Tag Archive for: Services

New to Offshore? Here’s how to get started…

If you’re new to the offshore world, or just wondering what your options are, here’s an introduction to going offshore. There are plenty of legal ways to go offshore. So long as you file the necessary forms and work with a firm that provides US tax compliance, going offshore will be safe and efficient.

Here are a few suggestions on how to plant your flag offshore and how we can help.

Open a Bank Account Offshore – Plant Your First Flag Abroad

The simplest way to gain experience in the offshore world is to open a bank account. There are a number of international banks that accept US persons. Services range from advanced investment and trading facilities to simple checking accounts. Some allow you to open an account by courier and some require you to visit their offices.

In it’s simplest form, an offshore account allows you to build a beachhead offshore. Put some of your cash abroad for a rainy day. Add to that an account held in a foreign currency, and you create a hedge against a weakening of the dollar. Combine this with a gold storage account and you have a solid offshore foundation and a place to land if necessary.

Accounts can be opened under your name or a corporation or LLC. Adding a structure to the mix increases privacy and protection, but you can plant that first flag… get your feet wet as it were… with a personal account.

For a list of banks we recommend, send an email with your account size and the investments you would like to have available to info@premieroffshore.com. If you want to start with a personal account, we will point you in the right direction. All of our formation services include opening bank and brokerage accounts.

Take Control of Your Retirement and Move Your IRA Offshore

Often the first major step in to the offshore world is to take control of your retirement account and move it out of the United States. If your IRA, 401k or defined benefit plan has vested, or is from a previous employer, you have the right to take control over that account and invest it in just about anything you like.

Whether you’re concerned with privacy, the possibility of government confiscation, or just want to increase your returns and diversify your investments, taking your IRA offshore is a quick and easy way to plant your flag offshore.

For more information, a personalized quote, and information on the banks and brokerages we work with, drop me a note to info@pemieroffshore.com.

Here are a few of my posts on this topic:

Protect Your Assets with a Foreign Trust or Foundation

Once your retirement account is out of harm’s way, you might consider placing the rest of your savings behind a protective barrier. That’s what offshore asset protection is all about… moving your assets behind a wall… a fortress guarded by archers and cannons… that can’t be breached by any civil creditor. The height and complexity of that fortress is up to you and depends on the level of risk (probability of litigation) balanced against the amount of capital being protected.

Asset protection is not hiding your cash in some banana republic or simple secrecy. It’s about devising a custom strategy that fits your needs and keeps your savings safe from future creditors. Even if those creditors have a map of your castle, they’ll have no way to scale the walls.

In most cases, offshore asset protection is tax neutral. You should not pay any more or any less US taxes because you’ve diversified and taken steps to protect whats yours.

One of the exceptions to this rule is that offshore asset protection can reduce or eliminate your US estate tax (death taxes). In certain cases, contributing your assets to a foreign trust moves them out of your US estate. If your total estate is over $5.43 million in 2015, an offshore trust or foundation might save you (or your heirs) on estate taxes.

And there are other exceptions to this rule. Advanced asset protection systems that include captive insurance companies and/or offshore life insurance contracts can reduce your US taxes by hundreds of thousands of dollars a year or more. These advanced planning options typically require an investment of $1 to $3 million or the need to shelter at least $1 million per year in active business income.

For the basics of offshore trusts and foundation, please see my International Trusts page. For information on this and other more advanced techniques, please send an email to info@premieroffshore.com.

Second Passports and Foreign Residency Options

Record numbers of Americans renounced their citizenship in 2015… 1,335 during the first quarter alone. Expatriations have nearly doubled from the first quarter of 2014 and are up 10 fold from the early 2,000’s when the US began it’s attack on expats and international investments.

If you’re considering giving Uncle Sam the boot, or just want a backup travel document should the stuff hit the fan, then a second passport is for you. Remember that you must have a new passport in hand before giving up your US citizenship.

There are two paths to a second passport. You can buy a passport from countries like St. Kitts, Austria, and Comoros (see my 10 Best article below for a full list). If you don’t have the cash, you can become a resident of countries like Panama and Paraguay for a few years and then apply for citizenship. The cash for passport program is quick and easy but expensive. The residency path is slow and steady with minimal costs.

Here are a few of my posts on second passports:

Buy Real Estate in Growth Markets

One of the best ways to diversify your assets is to invest in foreign real estate. Property is tangible, you typically receive payments in a foreign currency, appreciation is not taxed, there are a number of high growth markets available to American investors, and you might not be required to report international real estate to the IRS (see link below).

