and get to know the city of Mexico you’ll invest in, I believe it is one of the best options available.

Those of you who read my columns regularly know that I’m a big fan of Panama and that my business and investments are centered there.  I prefer Panama City to other areas, and now believe that the secondary districts of the city hold the most promise.

For example, if I were to diversify my IRA in to Panama today, I would avoid Punta Pacifica and Pitea.  I’d look to San Francisco, around Park Omar, and parts of 50th Street.  Most of the gringo dollars going in to Panama are flowing in to Pitea, around Trump Tower, so I’d focus elsewhere.

The same holds true for Colombia.  My preferred city is Medellin and I’d stay away from the ever popular “golden mile.”  I’d look for condos around parks and within walking distance to cafes and entertainment.  For me, the prices within the mile are just too high.

Whenever you invest offshore, you must understand the region of the city you are buying in to.  Each area will perform differently and will have differing long term prospects.  Doing your homework is 10 times more important offshore than on… especially when there’s no MLS.

If you would like additional information on where to invest, I suggest www.liveandinvestoverseas.com.  For more costs and rules related to taking your IRA offshore, please send me an email to info@premieroffshore.com.  I’ll be happy to answer any questions you may have.

Attack on the Dollar

France’s Attack on the Dollar

There is an attack on the dollar from all sides that will have a major impact on your retirement and savings.  This is the first of a two part series on the attack on the dollar by friends and old foes alike.  This time, it’s France coming after our currency.

Here’s the setup:  The United States now claims authority to regulate ANY transaction denominated in dollars.  Basically, any time the dollar is involved in a deal, the U.S. feels it has the duty to control the terms… might makes right seems to be the prevailing sentiment.

To many of you, this might sound ridiculous.  The U.S. wants to regulate a transaction having nothing to do with a U.S. business interest or one not tied to America in any way, simply because the contract lists the terms in dollars?

That’s exactly what happened in the case of the French bank BNP Paribas.  This company entered in to transactions with countries that the U.S. government didn’t like, including Sudan.  They made the mistake of setting the terms of these transactions in dollars, which let mighty Uncle Sam step in and fine the bank nearly $9 billion dollars (yes, that is billion, with a B, and yes, the fine was denominated in dollars).

These transactions between BNP Paribas and Sudan had nothing to do with the United States.  Neither party had any business interest in America, no European Union or French regulations were violated, and the only connection between the transactions and the U.S. is that they were completed in dollars.

Of course, France has come out very strongly against this attack on their financial sovereignty.  The best articles I’ve found on the topic are in the Financial Times, including July 7, 2014 – Paris rails against the dollar’s dominance.

And this is why we get to a place where France is mounting an attack on the dollar.  If the U.S. wants to control all transactions involving its currency, the solution is simple:  dump the dollar as the transactional currency.

Now, I’ve been on this beat for a number of years and consider myself experienced in international banking.  I never thought that the U.S. would go so far as to regulate a transaction simply because it was in dollars.  It seems preposterous… but I guess there is no limit to the audacity of my country.

Even after rules like FACTA et al came along, where foreign banks must report transactions involving U.S. persons, I still failed to see the level of control the U.S. was hoping to force on the rest of the world.  I justified these regs as being for the collection of tax from Americans living or investing abroad.  Now it is clear all of these attacks on liberty and financial freedom are for control.

While we’ve talked in theory about what would happen if the U.S. dollar was no longer the dominant currency, it now seems reasonably likely it will fall from its perch.  For example, the French Finance Minister, Michel Sapin, said,

“We need a rebalancing of the currencies for global payments.  The BNP Paribas case should make us realize the necessity of using a variety of currencies.”

“We Europeans are selling ourselves in dollars when we buy planes for example.  Is that necessary?  I don’t think so.”

“A rebalancing is possible and necessary, not just regarding the euro, but also for the big currencies of the emerging countries, which account for more and more of global trade.”

While the U.S. dollar has enjoyed a long run as the world’s currency, its hold over the world is becoming a matter of tradition, but no longer a requirement.  There is no need to buy oil in dollars.  Even if the price is quoted in our currency, the refinery can certainly transact in euros, or any currency it chooses, by using a standard exchange rate.  As with any other transaction, if the buyer or seller wants to hedge against fluctuation, they are welcome to do so.

And, after BNP, the major industries in France are behind the attack on the dollar.  For example, Total, the largest company in France by market capitalization, and the CAC Industrial Group, both came out in favor of dumping the dollar.  CAC said, “Companies like ours are in a bind because we sell a lot in dollars but we don’t want to always deal with the U.S. rules and regulations.”

And why should a company in France, doing business with a company in Africa, have any involvement with U.S. regulations?  It seems America may have bitten off more than it can chew in this case and their imperialistic attitude just might come back to bite them.  You can only push others so far before they fight back.

And, this attack on the dollar is a BIG deal.  It has significant implications for you and your savings.  If the dollar loses its place as the transaction currency, the demand for dollars, which has been artificially propping up its value for decades and allowing the U.S. to borrow and repay through inflation, will be over.

How much damage might this cause?  More than half of all international transactions are done in dollars.  The FX market is $5 trillion a day and the dollar is on one side or the other of 87% of all trades.  Add to this the fact that 60% of government reserves are in dollars, and you can see the size and scope of a move away from the dollar and how it will affect demand.

The risks associated with this attack on the dollar are enormous.  Please stay tuned for my next post, Russia’s Attack on the Dollar, and why the BRICs are looking to dump the petrodollar.

I will leave you with the suggestion that you diversify a portion of your portfolio out of the United States and out of the U.S. dollar.  You might consider purchasing physical gold and/or taking your IRA or other retirement account offshore.

