Tag Archive for: Investments

Best IRA Investments for 2018

Best IRA Investments for 2018

The best IRA investments for 2018 are all offshore. If you want higher returns in your retirement account, you need to invest offshore. If you want to move some of your IRA out of the United States, you need to invest your account offshore. With that in mind, here are the best IRA investments for 2018.

To start, let me note that you can only place a vested retirement account offshore. A vested account is usually one from a previous employer. If you can move the account from one custodian to another, it’s vested. If you can’t move the account because it’s held at your current employer’s custodian, it’s not vested.

Second, keep in mind that most custodians don’t want you to invest your IRA offshore. They want you to buy their mutual funds, annuities, and whatever else they make a nice commission on. When you invest offshore, your custodian makes zero on the buy/sell. They make nada on your gains and get no management fees.

With that in mind, here are the best IRA investments for 2018:

  1. Foreign real estate in countries with low capital gains rates,
  2. International ICOs,
  3. Crypto trades at foreign exchanges with better rates (difference in bid /ask),
  4. Investments that lead to foreign residency, and
  5. Leveraged investments no available in the United States.

The most popular international IRA investment for 2018 is real estate. Foreign real estate offers a higher yield compared to the United States and is a relatively low-risk investment. While other offshore IRA investments are higher risk with massive upsides (such as crypto below), real estate is true to the IRA mantra of steady and conservative.

Foreign real estate is the best IRA investment in 2018 for those willing to put in the time, effort, and expense to find deals. Yes, returns are higher abroad if you find the right area and the correct tax structure. But, finding these deals means hitting the streets to learn the target country, the city, and finally the neighborhood.

And the best IRA investment for 2018 will usually be in a country with a low capital gains rate. Because you won’t pay tax on the gain in the United States, you don’t care about the foreign tax credit. Therefore, you want to invest in a country that will minimize your worldwide tax costs.

When you invest non-IRA funds, you pay 20% to the US on long-term gains. If you invest in a country with a 20% capital gains rate, you pay zero to the US because the Foreign tax credit gives you a dollar for dollar credit on your US return. When you invest in a country with a 10% rate, you pay 10% to that country and 10% to the US.

When you invest using your IRA, your US rate is basically zero and the foreign tax credit doesn’t apply (in most cases). Thus, you want to buy in a zero tax country like Belize or a low tax country like Colombia (capital gains rate is 10% but the tax on rental income is 33%). For more, see: Where to Buy International Real Estate.

See also: Which Countries Tax Worldwide Income?

The second most popular category of foreign IRA investments for 2018 is cryptocurrency and ICOs. The United States has forced US exchanges to report all sales, creating a tax nightmare for many. Also, the US SEC is pushing the majority of ICOs offshore. If you want to get in on the ground floor of an ICO, before all the vulture capitalists have picked it clean, then you need to invest offshore.

For these reasons, the best IRA investments for those looking to get into crypto, smaller coins, and most ICOs, are offshore in 2018. For more see: Take your IRA offshore and invest in cryptocurrency.

The third most popular investment for your IRA is one that can be paired with residency or citizenship. In some countries, you can gain residency with an investment. If that investment can be held by your IRA, you can use retirement funds to secure residency.

However, you need to be careful. You can make the investment using IRA money. Then you need to pay all costs associated with the residency application with personal savings (not IRA money). If you were to pay for residency with IRA funds, this would be an improper benefit.

For example, you can get residency in Panama with a real estate investment of at least $350,000 or an investment in an authorized reforestation plantation of $20,000. For more on this, see Best Panama Residency by Investment Program.

The fourth best IRA investment for 2018 is only for very sophisticated IRA investors. It is any leveraged purchase or foreign real estate with a mortgage. This is because these investments are only possible outside of the United States.

When you invest your IRA in the US using leverage or a mortgage, you must pay Unrelated Business Income Tax at about 35%. That is to say, all gains from leverage or a mortgage are taxed at 35% before being passed through to your retirement account.

For example, you buy a house in California using your IRA. 50% of the money comes from your IRA and 50% from a non-recourse loan (the only type of loan an IRA can accept). When you sell that home, half the capital gain will be taxed at 35% and half will flow into your IRA tax-free.

When you invest using a mortgage or leverage (maybe in a crypto account) outside of the United States, you can block and avoid this tax. Set up a UBIT blocker corporation along with an offshore IRA LLC and eliminate UBIT in your international IRA transactions.