We can create a holding company and put you in contact with real estate experts around the globe. The key to high returns in growth markets is local knowledge… don’t pay the “gringo price,” negotiate like a local.

For example, Nicaragua is expected to be one of the hottest markets from 2016 to 2020. For the reason why, see Follow the Smart Money into Nicaragua (on EscapeArtist.com). For my thoughts on the Panama market, see Panama, 2015 and Beyond.

Here are a few of my other posts on international real estate:

Start a Business Abroad and Pay Zero Taxes

If you can take you and your business offshore, and qualify for the Foreign Earned Income Exclusion, then you can run a business and pay zero US taxes. Assuming you operate from a country like Panama that won’t tax your foreign sourced income, you might pay zero worldwide tax.

I have a number of articles on this topic, but the basics are that you need to be out of the US and operating your business through a foreign corporation setup in a country that won’t tax your profits. The most important component of this plan is that you qualify for the Foreign Earned Income Exclusion.

Here are my posts on how to start a business abroad:

For more information on moving your business offshore, please send an email to info@premieroffshore.com.

Offshore Merchant Account

The US has the cheapest and best credit card processing, period.

But, if you’re going to be offshore, you should go all the way, right?

If you can structure your business with an offshore bank account and merchant account, you will reduce your exposure to the US government and the risks of the IRS seizing your cash. You will increase privacy and protection for your business. This security comes at a cost, but it may be well worth it.

We can help you structure your business offshore and open bank and merchant accounts. If you wish to keep processing in the US, we can help you there as well. You will need a US corporation and merchant account added to your offshore structure. Of course, this means your US corporation will file a US return. It also adds a level of complexity to your accounting and tax planning.

For more information on offshore merchant accounts see my article How to Get an Offshore Merchant Account. This 9 page report will tell you more than you ever wanted to know about the credit card processing industry.

US Tax Preparation & Compliance

We offer tax preparation and planning for all levels of international investors. Whether you have a advanced trust and company structure, a simple single member LLC, or foreign real estate and assets that need to be reported, we can assist.

For a confidential quote to prepare your current year tax returns, send an email to info@premieroffshore.com, along with a copy of last year’s return.

We also provide a ton of tax research on this site, which is intended to help you plan your structures and investments, but not necessarily prepare your returns… we don’t update our posts with changes to the code unless a major law comes along that affects future planning.

Tax rules, rates and forms are constantly changing. The US tax code is over 4,000 words long and there’ve been over 5,000 changes since 2001. My International Tax and Business Guide (2015, 6th edition)  tracks these changes and is updated for each tax filing season.

To receive your free copy of my 120 page book please sign up for my free e-letter. I’ll send it to you as a PDF immediately.

To receive your free copy of my 120 page book please enter your email address below. I’ll send it to you as a PDF immediately.
[contact-form-7 id=”2719″ title=”US Tax Preparation & Compliance”]
IRS Audits and Tax Debt

The IRS has found it very profitable to go after international accounts and has gone to great lengths to target Americans abroad. The is the reason I created Premier – to offer legal and tax compliant options to Americans living, working, and investing abroad.

To many of my readers have been taken in by unscrupulous offshore incorporators. These scammers are not subject to US rules and provide little or no advice on the topic… and, those that do offer “guidance,” often tell you what you want to hear just to make the sale.

Unfortunately, the IRS doesn’t care why you didn’t file your forms on time… they just want to take as much of your hard earned money as possible and put another pelt on the wall.

If you’re behind in your filings, or being audited, we can help. Our team of experts have decades of experience in dealing with the IRS and can settle your tax controversy in the most efficient manner possible.

One option for those living abroad is the Offshore Voluntary Disclosure Program. If you qualify, you might be eligible to file your missing forms, get right with your government, and  pay no penalties.

For more information, see: 2014 IRS Settlement Program – I am writing this post in May of 2015 and the 2014 IRS program is still in effect. However, it may be modified or canceled at any time.

You might also take a read through: Prepare for an Offshore IRS Audit and Offshore Basics, What’s Legal and What’s Not

If you are a glutton for punishment, and want to read my articles on doing battle with the IRS, checkout the tax portal at EscapeArtist.com. There you will find over 40 posts on dealing with the great collector.

Note: Premier is not a law firm. If you’re being targeted by the IRS Criminal Investigation Division, or have been charged with a crime, you need a lawyer. Send a brief email to info@premieroffshore.com and I’ll put you in touch with a tax attorney who specializes in IRS criminal matters.