We at Premier don’t sell gold, so my suggestions are just that… and I like to think they are unbiased since we don’t have a financial incentive to suggest one product over another.  If you would like a few recommendations on how to purchase physical gold outside of the U.S., please send me an email to info@premieroffshore.com.

We do offer offshore IRA LLCs and will help you move your retirement account(s) offshore.  For a confidential consultation on taking your savings offshore, please drop me an email or give us a call.

Attack on the Dollar

Russia’s Attack on the Dollar

Russia is mounting an attack on the dollar and will threaten your retirement account in 2015.  An attack on the dollar that results in a significant devaluation will have a major impact on your assets denominated in dollars.

As I said in my last post, France Attacks the Dollar, our mighty greenback is in trouble.  I now say that Russia will be happy to push it over the cliff.  Harkening back to the days of the cold war, Mr. Putin is leading the effort to replace the United States dollar as the world’s reserve currency.

First, remember the election battle between Romney and Obama.  Romeny claimed Russia was the number one international threat America would face in the coming years.  Obama claimed that his opponent was living in the 1980s to great applause… I guess no one is cheering now.

Here are the facts.  America fined the French bank BNP Paribas nearly $9 billion for a transaction having nothing to do with the United States.  Uncle Sam didn’t like the bank doing business with Sudan – who was on our naughty list, and put sanctions on this tiny nation.  France and the European Union had no such laws or regulations and no formal position against Sudan.

Well, the U.S. claimed the authority to regulate BNP because the contracts that it entered in to with Sudan were in United States dollars.  That’s right, the only connection to the U.S. was the currency in which the trades were in.

As you might imagine, this caused a great uproar in France and has led to a major attack on the dollar as the transactional and reserve currency of Europe.

Add to this the fact that the United States claims the right to regulate all foreign banks, including those who don’t have branches or offices in the States, that accept U.S. persons as clients, and you will see that the international community is being pushed hard by our government.  At some point, enough will be enough and the dam supporting the dollar will burst.

It is important to note that the U.S.’s economic power is based on its being the reserve and transactional currency of the world.  And, this status is based primarily on the petrodollar and our being the primary trading currency.

  • Petrodollar refers to the requirement that the U.S. dollar be used for all oil transactions.  When a Chinese buyer wants to purchase Saudi oil, they must use the USD, even if the U.S. has nothing to do with the transaction.

It’s this status as the world’s transactional currency that allows the United States to amass enormous debt while other countries pay for it through inflation.  As I’ve said, this will end some day… when these nations have had enough… and it will be time to pay the debt.

In to this landscape steps a new and empowered Russia… and the attack on the dollar gets a major ally (Russia and its group of countries, the BRICS).

Like oil contracts, Russia’s natural gas sales with Europe are priced in USD.  Mr. Putin is pushing hard to change to a petroruble or petroeuro… any currency but the dollar.  If successful, Russia will be able to decouple all of its trade from the dollar and Europe may follow.

As you read in my last post, France is hoping to do the same… dump the dollar.  And this will have a devastating affect on the demand for greenbacks.  For example, removing the dollar as the transactional currency from the Russia/EU hydrocarbon market will take about $1 trillion dollars out of the market.

Regardless of what France or the European Union decide, if Russia and its group of nations effectively abandon the petrodollar, tens of trillions of dollars will be wiped from the market.  Today, the USD might be riding high against the euro, but such a loss in demand, followed by a move away from the USD as the reserve currency in these countries, will cripple the dollar.  It could result in a cascade of nations and large industries moving away from the dollar and the regulation (and fines) that doing business in dollars now entails.

As this point, you might be thinking I’m just crying wolf… that the USD is here to stay and there is no way to escape it.  Well, I could point you to a number of examples in history where currencies and nations have fallen following a similar line of attack.  But, I’ll leave that to the historians.  I need only to direct your attention to the events of the last few years.

As I said above, the United States has begun to regulate ALL foreign banks that allow U.S. citizens or residents to hold accounts.  These banks may not have branches or offices in America, but we claim authority over them because they do business with someone holding a blue passport.

And this regulation is based on the threat of taking away that bank’s ability to do business with corresponding partners that hold dollar facilities.  Without the leverage/threat of prohibiting these foreign banks from doing business in USD, America would have no way to punish non-compliant institutions.

Many banks have responded by kicking American clients to the curb.  I estimate that 90% of the foreign banks without offices in the U.S., and 75% of them who do business in the States, are now closed to Americans seeking offshore accounts.

It doesn’t take a great deal of imagination to see that these same banks could decide to give up the dollar.  All they need is some support from the likes of France, Russia, and the E.U., and an alternative transactional and reserve currency.

In my opinion, we Americans should take action to protect our retirement accounts and assets against the coming times.  I believe the attack on the dollar will be (partially) successful and that a significant realignment of value is on the horizon.  It may not result in the annihilation of the dollar (at least, I hope it doesn’t), but it certainly will have a major impact on the value of the U.S. dollar denominated assets.

My suggestions are simple enough to implement.  First, get some or all of your retirement account out of harms way by diversifying offshore.  This is done by forming an LLC outside of the U.S. and investing your savings there.  You will find a number of articles on this site on how to move your IRA offshore.

Next, I suggest you invest in physical gold.  For thousands of years, currencies have failed while gold has stood strong.  Today is no different.  Please see my recent posts for more information.

I’ve written on why I believe the price of gold is artificially low and is due for an upward correction… especially against the dollar.  However, today’s low price is barely a factor in my recommendation to hold physical gold.  Gold will act as a hedge against any catastrophic event and can be turned in to currency or goods just about anywhere in the world.

Also, it’s legal for you to hold physical gold offshore and not report it to the IRS.  That’s right, you don’t need to report gold held in a vault offshore to the U.S. government.