I hope you’ve found this article on why the best IRA investments for 2018 are all offshore to be helpful. For more on converting your retirement account to a self-directed IRA or forming an offshore IRA LLC, please contact us at info@premieroffshore.com or call us at (619) 483-1708.

international real estate in 2017

Where to buy international real estate in 2017

President Trump has promised to rewrite the US tax code as it applies to international business and foreign investment. He has also promised to lower both the capital gains rate and the personal income tax rate. With that in mind, this article will help you figure out where to buy international real estate in 2017.

You might be thinking, what the heck does any of this have to do with where I should buy international real estate. Well, the tips I’ll give you below can increase your returns by as much as 20%. Coordinating US tax policy with your foreign investment portfolio can make a very big difference.

We Americans are taxed on our worldwide income no matter where it’s earned. If we pay tax in a foreign country, we get a foreign tax credit from Uncle Sam to avoid double taxation. However, we will always pay at least the US rate.

The US rate for long term capital gains is currently 20%. It might go down to 10% or 15% under Trump. This is the minimum tax we will pay on gains from foreign investments.

For example, you buy a property in Colombia for $100,000 and sell it for $200,000 after 5 years. Your gain is $100,000. Colombia’s capital gains tax rate is 10%, so you will pay this to the local government. This leaves 10% available for the IRS.

So, even when you invest in a country with a 10% rate, you will pay a total of 20% because you’re a US citizen in 2017. Hopefully this will go down in 2018.

If the US rate goes to 10%, you will pay the same 10% to Colombia and nothing to the United States. Likewise, if the US rate goes to 15%, you will pay 10% to Colombia and 5% to Uncle Sam.

So, the key to tax efficiency in international real estate investing is to purchase in a country with a tax rate equal to or lower than the United States. You’ll always pay the US rate, but you never want to pay more than this.

With Trump looking to cut the US capital gains rate, international real estate investors need to rethink their strategies. Focus on countries with low tax rates to maximize your after tax ROI.

The same goes for local taxation of rental income. You’ll always pay the US ordinary income tax rate on rental profits. You don’t want significant rental income in a country with a rate significantly higher than the United States.

This isn’t always so easy to figure out. If you’re at the top of the US income brackets, just about every country will have a rate equal to or lower than your US effective tax rate. If you don’t have much ordinary income, then you want to watch your foreign tax rate carefully.

For example, Colombia taxes rental income at 33%. Also, they don’t allow you to deduct depreciation. So, Colombia’s tax rate on rental income can be much higher than your US rate, depending on your situation.

Someone focused on capital gains might like Colombia while someone focused on cash flow should look elsewhere.

This all goes double for US investors buying international real estate in 2017 using their retirement accounts. When you buy foreign real estate in your US IRA, you pay zero tax if it’s a ROTH and get significant tax deferral if a traditional account.

Thus, any foreign taxes paid are a waste of money because there’s no offsetting foreign tax credit and no minimum tax floor set by the US capital gains rate. IRA investors should focus on countries like Belize with zero capital gains tax or Nicaragua with a 10% rate.

Coordinating your US tax bill with the tax rate of the country where you purchase real estate can significantly increase your net return. If Trump’s tax cuts come through, those who have invested in low tax countries will be rewarded.

I hope you’ve found this article on where to buy international real estate in 2017 to be helpful. For more information, or to take your IRA offshore, please contact us at info@premieroffshore..com or call us at (619) 483-1708.

foreign real estate with my IRA

Can I buy foreign real estate with my IRA?

The number one question I get on offshore IRAs, is “can I buy foreign real estate with my retirement account?”  The answer is a resounding yes. You can buy raw land, a home, condo, office building, or anything else you like outside of the United States within your retirement account.

In fact, you can buy or invest in just about anything offshore. The only limitations on your IRA are found in Section 408 of the Internal Revenue Code. This says you are prohibited from investing in life insurance, collectibles, and certain coins (collectable coins that are not 99.99% pure).  Other than that, you can place whatever you like in your IRA.

Foreign real estate is the most popular investment with our offshore IRA LLC clients. They choose real estate as a way to further diversify out of the US and out of the dollar. To take some cash off the gambling table in the time of Trump and to help grow retirement wealth or turn it into income from rental profits.

There are two ways to buy foreign real estate in your IRA. You can setup a self directed IRA and ask your custodian to make the investment. This is best if you will have only one international investment and don’t want to open a foreign bank account for your retirement account.

The other option is to take your entire retirement account offshore. Get rid of your custodian and take over management of your IRA. Get the entire account out of the United States and under your control.

You can do this by forming an offshore IRA LLC owned by your retirement account. Then this LLC appoints you as the manager and opens international bank accounts at institutions that understand US IRA rules.