Offshore Business Planning

Multinationals have enjoyed the benefits of offshore business planning for decades. ProperBusinessman with ideas for success Businessman with ideas for success planning has allowed these companies to legally stash billions offshore and out of the reach of the IRS.

For example, Apple has $157.8 billion in cash sitting overseas and reported the biggest quarterly profit in corporate history this month. Microsoft and Google, not to be outdone at offshore business planning, hold about $82.1 billion and $60 billion respectively overseas.

While tech companies are often better suited to offshore business planning, these laws can be used by anyone willing to diversify abroad. For example, General Electric holds about $110 billion offshore. Other big time offshore business planners include tech and pharmaceutical giants such as Pfizer, Merck, Johnson & Johnson.

According to Forbes, U.S. companies seeking to avoid high corporate tax rates stockpiled an additional $154.5 billion overseas in the last year, bringing the grand total to more than $2 trillion (link is to Forbes).

But, here’s the thing: U.S. laws may have been designed by lobbyists for big corporations, but they apply equally to all of us entrepreneurs. Whether you’re a one man shop or a medium sized venture with millions in sales and 100 employees, offshore business planning can help you cut your taxes, increase profits, and protect your assets from frivolous lawsuits.

  • Our team of US expats has decades of experience offshore… and we live what we recommend. We are all American expats and Premier operates from Panama and Belize.

Here are just a few of the areas our offshore business planning service can help:

Planning Your Offshore Strategy: Beginning with the jurisdiction and then the type of entity, we will design a custom offshore business structure that will reduce your worldwide tax obligations, diversify your business abroad, and protect your asset.

For example, let’s say you have an ecommerce business. Together, we decide that the country of Panama is the most efficient jurisdiction for the parent company and call center:

  • the business can be structured to eliminate local taxes,
  • low cost English speaking employees are available,
  • the country offers excellent internet connectivity,
  • banking and ecommerce are available at competitive rates, and
  • 5) visas are available for you and your executives.

Next, we decide to add an offshore subsidiary in the country of Belize to receive payments from clients outside of Panama. Panama will not tax foreign sourced income, so billing through a subsidiary is efficient.

Then we transfer existing and future intellectual property in to subsidiaries incorporated in Cayman Islands. The Panama corporation licenses the IP from these companies, providing another level of asset protection, country and currency risk diversification, and tax mitigation.

Finally, we wrap all of this up in to an offshore trust or a Panama Foundation to maximize privacy and protection.

Offshore Staffing and Visa Issues: As expat entrepreneurs we bring years of experience to your team. We can help you find, qualify, and manage employees and independent contractors.

We can also help with work and business visas for you, your family, and your executive team. Some of our visa programs are proprietary and, depending on your country of operation, can reduce costs and speed up you entrance to the market.

Onshore and Offshore Merchant Accounts: We can negotiate both onshore and offshore merchant accounts on your behalf with ISOs and acquiring banks around the world. The country and structure selected will depend on many factors and we have experience in all levels of merchant processing.

Of course, if you are going to go offshore, you should go all the way. Moving your credit card processing offshore has many benefits. So long as you have an office with employees offshore, your discount rates will be reasonable.

Some clients require U.S. banking and credit card processing. We can assist you to find the best processor for your niche and mary your desire to go offshore with your need for a U.S. account. Such a structure adds layers of complexity to your offshore business plan, but we can guide you through the minefield.

For a detailed description of the offshore merchant account, see my article: How to Get an Offshore Merchant Account.

International Tax Planning: We are one of the few firms offering international formation and tax planning services to small and midsized businesses. Our offshore business plans are specifically designed for closely held companies looking for the same tax and business benefits available to the multinationals.

For example, we might develop an offshore plan that allows you to qualify for the Foreign Earned Income Exclusion, draw a salary of up to $100,800 tax free from your active offshore business ($200,000 p.a. for a husband and wife), and retain earnings over an above the FEIE tax deferred. For more on this, see my article on retained earnings in an offshore corporation.

Or, as mentioned above, we might decide that an IP holding company is the cost effective way to move a portion of your profits from foreign sales out of your parent company.

Another offshore business planning technique making headlines is the offshore inversion. This is where your business buys a foreign competitor (doesn’t need to be a competitor, but that is the most common) based in a low tax country. At the end of the transaction, the tax home of the business becomes the low tax jurisdiction, greatly reducing your worldwide tax obligations. That is to say, the tax home of the company is “inverted” from the U.S. to the low tax country.