Those are my thoughts.  I hope this article on the attack on the dollar has been helpful.  Feel free to call or email us at info@premieroffshore.com for additional information.  Alls consultations are confidential.

Offshore Investment

Quotes from Financial Giants Applied to Offshore Investment

These are my favorite quotes from the giants of finance that I apply to my offshore investment and my offshore business.  If you want to manage your offshore investment portfolio, follow this advice to diversification and wealth.

The two quotes that I follow in every offshore investment that I make, and in my business (which is based in Panama), is a combo from Warren Buffet and Peter Lynch.  Mr. Buffet says to “only invest in what you know and at the right price,” while Mr. Lynch says, “Buy what you know!”

I believe firmly one should only make investments, be they onshore or offshore, that you fully understand.  For this reason, much of my offshore investment is putting capital back in to my own business.  It also means that I thoroughly vet all rental real estate properties I purchase, and focus on hard assets, such as gold and wood.

To achieve this goal, I have taken control over my retirement plan.  Only I have the time, motivation, and am willing to spend the money necessary to vet each and every offshore investment.

If I left my retirement accounts to a U.S. advisor or custodian, he is not going to spend the time necessary to research, visit, and analyze a condo in Medellin.  He doesn’t make that kind of money from my accounts.  On the other hand, I expect a significant return from each and every offshore investment, so I am willing to spend my time, effort, and money to guarantee a high return to my IRA.

Next is Thomas Rowe Price, Jr., founder of T. Rowe Price & Assoc., probably not someone you’d expect me to be citing, too.  Premier makes quite a bit out of taking your retirement accounts and investments away from these big firms and under your control.  Well, my favorite quote attributed to Mr. Price is, “Most big fortunes result from investing in a growing business and staying with it through thick and thin.”

I interpret (or spin) this to mean we should make each offshore investment in a growing, tax efficient business and, if you own or control that business, even better.  Only you know for certain how your business is doing and are willing to fight through any adversity to keep it going.  Make your offshore investment count – invest in your business or start a joint venture offshore with a partner committed to these same principles.

Next, I’m a fan of Carl Icahn, who once said, “Complain loudly to force improvement.”  As you may know, Mr. Icahn rose to prominence as a corporate raider in the 1980s, and is now considered an activist investor… a term I guess means he or the industry has softened its approach.

In either case, Mr. Icahn invests in under-performing companies, complains loudly, and turns them around.  One way to apply this to an offshore investment or an offshore business is to bring American efficiency and work ethic to Latin America.  By pushing your employees, and complaining loudly about inefficiency, you are sure to increase revenues.

Also, because your investment is in a region with lower wages on average, you are able to compensate those who live up to your expectations.  You may have a tough time implementing this in some countries, but others, like Panama, already know what to expect and are more willing to adapt.

Now for two classics.  First, Nathan Mayer Rothchild (1777 – 1836) said that “information is money.”  This is the most important quote in this post for the American making an offshore investment in Latin America.  The bottom line is that there are two prices for many offshore investments, the local price and the gringo price.  The only way to avoid the gringo price is through information.

Keeping in mind that there is no MLS system for real estate in South and Central America, you must come about information the old fashioned way, just like Nathan Rothchild.  You need to build relationships, do your due diligence, speak to as many locals and real estate people as possible, and build a reliable spreadsheet of prices in each region in the city.

For example, you should be aware that name brand real estate agents in Panama often buy and flip property to an American to increase their profits.  I have also seen them push up the price and take a kickback from the seller.  Only through research and local knowledge will you be able to ferret out the best deals.

These backroom deals are common knowledge among Panamanians.  I have rented many apartments, and I am always asked if I want to offer the unit at the local rate or the gringo rate… which means I will need to wait for a sucker to come along, but will receive a higher monthly fee… often 50% or more than the local rate.

And this goes back to my first point of invest in what you know and at the right price.  Only someone willing to do the research in order to understand the market and the culture will have the information necessary to make an offshore investment.  There is no way your U.S. IRS custodian will be willing to put in this kind of time.  Information will ensure you get the best deals and can make a significant difference offshore.  But, you must be willing to work for and spend to obtain that information.

Second is Roger W. Babson (1875 – 1967), who said “diversification, caution and no margin debt are the keys to investing.”  Today, the only way to truly diversify is to go offshore.  If you diversify out of the United States, and out of the U.S. dollar, you are protecting against country and currency risk, which many believe are quite significant at this time in our history.  I also believe this should lead you to physical assets, such as gold and wood on the conservative side of your ledger and real estate with significant upside on the aggressive side of your offshore investment portfolio.

I personally don’t recommend leverage or margin debt in your retirement account.  I believe the only place for leverage in your offshore investment portfolio is in income producing real estate.

Margin interest increases your gains, but is also increasing your risks.  This is especially true with margin debt on currency trading, which can reach 100 times.  Very few should be taking these kinds of risks with their retirement money.

Of course, many don’t agree with me or Mr. Babson.  If you use margin debt in your retirement account onshore, then you must pay 35% tax on the income derived from this leverage, called Unrelated Business Income Tax or UBIT.  This UBIT is eliminated by taking your IRA offshore.  So, moving your retirement account offshore, and adding a UBIT Blocker Corporation to your offshore company structure, is the best way to go against the traditional wisdom of not using leverage in a retirement account.

The best quote and argument for taking control of your retirement account also comes from Mr. Babson.  He said, “Tell your dollars where to go rather than asking them where they went.”

By taking control of your retirement account, and directing those dollars to well researched higher yields and/or more diverse assets classes, you will be buying what you know and securing your retirement.

I believe William F. Sharpe sums up my feelings on offshore investments quite succinctly.  “Understand your risks!”

If you buy what you know, and have sufficient information to understand the market and, maybe more importantly, the culture in to which you are investing, then you will understand the risks of a particular offshore investment.  When you know your risks, you can take steps to mitigate those risks.