The last step is to instruct your custodian to invest your entire IRA into this newly formed offshore IRA LLC. Once the cash is transferred into the IRA LLC bank account, the custodian’s control ends and yours begins.

From here you can buy and sell foreign real estate, trade stocks, buy physical gold, and generally manage the assets of the account for the benefit of your IRA. You are to act as a professional investment manager and “always work in the best interest of the account.”

Once you’re installed as the manager of your offshore IRA LLC, you’re responsible to follow all of the US rules imposed on professional investment managers. This basically means that you can’t personally benefit from your retirement account.

So, you can’t buy a house and live in it, can’t borrow from the account, can’t use IRA funds to pay off an existing or personal mortgage, and can’t combine IRA money with after tax money in one offshore account.

These rules are detailed in IRC Section 4975 and referred to as prohibited transactions. A prohibited transaction is any improper use of an IRA by the account owner or account manager (both of whom are now you), beneficiaries, or any disqualified person.  

Examples of prohibited transactions include:

  • Borrowing money from your IRA
  • Selling your property to your IRA
  • Using your IRA as security for a loan
  • Buying property for personal use

Most of these are self explanatory. I should point out that you are allowed to use loans to by foreign real estate in your IRA. You are just prohibited from pledging your account as collateral for that loan. To put it another way, you can borrow money to buy foreign real estate with a nonrecourse loan. You can’t borrow with a recourse loan that’s guaranteed by the IRA or by you personally.

Above I said that these rules apply to you, beneficiaries and disqualified persons. Disqualified persons are defined in IRC Section 4975(e)(2). Here are the most common disqualified persons:

  • The account owner (obviously)
  • A person providing services to the plan such as an attorney, CPA, real estate agent, investment advisor, etc.
  • A business, corporation, partnership or trust of which you own 50% or more (ownership or control / voting rights)
  • Your spouse, parents, grandparents and great-grandparents, children (and their spouses), grandchildren and great-grandchildren (and their spouses).

The term “disqualified person” does not include siblings (brothers and sisters) or aunts, uncles and cousins of the IRA owner.

With all of those caveats, you are absolutely allowed to by foreign real estate in your IRA. You can do it through a custodian, if you don’t mind having him in control of the property, or setup an offshore IRA LLC to handle the transaction.

I hope you’ve found this article on whether you can buy foreign real estate in your IRA to be helpful. For more information on taking your account offshore, please contact me at info@premieroffshore.com or call us at (619) 483-1708. We have been assisting clients get their accounts offshore since 2002 and will be happy to work with you.

Just remember that there are risks in taking your IRA offshore. You must follow all the IRS rules and act in the best interest of the account. This means you’ll need ongoing support and an incorporator / advisor who’s an expert in these US rules. If you don’t hire Premier, hire someone in the United States. For more on why you need a US expert, see: Risks in Taking Your IRA Offshore.

finance real estate overseas

How to Finance Real Estate Overseas

To finance real estate overseas you must jump through all kinds of hoops and apply to multiple lenders in hopes of getting a decent rate. Compared to applying for a mortgage in the U.S., the battle to finance real estate overseas can seem confusing at best and silly at worst.

First, lets talk about why it’s so challenging for us to finance real estate overseas. When you’re an American investing in a foreign land, you have two strikes against you. We’re persona non grata in many countries around the world. The U.S. IRS has made it nearly impossible for us to open bank, brokerage, or escrow account. All institutions and firms that handle money are wary and weary of doing business with Americans.

And, we rarely have significant ties to the country where we want to purchase property. We have no credit history, nothing for a bank to latch on to if we default, and are as such considered a high credit risk. The only asset the lender is likely to have access to is the property.

Financing real estate overseas is like borrowing in the U.S. with a zero credit score and on a nonrecourse loan. If you are lucky enough to find a bank and escrow agent willing to take on American clients, the due diligence will be stringent and the interest rate high.

How high you ask? In most parts of Latin America, you’re looking at 6% to 12%, with the average being closer to 10%. And that’s the rate you might expect on a 50% loan to value. If you want to borrow 75% of the value of the property, that last quarter of the purchase price might cost you 20% or more.

Still Want to Finance Real Estate Overseas?

Ok, I bet many stopped reading a while back. Those of you still with me probably have had some experience offshore and knew going in that it can be expensive to finance real estate overseas. Here is what you’ve been waiting for. Some of these ideas are obvious, and some require a bit more planning.