If you, your business, and your employees must remain in the US, and you don’t have significant foreign sales, an offshore captive insurance company might be the solution. An offshore captive will allow you to move up to $1.2 million per year out of your U.S. corporation on on to the books of your offshore insurance company. That is to say, you pay insurance premiums to your offshore insurance company of up to $1.2 million which are deductible to your U.S. company.

The offshore captive is most effective for a U.S. based business with at least $500,000 p.a. in net profits it wants to move offshore for several years.

We can assist with these and other offshore business planning techniques. Every situation is unique and we will build a plan that fits your needs. Maybe a “double Irish,” or a “double Irish with a Dutch sandwich,” fits the bill. Or maybe you have significant capital gains and will benefit from a US complaint offshore life policy. Or maybe a merger or JV with a foreign partner that minimizes both taxes and reporting fits your goals. No matter the situation, we can help.

All you need to benefit from these offshore planning strategies is a guide. Our team has decades of experience advising entrepreneurs and navigating international waters… and we are US expats living what we recommend. [br][br][br][br]

Offshore Company Offshore Companies

Offshore Company

Offshore Company, Offshore Corporation and Offshore LLC Formations

The formation of an offshore company is an International Trust and Asset Protection Trusteffective asset protection and tax mitigation tool. But these structures are also extremely misunderstood.

I speak with potential clients every day who have read and researched offshore companies on the web, or spoken with non-US advisers or online incorporation mills, and they are often filled with inaccurate and potentially dangerous information on the legitimate uses of offshore companies. This is especially prevalent in those who seek cheap advice from international advisers who are not experts in the US tax laws affecting their offshore company.

In the article below, and in my email newsletter, I do my best to dispel these myths and explain the proper uses of offshore companies in a simple and straightforward manner.

A professionally structured and tax compliant offshore corporation can reduce or eliminate U.S. tax on an expat’s ordinary business income, while a non-complaint offshore company is the quickest way to land in hot water with the IRS.

I have been assisting U.S. individuals and businesses move or invest offshore for 15 years and I have been writing on this topic continually for most of this time. The culmination of my experience is contained in my 60 page Expat Tax and Business Guide, 2013 edition, available on this website as a free download.

While reading this article, please keep the following definitions in mind.

  • Offshore company or offshore companies are generic terms for an incorporated offshore structure.
  • An offshore corporation or offshore IBC is an offshore company organized and taxed as a corporation.
  • An offshore LLC is an offshore company organized as a flow-through entity for tax purposes.
  • A disregarded entity is a single member offshore LLC that is ignored for tax purposes. These offshore companies are generally used for asset protection or to hold IRAs
  • An offshore LLC with more than one member is incorporated and taxed as a partnership. These are offshore companies taxed as partnerships rather than corporations

Reasons to Form an Offshore Company

Operating through an offshore company allows you to conduct your business, bank transactions and/or personal financial affairs with maximum tax efficiently and a level of privacy and anonymity. Placing assets into an offshore company and incorporated legal structure provides a strong layer of protection from future liabilities.

Holding bank accounts and assets in an offshore company, rather than in your name, maximizes privacy and protection. In many jurisdictions, the company officers, shareholders and beneficial owners are not public record and their privacy is guaranteed by statute.

There are four primary uses for an offshore corporation or offshore LLC.

  1. If you are an American living outside of the United States and operating a business, an offshore corporation can provide significant tax savings and deferral opportunities. These benefits require that you qualify for the Foreign Earned Income Exclusion discussed in the taxation section of this site. Tax benefits from retained earnings do not apply to an offshore LLC.
  1. An offshore Self Directed IRA LLC can facilitate investments in to international markets and gives you control over your retirement assets. Likewise, an offshore corporation added to this structure may have significant tax benefits for the sophisticated investor. Please review the Self Directed IRA section of this website for additional information.
  1. Placing your after tax assets in to an offshore LLC provides one level of international asset protection and, when combined with a foreign trust or foundation, maximum privacy and security can be realized. Advanced asset protection structures are discussed in the International Trust section of this website and a wide range of techniques are covered in my newsletter.
  1. An offshore LLC can open bank accounts around the world to facilitate currency and investment diversification. See Offshore Banking for additional information.

The articles on this website and my offshore company formation methodologies are focused on tax compliant company formations for American citizens or residents. Please contact us at info@premieroffshore.com or by phone at (619) 550-2743 with any questions.