I will close with a quote from Alexander Hamilton (1755 – 1804), who said “sovereign strength begets financial stability.”  A basic reading of this statement will lead you to invest in countries which are stable and encourage you to do your research on the currency and balance sheet of any nation you are thinking of making an investment in.

On a deeper level, it might cause some to look back at the United States and see a country that has lost much of its sovereign strength because of its ever weakening financial position.  When you consider that holding accounts in U.S. dollars is a form of investing in the U.S., you might decide to modify your portfolio mix.

I will leave it here because I prefer to focus on the facts of offshore investment and doing business abroad.  I try, and sometimes fail, to keep politics out of it.

As a parting shot, here is one more quote from Mr. Hamilton:  “A nation which can prefer disgrace to danger is prepared for a master, and deserves one.”

Return on U.S. Treasuries

The Real Return on a U.S. Treasury

The real return on U.S. Treasuries is a miserable 0.6% per year.  If you don’t think you can do better than this offshore, then leave your retirement with Fidelity and risk it being taken over by the U.S government and MyRa.

If you think you can beat the real return on U.S. Treasuries by diversifying out of the United States and out of the U.S. dollar, then get your retirement account out of harms way ASAP.

If you buy a U.S. Treasury bond today (July 2014), which is due in 2024, the yield to maturity is 2.6%.  If you subtract inflation from this lofty percentage, it becomes a miserable 0.6% per year.

If you, like many of my readers, are concerned with the U.S. dollar and the possibility of significant inflation in America, you can always buy a TIPS bond.  The TIPS protects against inflation and is returning all of 0.4% per year.

There has been a lot of talk of late that the U.S. will nationalize the retirement account system and block foreign investments.  If this happens, all retirement accounts will be transferred to government control and forced to buy U.S. Treasuries, the most secure investment around… and the nationalization will be sold as protecting Americans.

Now, I don’t know if this will occur, but I do know how to protect you from the possibility.  Take your IRA offshore now, by moving it in to an Offshore IRA LLC.  This will give you control over your assets and investments, all while keeping the government out of your affairs.

If the return on U.S. Treasuries excites you, and you don’t believe the U.S. will come for your retirement account, then do nothing.  If you want to protect your assets and diversify offshore, please take a read through my various articles on offshore IRAs.

As I said, I don’t know what will happen, but I know how to eliminate the risk.  Most advisors agree that, once your IRA is offshore, it will be grandfathered in and no changes in the law will affect its status.  Therefore, time is of the essence.

The reason for this opinion is simple:  it would be near impossible to force the sale of real estate and physical assets (like gold) that are held offshore.  It is much more likely that future formations will be prohibited.  Those already setup will be allowed to continue.

“Tell your dollars where to go rather than asking them where they went.” – Roger W. Badson, 1875 to 1967

If you have any questions, feel free to phone us or drop me an email at info@premieroffshore.com.  I will be happy to work with you to get your account under your control and out of the United Sates.

Offshore IRA

Invest in What You Know with an Offshore IRA

Follow the advice of Warren Buffet and many others who came before him and invest in what you know.  An offshore IRA gives you the power to diversify offshore and invest in what you understand at the right price.

An offshore IRA placed in an offshore company, where you are the manager of that company, gives you checkbook control.  The IRS can then pay your research and travel expenses and you can buy what you know, which is not possible in a self directed IRA.

  • The offshore company is usually structured as a limited liability company.

In a self directed IRA, you can recommend investments to your custodian or advisor.  If he is comfortable with the investment, he will proceed.  If he is not, then he will block the transfer… which is quite common with offshore investments.

The bottom line is that the custodian does not have the time or desire to understand and vet the offshore project.  Are you going to pay him thousands to visit a build in Panama?  Probably not… but you are willing to spend your time and money to get to know the city and the investment.

  • The custodian has some liability if the investment goes south.  In an offshore IRA LLC, this is all on your shoulders.

So, while an offshore real estate investment is filled with risk and uncertainty for the self directed custodian, it is something you can become knowledgeable in, which means it is the perfect investment for your offshore IRA.

If you want to research and invest in high returning international real estate or hard assets, like physical gold or wood, you should be making these investments through an offshore IRA held by an offshore company.

You should only buy what you know, and you are the only one who is willing to spend the time and make the effort to get to know a real estate project offshore.

Panama Foundation Scam

Is Panama the Next Singapore?

Panama vs. Singapore by By Christian Reeves and Lief Simon (www.offshorelivingletter.com)

“Panama is the next Singapore,” declared a friend over lunch the other day. He wasn’t the first I’ve heard make the prediction.

Since finding its legs after the U.S. military handed over the canal, Panama’s economy has been on an uninterrupted upward trend. Even throughout the global recession of the past several years, Panama has racked up positive, albeit slower, growth.

Like Singapore, Panama is a shipping, banking, and corporate headquarter hub. Both countries are also tax havens. Where they diverge is gross domestic product (GDP) per capita and cost of real estate. Singapore’s GDP is about four times that of Panama, depending on the statistics you look at. The population of Singapore is about 50% greater than that of Panama, making this GDP figure even more stunning.

The average price per square meter for apartments in Singapore is eight times the current average cost in Panama City. (And we’ve been complaining about property values in Panama City!)

The point is that both of these statistics are being used as predictors for Panama’s potential. The consensus is that Panama is looking at at least another decade of continued tremendous growth rates.

I agree.

Panama has 100 times more land area than Singapore. As a result, there are different markets at work in this country. While real estate prices will continue to increase in Panama City as the country continues to mature and will, sooner or later, I believe, reach levels to qualify as “expensive” in a global context, prices in the interior of this country and in most of the beach areas will remain more affordable than those in comparable options in the United States. That will allow Panama to continue to attract retirees from North America and Europe.