  1. Pull equity from your U.S. home. Your most friendly partner will always be your U.S. real estate. You might get a second mortgage at 2.8% APR, just a fraction of what you will pay overseas. If you have equity in your home, this might be your first best hope to buy real estate overseas. Of course, the days of no document loans are gone, but this is still a viable option for many.
  1. Some banks lend to Americans no matter where the property is located. There are a few U.S. banks, and even fewer offshore banks, that will lend to Americans investing overseas. The international bank I recommend is Caye Bank in Belize. They offer financing for overseas real estate in a number of markets.

Another bank that finances offshore real estate, and is just a bit bigger than Caye, is HSBC. Their international division will lend against real estate in many countries, especially in Asia. Click here for more information on the international division of HSBC.

  1. Use a private lender to finance your overseas dreams. There are private or hard money lenders focused on overseas real estate. If you’ve opened an offshore company, have a foreign trustee for your asset protection trust, or have a relationship with an offshore bank, ask about private financing. You’ll be surprised how many lenders want to diversify into these markets.

Please note that this is for information purposes only. Premier Offshore is not a lender nor do we provide introductions to lenders.

  1. Negotiate with the seller. Seller financed real estate is rare in the U.S. but common offshore. Because credit ratings and the MLS system are nonexistent in most countries, mortgages are hard to come by for foreigners and locals alike. For this reason, seller financing is common.

Seller financed overseas real estate might mean you are paying the owner directly, in a rent-to-own situation, or taking over the existing mortgage with the original owner as co-signor. If you pay off the debt, the property reverts to you. If you default, the seller steps in and makes payments, taking back the home.

  1. Developer or builder financing on new overseas real estate. Just about every major new development, including condos, single family homes, and resort investments, offer financing. Many of these options are funded by the builder and offer better terms than local banks. They want you to buy in to their project so they’ve worked the market to offer the most competitive rates available.

One of my favorite developers is ECI. They have great financing options along with unique projects in some cool areas. For more information, see ECI Development.

  1. Buy offshore real estate in your IRA. Yes, you can buy overseas real estate in your U.S. retirement account. The most efficient way to do this is to form an offshore IRA LLC or Foundation (if buying in Panama), transferring your retirement account into that entity, and then making the investment.

More on Overseas Real Estate in Your IRA

And here is some good news. You don’t need to report offshore bank accounts or investments to the IRS if they are within your retirement account. IRA investments are exempt from FBAR, Form 5471, and related offshore reporting requirements. You need only inform your U.S. custodian of their value at the end of they year and he or she will handle any filings.

Of course, there are rules for buying overseas real estate in your retirement account.

First, you can’t live in the property…even for one day. It must be an investment or rental property. You can’t rent it from your IRA and may not have any personal gain from the property. All benefit are to accrue to the IRA and not you personally.

Second, if you borrow money to buy the property, you can’t pledge your IRA assets, or sign a personal guarantee, to secure the loan. That is to say, if you buy overseas real estate in your retirement account with a mortgage, you must use an unsecured loan…a mortgage backed only by the property. Such arrangements are more common overseas than they are in the U.S. and typically mean you won’t get more than a 50% LTV.

Also, if you use a mortgage, you might benefit from an advanced structure called a UBIT Blocker. See: Eliminate UBIT in Your IRA by Investing Offshore.

To peruse my various articles on buying foreign real estate in your IRA, or the tax consequences of investing in overseas real estate, please click here.

Please note that we at Premier Offshore do not offer loans. Since the posting of this article, it has become very difficult to get loans outside of the Untied States. If you would like to finance property in Belize, Costa Rica, Panama, or Nicaragua, I suggest you contact Caye Bank in Belize. This is the only lender we are working with in 2016.

Panama 2015

Panama 2015 and Beyond

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Chile’s Tax & Economic Climate

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

–        Gains from publicly traded companies are tax free.

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

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

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

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

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

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

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

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

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

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

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

IRA Gold

IRA Gold Rules

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

Here are the basics of buying IRA Gold:

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

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

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

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

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

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

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

Buy the Alibaba IPO

Should I buy the Alibaba IPO?

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

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

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

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

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

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

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

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

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

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

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

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

Physical Gold

Physical Gold is the Ultimate Investment

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

Jim Rickards – Threats to Our Dollar

A conversation with Jim Rickards by Christian Reeves on February 6, 2015.

Our currency and our financial system are under attack from all sides. Here’s what you can do to protect your wealth and your family.

Jim Rickards is the best selling author of Currency Wars and Death of the dollar. He has been cited on to on the floor as the senate by Rand Paul and is an adviser to both the Pentagon and the CIA on financial warfare.

Please click here to listen to the recording.