Offshore Corporation or Offshore LLC

An offshore corporation, also referred to as an International Business Company or Offshore IBC, is an entity separate and distinct from its shareholder(s) while an offshore Limited Liability Company is tied to its members as a pass-through entity for U.S. tax purposes. Both structures provide the same level of asset protection but are treated differently by the tax code.

An offshore LLC with only one member is treated as a disregarded entity. This investment and asset protection structure has simplified U.S. reporting requirements and selecting the offshore LLC entity classification with the IRS will reduce your annual maintenance costs. A single member offshore LLC is best suited for the following:

  1. To manage your IRA. The Self Directed IRA  LLC allows IRA income to flow-through to the retirement account, thereby maintaining the exempt or deferred status of the plan.
  1. To hold an offshore bank account for a U.S. resident seeking asset protection. A person living in the U.S., who does not qualify for the Foreign Earned Income Exclusion, receives no tax benefit from being offshore. Therefore, the simplified reporting of an offshore LLC is preferred.
  1. To hold an international business that is expected to generate net profits that are less than the Foreign Earned Income Exclusion amount and/or does not want to retain profits in the offshore company. Even if you qualify for the FEIE, the simplified tax reporting of a single member offshore LLC is preferable to the complex tax scheme of offshore companies if net profits are unlikely to exceed $97,600 for one owner or $195,200 for a husband and wife in 2013.

A multi-member offshore LLC is also a flow-through entity for U.S. tax purposes. However, it is reported as a partnership and requires a complex tax return. Offshore LLC partnerships are primarily used in joint venture arrangements.

An Offshore IBC or offshore corporation is best suited to hold an active business that will generate net profits in excess of the Foreign Earned Income Exclusion amount and for complex offshore IRA structures. If you, as the owner of a business, are living and working abroad, you may be able to defer U.S. income tax on net operating profits by retaining income in an offshore IBC. How to achieve this level of tax efficiency is covered in detail in my Expat Tax and Business Guide.

Diversified Offshore Companies Structure: Five Flags Approach

The key to a tax efficient offshore companies structure is diversification of entity, operations and banking. Likewise, the key to maximum asset protection is diversification of jurisdiction, offshore structure portability, and of your portfolio. A well designed offshore company structure will allow you to achieve personal freedom, privacy, and protection. If you are living and working abroad, this same approach may allow you to live tax tax-free, thereby increasing the quality of your life and reduce your cost of living.

Offshore Company

A complete approach to offshore planning takes in to account five primary factors, and is typically referred to as the “Five Flags” approach. The five flags you must plant to achieve freedom, privacy and protection are:

  1. Residency. Living and/or working in one country (where you pay little or no tax).
  2. Offshore banking. Doing your banking in another country (where you can feel secure your deposits are safe).
  3. Foreign Investments. Making investments in a third market (such as real estate, maintaining a brokerage account, storing gold, etc.).
  4. Passport. Holding a passport in another jurisdiction, such as your country of origin or a “second” passport. For information on passport programs, see the Second Passport section on this site.
  5. Offshore Company. Incorporating your business or protecting your assets in a country separate from any of the ones above. A diversified structure with multiple offshore companies is one of the best asset protection and tax planning solutions.

In most cases, the first flag to be planted is a bank account held by your offshore company. This opens up a number of investment and diversification options and will get you started on a complete Five Flags approach.

Offshore Company Selection Guide

When designing an offshore companies plan, I always start with a country with a history of strong privacy and protection laws and that will not tax your investment or business income. If you are operating a business, I suggest incorporating in a jurisdiction separate from where you live to minimize taxes in your country of residence.

Second, we decide together whether you require an offshore LLC or an offshore corporation or offshore IBC. Most countries offer corporations, but only a few, such as Nevis and Cook Islands, have U.S. compliant single-member LLC statutes. Other countries, such as Belize and Panama, offer LLCs but require at least two members, and are thus akin to U.S. partnerships and not disregarded single member offshore LLCs.

Next, I shorten the list of possible domiciles by analyzing your primary motivation for the incorporation. Here is my usual thought process:

  • If you are focused on simplicity, ease of administration, and privacy, I often recommend Seychelles, Nevis or Belize.
  • If you are focused on asset protection, I might recommend the Cook Islands.
  • If you are operating a business, or wish to create a hybrid corporate / foundation model, I usually recommend Panama.
  • If you are doing business in Asia, I usually start with Hong Kong or Singapore.
  • If you are looking for a financial services or ForEx licensed entity, I usually suggest Belize, Panama or New Zealand.
  • If you will invest in a hedge fund, or require maximum transparency / compatibility with U.S. regulatory agencies, I usually recommend Cayman Islands.