Banking, shipping, business, tax benefits, and retirees: That is a dynamic combination for the Panamanian economy, which has grown at a rate of at least 7.2% per year every year since 2004, with the exception of 2009 (the “slow year”), when it grew at a rate of 3.9%. Unemployment is low, at 4.2%. In fact, the country is growing so quickly that it can’t educate and train its own citizens fast enough to keep up with the ever-expanding job market. The new “Specific Countries” residency visa, which comes with the possibility of a work permit for citizens of 47 countries, is one attempt to ease the strain the country is experiencing trying to find qualified workers for all the international companies relocating here, not to mention the local businesses and banks.

Global Banking Haven?

Historically, Panama has been generally acknowledged as a “banking haven.” No question, this is an international banking center; there are currently 78 banks licensed in this country. However, there is no longer any pretext of banking privacy or secrecy; not since November 2011 when Panama signed an exchange-of-information agreement with the United States.

Still, there are a lot of banks here and a lot of banking options. Like most offshore banking destinations, Panama offers two kinds of banking—local and international. Of the 78 banks licensed in Panama, 2 are state owned, 28 are international banks, and 48 are general licensed banks. International banks can only take clients from outside Panama, while general licensed banks can have both local clients and clients outside the country. The main difference from a practical point of view is that international banks don’t offer day-to-day banking services such as checking accounts or mortgage lending. These are places to keep investment, not operating, accounts.

You can see the full list of banks in Panama here. LINK TO http://www.superbancos.gob.pa/en/igee-general-information

The problem with most of the 48 general licensed banks in Panama is that, while they can take foreign (that is, non-resident) clients, in the current climate, they tend to not want to. That said, a colleague walked into Balboa Bank and was able to open an account as a non-resident foreigner with remarkably little hassle. He had his bank reference letter and his passport, which is all you need in theory. However, when it comes to banking overseas, the theory can be one thing, while the reality is something else.

While I’ve given up on identifying a local bank in Panama that will consistently open accounts for foreigners, ones to try in addition to Balboa Bank (which recently merged with Banco Trasatlantico and seems to be interested in growing its client base)include Banco General (one of the biggest banks in Panama in terms of number of branches), and Global Bank (where some I know have recently reported having good luck opening accounts).

All banks in Panama offer some level of internet banking, but check the details of this before investing the time in getting an account open to make sure you can initiate wire transfers online if that’s something you’ll need to do. Balboa Bank offers that service online, as well as an English-language version of their interface. This is notable, as many banks in this country don’t have English versions of their websites.

Many of the general licensed banks offer consumer as well as private or investment banking. If you’re a private banking client (meaning you’ve deposited US$250,000 or more), then you’ll generally have an easier time opening an operating or consumer account with one of those banks.

Again, the international banks operating in Panama deal only with foreign clients. Further, the minimum account balance required to open an account with one of these banks is US$1 million or more.

One exception is Banca Privada d’Andorra (BPA), which has a branch with an international license in Panama. BPA will open an account for you with a minimum account balance of US$100,000 (although they prefer US$250,000). Their online banking interface is in Spanish, French, Catalan, and English. You can contact Yariela Montenegro at y.montenegro@bpa.ad for more information about BPA’s services.

With the growing cost of the compliance required of any bank with American clients, many of the world’s international licensed banks are simply opting out of dealing with U.S. citizens, even those with the funds to open an account with US$1 million. Meantime, with everything going on in the global banking industry, banks are changing their policies and rules regularly. One bank that will open an account for a foreigner today may not next week and vice versa. We’ve watched this in Panama. Last year, for example, the executive committee of Unibank, a bank we’ve been recommending to readers since it opened in December 2010, decided that they would no longer take non-resident foreigners as clients except in their private banking division (US$250,000 minimum deposit). In December, they reversed that decision, but implemented a US$300 application fee for any foreigner wishing to open an account. Probably the back and forth and the new application fee are a reaction to the escalating cost of compliance when dealing with foreign clients.

Panama banks are generally solid, as the country’s Superintendent of Banking strictly monitors all bank activity. Currently, one bank is in “forced liquidation.” I’m not sure what that means, but banks don’t fail in Panama. When a problem does arise, the Superintendent takes action.

One specific occurrence a few years ago had to do with Stanford Bank in Antigua (the island, not the town in Guatemala). Stanford went bust because of malfeasance of the founder, and all related banks in different countries were affected. The Panama subsidiary of Stanford was closed, its assets frozen. The U.S. entities handling the case against Allen Stanford tried to seize the Panama assets, but the Panama Banking Superintendent wouldn’t allow that. After about 18 months, Stanford in Panama was sold to a group that reopened as Balboa Bank (still in operation today). All the Stanford Panama clients received the return of their funds.

It’s difficult to try to make a direct comparison of banking in Panama with that in Singapore. There are more banks and financial institutions in Singapore, which also offers more types of licenses. The number of banks in Panama has been relatively stable over the last 10 years, with new banks opening as other banks merge. Meantime, the volume of banking in Panama has increased, and I expect the number of banks to continue to increase as more international banks decide to open branches in this country.

Business And Taxation

One of the biggest advantages to Panama as a jurisdiction right now is that it is the best place in the world to run a business. Not a local business. I’d say that running a local business here in Panama would come with all the same challenges of running a local retail business anywhere in the world. In addition, though, the important thing to note about local trade in Panama is that much of it is restricted to foreigners. Most professions – doctors, lawyers, accountants, etc. – are restricted to Panamanian citizens, as are retail businesses. Most foreigners who want to be in business in the country focus on tourism-related opportunities or other service-related businesses…or restaurants.