IRA Gold

Buy Physical Gold in Your IRA

If you see some risk in the U.S. economy and want to protect your retirement savings, I suggest you buy physical gold in your IRA.

This can be done easily enough.  You first move your retirement account to a U.S. custodian that allows for this type of investment.  We then form an offshore LLC and open bank and storage accounts under that entity.  The LLC is the owner of your account and assets… with you as the only signatory on those accounts.  You can now buy physical gold to hold in a vault in Panama or Switzerland, or coins that you take possession of.  You can also open bank accounts in just about any currency and completely diversify out of the U.S.

And now is a great time to buy physical gold.  The growing distrust of America has not translated in to higher gold prices.  In fact, gold is well off its high of $1,895.  Add to this the fact that production is set to decline significantly in 2015 (because the production cost per ounce is skyrocketing) and gold looks like a solid long term investment.

For the first time ever, the majority of Americans are afraid of their own government.  According to a Pew Research poll 53% of us think that the U.S. government threatens our personal rights and freedoms.

Though, in my opinion, the price of gold has little to do with the decision to buy.  While it’s nice to sell at a profit, the focus is to diversify and create a partial hedge out of a U.S. economic melt down.  Gold is the perfect investment to protect your assets.  Because it can be bought and sold just about anywhere in the world, and because you can buy it in your retirement account if you set up an IRA LLC, to buy physical gold at any price is a wise move.

For now, gold’s value is determined by a very complex financial trading system.  Gold is loaned, leased, hypothecated and re-hypothecated over and over.  This inflates the supply – at least on paper – and has a significant downward impact on the market price.  For example, 9,000 metric tons are traded daily while only 2,800 metric tons are mined annually.

This artificial system has created havoc in the market.  When Germany demanded the return of its 700 tons of gold back in 2011 the U.S. couldn’t deliver.  So far, only a small portion has been sent and the U.S. now says it will be some time after 2020 before the full amount can be sent.  Of course, Germany can visit its gold in New York, but they can’t take it until all of the hypothecation contracts are up.

The bottom line is that gold contracts and paper gold often leverage physical gold by 40 to 1.  All of these shenanigans in the paper gold market (EFTs, LBMA, and Comex) push down the price.  If there was no leverage or hypothecated trading, especially as a hedge in FX, prices would be many times higher than they are now.

Again, this is all to say that the price of gold has a lot of potential and is a uniquely interesting investment.  Though, I still believe that, to buy physical gold for your retirement account is not about investment return.  It’s to protect your retirement from the United States and the weakened financial position we find our nation in.

It is also to say that, holding paper gold for the purpose of protecting yourself from a major devaluation or catastrophic collapse is folly.  Fear of the government means you must also fear the economic system in general and that you must hold physical gold.

For these reasons, I suggest you buy physical gold in your retirement account.  The price should not be your primary motivating factor, but know that any event that cuts off leverage and hypothecation will send the value of physical gold rocketing upward.  In a panic, paper gold has no value.  You need the real thing.

I hope you have found this post interesting.  For more information on how and where to buy physical gold in your IRA, please send me an email to info@premieroffshore.com.  I look forward to working with you.


Chile: An Entrepreneur’s Paradise

Chile is now one of the best countries in South and Central America for tech startups.  As you will see in this article, it is blowing past my Panama… at least in attracting tech start-ups.

Termed “The Chilecon Valley,” Santiago, Chile has become the entrepreneurial hub of Latin America by focusing on talent… and backing up its policies with cash.  As a result of these government programs, it’s attracting many tech professionals from the U.S. and elsewhere.

In tech, the world’s most valuable resource is talent.  Chile doesn’t have the talent, but they’ve found a way to import it.  While the U.S. turns away many of the best and brightest by denying them residency and visas, Chile is welcoming them with open arms.  Tech geniuses come to Stanford, Harvard and MIT, only to find that the U.S. won’t allow them to stay when their schooling is over.  Chile is cashing in on our loss by giving out residency permits to anyone who will add to the country’s emerging tech industry… and then giving out grants to get these businesses up and running.

Want to move your startup to Chile?  Talk to Start-Up Chile first.  They offer a government sponsored program that may award a grant of $40,000… and all the visas you need… if you come to their fine country.  As your business becomes more mature, they have additional government funded seed capital programs and investment rounds.  For those moving on to the big leagues, Chile has convinced many of the best venture capital firms to visit Chile to hear pitches from these businesses.