Finally, we review your banking, business and residency situation before selecting the best jurisdiction for your offshore company. With the Five Flags approach in mind, we are able to create a solution tailored to your specific needs.

Please contact us at info@premieroffshore.com or by phone to (619) 550-2743 to discuss your offshore company formation needs. To facilitate this conversation, my thoughts on our most popular offshore jurisdictions are below.

Country Guide



My preferred country from which to operate a business is Panama. Panama City is a first world metropolis with first world amenities and technology. Employment costs are about 25% of the United States and English speaking labor is abundant.

Also, my preferred jurisdiction for an offshore IBC or an international Foundation      for asset protection purposes is Panama. Panama’s legal system is well developed and tested, professional local counsel is available, and their advanced corporate code allows for maximum protection.

Finally, Panama’s Foundation law provides a cost effective alternative to the Cook Islands asset protection trust.


The most common jurisdiction for single member offshore LLCs is Nevis. This Eastern Caribbean nation was a pioneer in the offshore formation industry and offers simplicity and maximum privacy and protection to both offshore IBCs and offshore LLCs.

Nevis also offers a very adaptable offshore trust code that allows you to create your own licensed trust management company, something not available in any other jurisdiction. As a leader in privacy, Nevis offers many unique planning opportunities.


Like Nevis, Belize provides a very efficient corporate, LLC and trust code which can be adapted to just about any situation. Their LLC is suited for local investments and requires two officers, akin to a U.S. partnership.

Belize also offers the simplest residency program around and has a nice array of small business banks with excellent records on privacy and stability / capitalization. Both of these factors are beneficial to the American abroad looking to qualify for the Foreign Earned Income Exclusion.

I recommend Belize to those seeking for an offshore structure with minimal maintenance and who are investing or doing business in Panama, Mexico, or South America.

I also recommend Belize to those considering developing a licensed currency trading platform.


The most popular offshore company among U.S. lawyers these days is the Seychelles IBC. Seychelles is lesser known than Nevis, but just as effective. Seychelles’ flexible tax exempt company is best utilized as a personal services corporation, holding company, royalties/patents/copyright company, or investment company (real estate, equities, commodities, ForEx, etc.).

Seychelles lawyers are experienced in European Union transactions and a Seychelles IBC is the most efficient entity through which to open an account at an E.U or offshore U.K. center (Isle of Man, Gibraltar, etc.).

Like Nevis, the names of directors and shareholders of a Seychelles IBC do not appear in the public record. It is against the law for a registered agent or anyone else privy to information to disclose this material to any third party. The only exception is if the release is ordered by the Seychelles Supreme Court or the Seychelles Financial Intelligence Unit investigating money laundering or terrorist financing. The only records delivered to the Registrar are the Memorandum and Articles of Association which have no reference to the beneficial owner, directors, officers or shareholders.

For those who require a tax paying domestic company, the Seychelles CSL is a local tax resident company which is taxed at a rate of 1.5% of its worldwide (gross) income. It is registered as a normal domestic company under the Companies Ordinance but granted a special license by the Seychelles International Business Authority. These entities, and the various applicable tax treaties, provide excellent planning opportunities for sophisticated investors or business operators.

Cook Islands

The Cook Islands are the preeminent asset protection jurisdiction. Their trusts, legal configurations, statutes, and court system based in New Zealand, are the most tried and tested around.

Formation of a Cook Islands offshore company is a cost effective way to access this asset protection legal history, and gives you access to New Zealand banking facilities. For example, a Cook Islands LLC can open an account at ANZ Bank (click here), a bank not available to company from any other jurisdiction.

For additional information on Cook Islands trusts, see the International Trusts section of this website.

Cayman Islands

Back in the day, the Cayman Islands were the original offshore jurisdiction. Now, this island is closely aligned and transparent with the U.S. government and IRS. As such, a Cayman offshore corporation is popular with large fund formations and investments, individuals seeking entry to the most compliant banks, and is the jurisdiction of choice for large offshore IRA structures…and apparently home to Mitt Romney’s offshore structure.

The Cayman Islands is the largest offshore banking center with 350 banks and deposits worth more than US$1 trillion. It is second in captive insurance after Bermuda with assets worth $20 billion and it is believed that the island’s trust sector manages more than $500 billion.