If you’re looking for a place to launch or relocate an international business, however, you won’t find a better locale…

Except, perhaps, Singapore. I’d say these two countries are the top choices worldwide for where to base an Internet, consulting, or other laptop-based business. And, given the choice between Panama and Singapore, I’d choose Panama (as I did five years ago when my wife and I decided to relocate from Paris to Panama City to launch the Live and Invest Overseas business). Singapore is a far more expensive place to live and to do business. It’s also halfway around the world and many time zones away from your customer base if your customer base is based in North America.

One important reason Panama is as appealing as a doing-business choice as it is, is because it is a jurisdictional-based tax regime. That means any person or entity is taxed in Panama only if his, her, or its income is earned in Panama. Further, Panama doesn’t impose tax on interest income from deposits in Panamanian banks. Therefore, it’s possible, if you organize your life appropriately, for an individual to live in Panama free of any Panama income tax liability. Don’t earn any money in Panama, and you owe no tax in Panama. It’s as simple as that.

The easiest strategy for setting yourself up to be in Panama and in business without earning any income in Panama is to start a consulting or internet business based outside Panama. Create a non-Panamanian entity to house your non-Panamanian business, earn your income outside Panama (by consulting for a client in Costa Rica, for example), and have your clients pay your non-Panamanian company.

What you can’t do is set up a physical business in Panama with a non-Panamanian business providing the goods, and then have the non-Panamanian entity charge enough to the Panama company to keep it from showing any profit in Panama.

Panama has two rules that void that practice. One is simply an implied income tax on the gross revenue of a company if the company continually shows no profit. It’s essentially a minimum income tax charged at 1.168% of gross income for companies with gross revenue of US$1.5 million or more if the calculated tax on net income is less.

The other rule has to do with transfer pricing between affiliated companies. Panama passed a law last year specifically addressing this. A company with a Panama operation and a foreign subsidiary that provides products or services for local sales cannot charge above market prices for those products and services to the Panama entity in order to reduce the taxable income in Panama.

If you want to start a business in Panama for local trade, the tax rate is a flat 25% tax on net income. However, again, Panama places many restrictions on foreigners doing business locally.

To avoid this 25% tax on local business profits, you could consider basing your local business in either the free-trade zone in Colon or the Panama Pacifico “city” being developed at the former Howard Air Base outside Panama City. The free-trade zone in Colon is essentially a place to warehouse and modify goods to be shipped out of Panama. You can import and export goods to and from this zone with no tax implications, including no income tax. Any goods brought into Panama from this zone, however, are subject to import duties.

Panama Pacifico has been designated a tax-free zone for companies that qualify. The 13 categories of businesses that can operate here tax-exempt are:

 Distribution centers of multinational companies
 Back office operations
 Call centers
 Multimodal and logistics services
 High-tech product and process manufacturing
 Maintenance, repair, and overhauling of aircraft
 Sale of goods and services to the aviation industry
 Offshore services
 Film industry
 Data transmission, radio, TV, audio, and video
 Stock transfer between on-site companies
 Sale of goods and services to ships and their passengers
 Corporate headquarters

Another benefit of basing your business in Panama Pacifico is the opportunity that creates for you, as the business-owner/employer to be able to obtain work permits for foreign employees beyond the usual 90/10 rule. The 90/10 rule, which applies to all businesses operating in Panama outside Panama Pacifico, means that the business must employ nine Panamanians for every one non-Panamanian.

In recent history, again, the exception to this requirement that 90% of the employees for any business be Panamanian, has been to base yourself in Panama Pacifico. However, the new “Specific Country” residency permit means that this Panama Pacifico benefit isn’t as big a deal as it used to be. Now, any foreigner from any of the 47 countries included on the Specific Country visa list can obtain residency and a work permit, creating a chance for businesses to hire non-Panamanian labor without restriction. I believe this window of opportunity will continue only until President Martinelli is out of office. Martinelli created the new visa program through special Executive Order. The guy who follows him in office likely will repeal the order.

Unless the guy who follows Martinelli in office isn’t a guy at all but Mrs. Martinelli, as is lately being discussed.


Another important benefit of Panama as a jurisdiction includes the offshore services available here. In this way, too, Panama is very similar to Singapore. While Singapore has taken the offshore structures game to a next level, as it has been at this for much longer, Panama is working hard to catch up.

Panama offers corporations, trusts, and foundations. Again, Panama corporations pay no income tax in Panama if they don’t earn any money in Panama, making a Panama corporation a very appealing option for structuring business operations in other locations.

You can also use a Panama corporation to hold real estate in Panama or outside the country. Historically, this strategy provided important benefits to do with property and capital gains taxes. However, the rules for these things have changed recently, making this less of a no-brainer option. It can still make sense to hold Panama real estate in a Panama corporation, but not always.

Here’s how this used to work:

Once the Panama property was put into a Panama corporation, the “value” was locked into the public property registry. When the owner decided to sell, he sold not the property but the corporation holding the property. Ownership of the property didn’t change, and, therefore, the public registry value of the property didn’t change. As a result, the amount of property tax charged for the property didn’t change either. In other words, property values could increase, but property taxes (which are figured on property values) could be held constant this way.

Additionally, it used to be that, while Panama did charge capital gains tax on the transfer of property, it did not charge capital gains tax on the transfer of company shares, saving the seller 10% of the appreciation.

This changed in 2006. Now, sellers pay capital gains tax on both the transfer of property and the transfer of company shares.

Finally, Panama charges a 2% transfer fee on real estate. Selling the corporation rather than the property avoided that tax, as well.

Bottom line, today, with capital gains tax charged on the sale of shares and property values being reevaluated for the purposes of property tax, as I said, holding Panama real estate in a Panama corporation isn’t the no-brainer decision it was years ago. The cost of setting up a corporation runs from about US$1,000 to US$1,500, depending on the attorney. Maintaining the corporation runs US$530 a year without nominee directors, which should cost around another US$250.