This program, which began in 2012, has funded over 1,000 companies and entrepreneurs from 37 countries.  Of these, around 1/5th are local businesses and about 1/4th are American.  The rest are from anywhere and everywhere on the globe.  This has created a very “Californian” vibe along the Pacific coast of South America and a vibrant expat entrepreneurial community.  Like Paris in the 1920s and 1030s was the home of a great expat writing revolution, led by the likes of F. Scott Fitzgerald and Earnest Hemingway, Chile is leading the way for the best and brightest in tech that don’t feel welcome in Silicon Valley.

The differences between Chile and Panama are:  1) Chile is focused on tech start-ups while Panama has targeted call centers;  2)  Panama wants you to hire local, where Chile will allow you to bring in as many of your own people as you like… from your home country or elsewhere (i.e., India).

  • Panama’s visa programs are for executives, while Chile’s are for anyone.

What does Chile get out of the program?  Other than the obvious short term financial benefits of bringing in successful people, they require recipients of the grants to coach local businesses.  They expect you to give back some of your time.  Since 2012, Start-Up Chile has held 500 meetings and 1,200 workshops and conferences focused on improving local talent.

Also, these programs have led to a number of joint ventures between Chilean and international businesses that would’ve been unattainable just a few years ago.  This, and the influx of international talent which is often hired by Chilean companies, has had a positive and lasting impact on local businesses.

But Chile has some tough competition coming on.  Brazil has been working towards becoming a tech mecca for the last few years, and, now that the World cup with its billions in investment is completed, this nation is pushing hard.  With aspirations of being the China of Latin America, Brazil offers better infrastructure and local resources, and an economy 10 times larger than Chile’s, but also a much more dense bureaucracy… one that can be impenetrable for foreign investors.

Whether or not Brazil is successful in its efforts, I suggest that Chile will remain a strong option for tech start-ups.  For me, the focused community and a government that looks to make my life easier, rather than one that’s constantly looking over my shoulder (Uncle Sam), is all I need to know to say that Chile is a great place to set up an offshore tech business.

Brazil might become the China of Latin America, but Chile will be the Singapore… which is where I would rather be.  Brazil has the local market base, but Chile has the privacy and community I want, plus a more educated workforce.

As the U.S. pushes out foreign-born talent, some might say in favor of the huddled masses coming through the Mexican border, you can expect the likes of Chile and Brazil to become even more important players on the world tech stage.

In fact, the U.S. has cut its skilled worker visas to 65,000 per year, down from 100,000 in 1999, and made the process nearly impossible to navigate.  Back in the days of Reagan (the good ole days to some), these visas took 18 months to procure.  Now, one can wait as long as 10 years!

The U.S. should be focused on winning the global war for talent, but obviously has decided to focus on other matters.  Tech firms hoping to compete with lower cost and more efficient programs in South America might find themselves losing to Chilecon Valley and the like.

I hope you’ve found this post interesting.  If you’re considering moving your business out of the United States, we can help structure it in a manner that is tax efficient and compliant.  Feel free to call or email us at info@premieroffshore.com with any questions.  All consultations are confidential and free.

Next up will be a review of Chile’s economy tax system, which was designed to go hand in hand with the U.S. Foreign Earned Income Exclusion.

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.

Physical Gold

Buy Gold in an Offshore IRA

When you buy gold in an offshore IRA, you create a hedge against currency risks, move assets out of the United States, and maximize asset protection, all the while maintaining the tax benefits of the retirement account.  Buy gold in an offshore IRA LLC to maximize the benefits of taking your retirement account offshore.

When you invest in only U.S. stocks and U.S. dollar denominated assets, you place your retirement at risk.  Diversify out of the U.S. by moving your retirement account in to an offshore IRA LLC and then buy gold in an offshore account.

When you buy gold in an offshore IRA LLC, you create a hedge against currency devaluation, economic turmoil, and volatile markets.  As I write this post, the price of gold is lower and more attractive than it has been in years.  But, I suggest you buy gold in an offshore IRA at almost any price.  When you hold gold as a hedge against catastrophic risks, it makes little long term difference where the spot price moves.  Buying gold in an offshore IRA LLC is the ultimate retirement insurance policy.

When you take your IRA offshore, you take control over all account decisions.  You choose your investment mix and can reduce volatility and risk while safeguarding your standard of living.  This type of control is not available onshore.  Yes, you can form a domestic IRA LLC, but you will be limited to U.S. investments and tied to the U.S. government.

*Tax Tip:  You are not required to report gold held in your name offshore.  This is not an issue for gold in an offshore IRA, but it is for those who buy in a taxable account.  For more information on this topic, check out my article on gold.

Note that I am referring to physical ownership of gold and other hard assets.  I never recommend gold certificates or holding facilities like Perth Mint.  Unless you take possession of the assets, they must be reported to the IRS and are not a true hedge against catastrophic events.