Hong Kong

Hong Kong has long been the door to mainland China. If you are looking to do business in China, or in the RMB, Hong Kong is the place to start. I have been forming offshore corporations in Hong Kong for a decade and have cultivated strong relationships in the region.

Hong Kong imposes no withholding tax, sales, tax, capitals gains tax, net worth tax, or VAT and there is no tax on investment income or capital gains. Its companies require annual financial statements, thus local directors and tax and business counsel are required.


Singapore is one of Asia’s most important financial centers. Its concentration of financial institutions and efficient capital markets make it a leader in global finance. Since its abolishment of currency exchange controls in 1978, Singapore has evolved into one of the world’s premier banking centers. Indeed, in recent years, substantial capital has moved into Singapore from traditional European banking centers due in large part to new regulatory requirements promulgated by the European Union and the shredding of Swiss banking secrecy by the U.S.

A Singapore corporation requires two local directors and at least two individual shareholders or one corporate shareholder. Bearer shares are not permitted. Accounts must be audited by a qualified resident examiner. General meetings must be held annually and a local company secretary is required.

Therefore, annual costs in Singapore are significant when compared to traditional offshore jurisdictions. Like Cayman, Singapore offers top flight legal, tax and business counsel, and is a popular jurisdiction for large cooperatives and investment accounts.

The Panama Foundation for Asset Protection

The Panama Foundation provides the best asset protection and estate planning available… hands down, no questions asked.  Here’s why the Panama Foundation is the ticket for those wanting to diversify abroad and protect their savings.

While the offshore trust, especially the Cook Island Trust, has a longer history, the modern Panama Foundation costs less to set up and maintain, and you don’t need to pay a professional trustee or protector. This can save you thousands of dollars a year. The Panama Foundation is the most efficient advanced asset protection structure available… and it’s just as effective as its high cost cousin.

With a Panama Foundation, you can appoint anyone you like to handle your estate should you become incapacitated. Also, unlike a Belize trust, you can be the manager of the Foundation, controlling its investments for the benefits of your heirs.

But I’m getting ahead of myself. Let me start from the beginning…

Panama Foundation Overview

First, let me take a moment to summarize the Panama Foundation as an asset protection tool.  The Foundation, as defined in the Panama law in 1995, and as updated and improved over the years, is a separate and distinct entity from its owners.  As a result, the Panama Foundation is now recognized, not only by Panama,  but by the United States and other countries, as one of the most efficient asset protection tools.

For example, the Panama Foundation is one of the very few foreign structures approved in the Cayman Islands.  The very conservative country of Cayman (regardless of what you see in the movies, Cayman is extremely conservative) has approved the Panama Foundation to open accounts in its banks without any extra due diligence required.  Try to open an account under a Nevis corporation here and you will be shown the door or told to form a local company.

  • Being recognized around the world gives you access to more foreign banks, currencies and investments.  It also means you can move quickly out of Panama if sued there.

Also, the Panama Foundation does not require members or shareholders.  All that is needed is the Founder (you, the settlor), the Foundation council (we or you provide), and a beneficiary.  You may act as both the Founder and the beneficiary and may appoint any three people or any one company as the counsel.  It is usually this counsel that manages the assets should you become unable or unwilling to do so (such as if you are in litigation or otherwise incapacitated).

That’s the basic structure.  I usually recommend that larger Panama Foundations 1) don’t list the settlor as the beneficiary and 2) appoint an asset manager as the protector or foundation counsel.  If the primary purpose of the Foundation is asset protection, taking these steps early can save you in the long run.  Of course, you can add the protector or investment manager later if an attack on your assets becomes likely.

Benefits of a Panama Foundation

There are many benefits of a Panama Foundation for asset protection and I’ll take them in turn here.  The first is that the Foundation won’t be taxed in Panama… and no local accounting or audit will be required.  I never recommend a jurisdiction for asset protection that requires audited financials, the filing of tax forms, or any other compliance.  For example, Hong Kong requires audited financial statements be filed each year, and thus an expensive CPA is required, so I avoid that country.

  • So long as the Foundation’s income is from outside of Panama, it will be tax free.  Of course, if you open a business (such as a bar) in Panama, you will pay Panamanian tax on the profits.

Next, the Panama Foundation is a hybrid entity in between a trust and a corporation.  Therefore, it may act as an offshore trust, but it is far more cost effective to form and operate than other international trust arrangements.

For example, the Panama Foundation is about 1/2 the cost of a Cook Island Trust and you need not pay for a Protector or asset manager unless you elect to have one.  Most trusts require one of these two persons and charge a few points on the assets of the trust (assets under management) to provide them.