On the other hand, using a Panama corporation to hold non-Panama real estate can be an excellent strategy, with estate planning and asset protection benefits. American readers should note, though, that a Panama corporation cannot be treated as a disregarded entity for tax purposes; they are treated like corporations. An American considering options for holding real estate in different countries should consider an LLC, a trust, or a foundation, which can be better choices depending on your circumstances overall.

Few people think of Panama as a trust jurisdiction; most look to the Cook Islands or perhaps Belize for this kind of structure. However, Panama does offer trusts (an odd thing for a civil law country).

Panama also offers foundations which is the civil law equivalent.

Foundations work very much like trusts and can be a good alternative to a trust depending on your needs. On the U.S. side, for tax purposes, a foundation can be treated like either a corporation or a trust. You want to make sure you set everything up so your foundation is treated like a trust. If you’re an American, have your Panama attorney work with a U.S. attorney who knows something about Panamanian foundations to be sure that the wording of the foundation documents is such that the entity will be treated as a trust by the IRS. Otherwise, you risk negative U.S. tax implications.

One other thing to keep in mind with a Panamanian foundation is that, while the name may suggest that it is a charitable organization, it is not. A Panamanian foundation is a tax-paying entity and can be liable for tax, both in Panama (if the foundation has any Panama based income) and in the United States (if the foundation has any income at all).

Pushing For First World Status

Panama’s President Martinelli has set an ambitious agenda. He has declared that he’s pushing Panama toward First World status. To that end, he’s taking all the revenues being thrown off by the Panama Canal (and then some) and investing them in infrastructure improvement projects across the country. You can’t drive more than a few blocks in any direction in Panama City without encountering some kind of construction—road expansion or repaving, digging for the new city metro, new building construction or old building renovation, electric and phone cables being moved underground, tunnels, bypasses, etc. Every main thoroughfare in the city is being improved in some way. The latest extension of the Cinta Costera, the new highway and pedestrian area that runs along the Bay of Panama, will take motorists around Casco Viejo and to the Bridge of the Americas, allowing drivers to avoid the current log jam trying to exit the city.

Around the country, roads are likewise being improved, expanded, and dug anew. Plus, new airports, new hospitals (including a big one in Santiago), new schools, and new shopping malls. The landscape of this country is being remade before our eyes.

The investment opportunities that all of this translates into are tremendous. Someday, people could be saying that Singapore is like Panama City.


Seize my IRA

Can the Government Seize my IRA?

One of the most common questions I get is, “can the government seize my IRA?”

With all of the uncertainty in the USA, and the growing hostility towards our government and its practices, many Americans are concerned about their retirement accounts. For most, their retirement account is their only liquid asset, the majority of their savings, and probably their largest holding, after their home. Just about every day I am asked, “Can the US seize my IRA account and, if so, what can I do to protect it?”

I hate to be an alarmist, so I usually try to calm the fears of these concerned citizens by saying the government can seize your IRA, but they probably won’t. This is the best I can offer because there are many examples of the US government seizing bank accounts, real estate and other properties, and yes – retirement accounts. The government can and does seize these accounts all the time and court action or oversight is not required. In fact, I would bet that the US government seizes several IRA accounts every day.

Let me explain how the government can seize your IRA: Most think their retirement accounts are protected…and some are, from civil creditors under your State’s applicable law. How much is protected depends on your State and the type of claim brought against you.

Level 1: There are Federal ERISA laws that protect some accounts, but not all.

Examples of ERISA-qualified pension and benefit plans include:

  •  401(K) accounts
  • pension and profit-sharing plans
  • group health and life insurance plans
  • dental and vision plans, and
  • HRAs, HSAs, and accidental death or disability benefits.

If your retirement account is not covered by ERISA, and you live in California, then a judgment creditor may be able to get to it.*

Level 2: Some of the most popular retirement accounts are not covered by ERISA.

Types of non-ERISA accounts that may be vulnerable include:

  • IRAs, Roth IRAs and SIMPLE IRAs
  • SEP and Keogh Plans
  • 403(b) plans for employees of a public school or university
  • plans that do not benefit employees, or “employer-only” plans, and
  • government or church plans

* Each State has its own laws. The example above is from California and may not apply to you.

The above applies only to civil creditors. None of these accounts are protected from the Federal government going after unpaid taxes or a spouse or child seeking back support with a domestic relation order in hand (called a “QDRO”).

While a spouse or child must go to court and get a judgment, the IRS needs no such approval. Any IRS agent assigned to collect from you can issue a letter to your bank and IRA custodian to seize 100% of your assets up to the amount they claim you owe. No court or other oversight is required and no formal process is required. The agent need only hit a few keys on his computer and your money is gone.

The same is true for those charged with a crime. The government can step in and seize all of your assets and hold them until the case has run its course. This includes real estate, cash, bank and retirement accounts, and automobiles. If you win your case, you will get these back…of course, you have no money to pay a decent attorney, but who cares?

The Feds can also seize your property if it is used by someone else in the commission of a crime. In 2012, Pot Shops were big business in California. Various counties and the State passed laws that allowed for medical marijuana use and sale with a prescription. Well, these dispensaries were usually rented from building owners by the operators. The Federal Government, not big fans of California’s tomfoolery, sent letters to the owners of these properties saying the Feds would seize their buildings, regardless of State or local law, if they continued to rent to these modern hippies. Building owners complied and the industry was largely shut down.

If you have read this far, you may be wondering why I am rambling on about tax cheats, criminals and potheads. It is because these are current examples of the Feds taking from its citizenry without judicial oversight or new laws being passed. How difficult would it be for the government to demand all retirement accounts be placed under Federal control, or at least force them to be held in a central depository? I guarantee it is easier than finding a legitimate way to solve America’s spending problem.