When you buy gold in an offshore IRA, you have the same tax benefits and responsibilities as if you made the investment in the United States.  You are acting as the investment manager for your offshore IRA and must follow U.S. rules while offshore.  This means that you may buy gold bullion and Golden Eagle coins, but you may not buy collectable gold coins.

When you buy gold in an offshore IRA, you must be buying it for the value of the gold.  If the coin has a value in addition to its gold content, it is probably not a permitted investment.

I recommend you buy gold in an offshore IRA and take possession of that gold.  We work with firms in Zurich, Switzerland and Panama City, Panama that offer bullion in just about any amount and private vaults that will store it in complete anonymity.  The private vault company we work with in Panama will allow you to store just about any investment asset.

If you search the web for how to buy gold in an IRA or how to buy gold in an offshore IRA, you will find a number of U.S. providers.  There are even some U.S. firms offering to buy foreign gold through a self directed IRA, without an offshore LLC or offshore bank account.  This makes no sense to me.  There is no value to going offshore if you are not going to take control over the investments.

When you use a self directed IRA, you can “direct” the custodian to make certain investments.  You can’t force him to make an investment, but you can request and suggest investments.  Also, all investments in the self directed account are under the control of the custodian/investment manager.  If the U.S. comes calling, and tells him to bring the money back to invest in U.S. Treasuries or in the MyRa scam (see my article on MyRa), he will do so.  You have very little control over the investments in your retirement account if things go bad or you want to make an investment that the custodian is not comfortable with.  If you are buying gold in an offshore IRA as a hedge against catastrophic risks, you must use an offshore LLC.

I also note that the self directed custodian/investment manager earns a transaction fee from each investment you ask him to make.  If he picks up the phone, he’s getting paid.  If you move your retirement account in to an offshore IRA LLC, you make the investments, choose your gold broker, your vault, and the level of protection you feel is necessary.  You will pay no transaction fees to the custodian.

If you want to buy gold in an offshore IRA, I suggest you go all in and dump the self directed U.S. controlled investment advisor/custodian.  When you form an offshore IRA LLC, you are the signor on the bank account, gold purchase contract, and the vault.  No one has access to or control over your investments.  If you go offshore, then go offshore.

To clarify, when you buy gold in an offshore IRA LLC, there is a U.S. custodian involved, but he has no control over your investments or accounts.  His job is to invest your retirement account in to the offshore LLC.  Once the money is in the LLC, the custodian is responsible for annual reporting to the IRS… that’s it.  He doesn’t charge a transaction fee on your investments in the LLC and has no control over your retirement assets.

As I said above, you must follow the same rules offshore as a professional advisor follows onshore.  My point is that the choice of what to do if the U.S. decides to force retirement accounts to invest in Treasuries, is yours.  The decision to comply or not comply is yours and not the custodian’s.

Also, most experts believe that offshore IRA LLCs will be grandfathered in should the IRS go after foreign transactions.  They may close IRAs and prohibit the formation of new IRA LLCs (or the funding of offshore structures), but it is unlikely they will go after existing entities.

If you buy gold in an offshore IRA, go offshore with an LLC.  If you plan on using a self directed IRA without an LLC, then save a few dollars and buy the gold in the United States.  There is no reason to go offshore with a self directed account.

I hope this article on why you should buy gold in an offshore IRA has been helpful.  We all come at risk and diversification from different points of view.  If you want a hedge against catastrophic events, move your assets out of harms way and out of the control of a U.S. custodian with an offshore IRA LLC.  If you think this risk is minimal, then a domestic self directed IRA is all you need.

Feel free to phone or email us at info@premieroffshore.com for a confidential consultation.  We will be happy to help you take your retirement account offshore and diversify out of the United States.

Asset Protection, Banking Offshore, IRS and Retire, Offshore Bank Accounts

Eliminate UBIT in Your IRA by Investing Offshore

Are you paying Unrelated Business Income Tax in your IRA? Want to eliminate UBIT in your IRA? Is your retirement account invested in U.S. mutual funds or hedge funds? Are you thinking of taking control of your retirement account with an offshore IRA LLC and are concerned with UBIT? Do you have no idea what the heck UBIT is? Here are the ins and outs of UBIT in your IRA or other retirement account structures.

Let me start with the basics: Unrelated business income tax is a 35% tax paid on certain types of income earned by a retirement account. Regardless of whether you are a ROTH or a traditional, a 401K or a SEP, UBIT can apply to you…but it is simple to eliminate UBIT in your IRA, go offshore!

  • If your retirement account is invested in traditional stocks and bonds, or just about any type of passive investment, you don’t need to worry about UBIT.

The most common forms of UBI in an IRA is income from leverage or profit distributions from an active business. For example, if you purchase a rental property in your ROTH and 50% of the money comes from your retirement account and 50% from a non-recourse bank loan, then 50% of the profits generated will be taxable at 35% as UBI and 50% will flow through to your ROTH tax free.

Another example is a leveraged brokerage account. If you use leverage in the trading account held by your IRA, then income generated by that leverage is taxable.  If you leverage the account 10 times, then the majority of your income will be taxable and only that portion attributable to your original deposit will be tax free.

Finally, if you invest in an active business, or in to a U.S. hedge fund that invests in active businesses, then you might end up paying 35% tax on all profits generated. This is because the business or fund passes income to you, often on Form K-1, which is taxable as income not related to typical investing.

The solution for UBIT from investing in U.S. funds is simple – DON’T DO IT! A tax preferred investor should never be talked in to a U.S. fund that will generate UBIT. If the fund is structured properly, it will have an offshore feeder component. By investing in the offshore feeder, rather than the U.S. LP or LLC, you completely eliminate UBIT.

As shown below, traditional U.S. investors should come in to a fund through a U.S. structure while foreign and tax preferred investors (retirement accounts, pension funds, etc.) should come in through an offshore corporate entity. If the fund you are being sold does not have a structure for retirement accounts, you can be assured they will also be dazed and confused when it comes to reporting and tax compliance, so don’t get involved.

eliminate UBIT

eliminate UBIT

So, the costs and planning to avoid UBIT in a mutual fund or a hedge fund (should) fall on the administrator of that fund. If you are running your own investment account using leverage, or investing in real estate through leverage, you need to create your own offshore structure to deal with the tax.

Smaller retirement account investors are generally told they can’t use leverage. Accounts that are with private banking divisions, or with professional trading platforms, are allowed to access leverage at their own risk. In other words, the broker or bank won’t help you when it comes tax time.

To eliminate UBIT in your retirement account you need to 1) take that retirement account offshore in an LLC and 2) form an offshore UBIT Blocker Corporation under the LLC. This offshore corporation is the entity that holds the trading account or purchases the property. Income flows to the corporation, then the LLC, and then in to your IRA.

Here’s the trick: UBIT applies to income from leverage or ordinary income received by the IRA. By sending that money first in to an offshore corporation, and then in the LLC as a dividend, you eliminate the UBI character of the transaction and thereby jettison UBIT.

If you would like more information on the IRA LLC structure, please check out my Self Directed article.

For more information on investing in an active business, please read Can I Invest in a Business with my IRA?

As always, please post general questions in the comments below or contact me at info@premieroffshore.com for a confidential consultation.

UBIT Blocker

Eliminate Tax on Leverage in your IRA with UBIT Blocker

If you want to use leverage / margin to increase your IRA’s investing power, then you need an offshore UBIT Blocker Corporation. There are major benefits available for the sophisticated investor offshore, and the most important is the ability to use leverage and avoiding US tax on that leverage.

Without a blocker, you will pay US tax on the profits generated by the loans in your retirement account. This is called Unrelated Business Income Tax, or UBIT for short, and can be a real killer at 35%. UBIT is taxed at the corporate rate and the United States has the highest nominal corporate tax in any of the world’s developed economies. There is no (long term) capital gains treatment available for UBI.

For example, if you want use your IRA to purchase a rental property in Belize, a local bank will give you a non-recourse loan for up to 50% of the value. So, your $50,000 IRA can purchase a $100,000 property…which sounds great. Well, if you are not structured properly, 50% of the net profits from the rental, and 50% of the gains when the property is sold, are attributed to leverage and thus UBIT. This means that half of your profits are taxable in the United States at 35%.

The same is true with leveraged brokerage accounts. Sophisticated investors might wish to trade their IRAs with 10 times leverage in the FX or commodities markets, but UBIT tax is so high that it makes the leverage worthless.

These investors can form an offshore IRA LLC, an offshore corporation as a UBIT Blocker, open a trading account onshore or offshore, and eliminate UBIT on leverage. A properly structured UBIT Blocker corporation will completely eliminate US tax on leverage!

For more information on UBIT and blocker corporations, please check out my Self Directed page. For further reading, here are a couple outside links:

Please contact me directly at info@premieroffshore.com for a confidential consultation on the use and benefits of offshore UBIT structures. I will be happy to answer your questions and assist you in taking your retirement account offshore.