There are historic examples, and international instances, of government takings. It was not so long ago that the tiny island of Cyprus, on the insistence of the EU, took a significant portion of the money held in its banks to pay down its debts. Of course, we assume this will never happen in America…just as we assume our government was not spying on us and operates with only good intentions.

In the good ole’ USA, we can look back to 1933 when the Federal Government seized all gold and gold certificates by Presidential Order 2039. There was no need to pass a new law or special process to protect the citizenry. It was deemed to be in the best interest of the masses, so it was done.

This taking was sold to the public as being for their own good. The Feds claimed that “hoarding” of gold was stalling economic growth and making the depression worse. Why not hording of retirement assets by the “rich?”

As it turned out, it was just a money grab – prior to the taking, the price of gold was fixed at $20.67 per ounce. After the gold had been rounded up, the Fed raised the price to $35 an ounce, resulting in an immediate loss for everyone who had been forced to surrender their gold. The profit funded the Exchange Stabilization Fund established by the Gold Reserve Act in 1934.

So, I ask you this: When you look at the current state of the US, the economic situation of the average voter, and the unprecedented attack on the “rich,” do you think there would be a major revolt if the Government seized all retirement accounts over, say, $50,000 or $100,000?

You do have one option to protect your nest egg. You can move it in to an offshore IRA LLC with an account at an international bank outside of the reach of any type of US creditor. Such a structure is compliant with all current US rules and you will maintain the tax free (ROTH) or tax deferred (traditional IRA, etc.) nature of your retirement account.

The only caveat is that you need to be careful where in incorporate and where you bank. The US IRS can seize assets in Canada, France and the UK without notice and without legal proceedings. They can also levy any bank account at any institution with a branch in the United States.

For example, if you buy real estate in France, the IRS can seize it to satisfy back taxes. If you take your IRA to Panama, but make the mistake of depositing it in to HSBC, the IRS can levy that account by issuing a notice to HSBC New York. These are not hypothetical…I have personally handled cases of this type around the world and know these things to be true.

For detailed information on moving your IRA or other retirement account offshore, please see: Moving Your Retirement Account Offshore with a Self Directed IRA LLC. If you are concerned about protecting your retirement, I suggest you take action now. It is imperative that you have your affairs settled prior to the end of the year and the implementation of the Foreign Account Tax Compliance Act. For information on this law, see the Deloitte website.

So, can the government seize your IRA? The answer is yes. Now, what will you do to protect it?

trillion dollar coin

Trillion dollar coin: Evidence of a failing economic system

The president’s ability to print a trillion dollar coin or two to cover America’s debts is emerging as a surprisingly serious proposal and proves the absolute lunacy of our financial system. While such measures are unlikely, the fact that they are possible proves just how far we have come from the days when our currency was backed by gold.

As the result of a change in law from the mid 1990’s, the U.S. Treasury is allowed to mint as many coins made of platinum as it wants and can assign them whatever value it pleases. It is thus possible for the U.S. Mint to produce a pair of trillion dollar coins from platinum.

If such trillion dollar coins were minted, the president could have them deposited at the Federal Reserve and place their value added to the Country’s books. Magically, the Treasury suddenly has an extra $2 trillion to pay off its obligations — without needing to issue new debt. The ceiling is no longer an issue.

Oh, how far has the country fallen from the days when its currency had real value? From the days when a dollar was worth a fixed amount of gold and the U.S. treasury had real assets backing its issuances. As a reminder, here is a bit of history:

On June 5, 1933, the United States abandoned the gold standard, a monetary system in which currency is backed by gold. Allegedly in response to the public hording gold during the Great Depression of the 1930’s, Congress nullified the right of creditors to demand payment in gold. The United States had been on a gold standard since 1879, except for an embargo on gold exports during World War I, and has been printing currency at will ever since.

Soon after taking office in March 1933, Roosevelt declared a nationwide bank moratorium in order to prevent a run on the banks by consumers lacking confidence in the economy. He also forbade banks to pay out gold or to export it. Then, on April 5, 1933, Roosevelt ordered all gold coins and gold certificates in denominations of more than $100 turned in for other money. It required all persons to deliver all gold coin, gold bullion and gold certificates owned by them to the Federal Reserve by May 1 for the set price of $20.67 per ounce. By May 10, the government had taken in $300 million of gold coin and $470 million of gold certificates. In 1934, the government price of gold was increased to $35 per ounce, effectively increasing the gold on the Federal Reserve’s balance sheets by 69 percent. This increase in assets allowed the Federal Reserve to further inflate the money supply.

Current Price: The current price of gold is $1,659 per oz., which represents an 88% increase over the last 5 years.

The government held the $35 per ounce price until August 15, 1971, when President Richard Nixon announced that the United States would no longer convert dollars to gold at a fixed value, thus completely abandoning the gold standard. In 1974, President Gerald Ford signed legislation that permitted Americans again to own gold bullion.

Now, with the possibility of a worthless dollar, and an economy in shambles, what can you do about it?

Unfortunately as individuals we have little control over the currency value and can’t print our own trillion dollar coin, but we can protect our ass(ets).

  • Diversify investments away from those tied to US currency or economy
  • Buy gold and related assets
  • Diversify out of the USD and US banks
  • Find ways to earn in foreign currencies, such as starting an international business
  • Carefully monitor your buying power and buy in bulk items that will not perish but seem to be going up in price (relatively speaking as your dollar goes down in value)
  • Spread your savings so not all in one bank, preferably with at least one foreign account
  • Purchase real estate in those international markets with strong growth prospects, which are not dependent on the Untied States