  • I helped a CI trust that was spending $6,000+ per year in maintenance and management move to Panama. We cut these costs down to about $950 p.a.

Of course, if you desire advanced investment management services, they are available in Panama, Cayman Islands, or elsewhere.  All of the major financial service providers are in Panama and we can arrange bank and brokerage accounts at all levels.

Next, the Panama Foundation is a separate entity and, as such, may enter in to contracts and agreements on behalf of its Founder (you).  The Foundation’s ability to contract and operate as a company separate and distinct from its owner is why we call the Panama Foundation a hybrid structure.  While a trust is one with its settlor, a Panama Foundation is a legal entity like a corporation or LLC (which is why I refer to it as a company).

The only limitation is that a Panama Foundation may not operate an active business.  If you want to hold a business in a Panama structure, your Foundation may form a Panama corporation, but may not own the business directly.

I note that real estate is usually not an active business… unless you own many units or buy land, divide it, and sell parcels.  Your Panama Foundation may own a rental or two, or you may decide to purchase the condo in a corporation for maximum local asset protection… if something happens to the condo, liability in Panama won’t reach the assets of the Foundation.

A Panama Foundation may be established for the benefit of any third party. Alternately, the Founder/settlor may be the beneficiary.  As stated above, I don’t recommend the Founder be the beneficiary, but it is possible.  You may also list anyone or any company as the beneficiary.

  • Beneficiaries may be any person(s) or company(ies).  Beneficiaries are not public record.

In fact, your estate plan may be as simple or complex as you like.  You might decide to work with the U.S. gift tax exclusion, or the Foreign Earned Income Exclusion for a business in Panama, create a charitable remainder structure, a generation skipping Foundation, or any variation thereof.

The bottom line is that you may control the disposition of assets by lodging a simple or complex list of instructions with the Foundation council.  This “letter of wishes” will tell the banks, brokerages, and property managers what to do with your assets upon your passing and may be changed or updated as often as you like… usually at no cost.

Also, the Panama Foundation requires no annual meeting or formalities.  With a U.S. structure, if you fail to keep up appearances, creditors may pierce the corporate veil and get to your assets.  In Panama, no such laws apply and your assets are secure.  As stated above, no audit, accounting, or tax filing will be required in Panama.

Conventions of the Panama Foundation

A Panama Foundation may use any name available.  You’re not required to use your last name, as is the custom with a trust.  Though, you do need to include the word “Foundation” in the name.  So, The Reeves Private Interest Foundation, Reeves Foundation, or Great Panama Foundation would all be acceptable names.

A Panama Foundation must have a local address and local agent for service of process.  Just as when you form an out of state company or LLC in the US, you need to have a local representative to receive legal correspondence.  We provide this for you at no cost.

The Founder of a Panama Foundation may be any person or entity (a foreign or domestic corporation, trust, LLC, etc.).

Uses for a Panama Foundation

The most common uses of a Panama Foundation are:

  • To hold shares, patents, collect royalties, manage trademarks and other passive activities;
  • Offshore asset protection for those who want to diversify out of the U.S.;
  • Moving assets out of your US estate to minimize US estate tax;
  • Investment management and private asset management by firms or outside of the United States, especially where the provider is unwilling to do business with a U.S. person directly.

Panama Foundation Council

As I’ve said, a Panama Foundation may be as simple or complex as necessary.  One of the reasons for this flexibility is the Foundation Council, which is unique to Panama.  It is this council that allows you to maximize asset protection and, should you come under duress, allows you to separate yourself from the structure and the assets.

  • You may manage the Panama Foundation directly until or unless you have an issue (come under attack by a creditor).

You may elect to retain a professional trust company or lawyer to act as your trustee/protector.  This person would be appointed by your foundation council and act at your direction.

We provide your foundation council at no additional charge.  You may then add an investment manager or lawyer as you see fit.  Alternatively, you can manage your Panama Foundation and then seek professional assistance only if you come under duress or litigation becomes likely. Of course, you can provide the Foundation council.

Your Panama Foundation Council may consist of three or more persons or one legal entity (a corporation or LLC).  These people or company may be from any country… they need not be Panamanians.  Though, I don’t recommend U.S. persons or companies as council members. This would reduce the asset protection benefits of the Panama Foundation.  U.S. persons are subject to the control and whims of a U.S. court.

So, if you want to create an advanced structure, we can provide a Panama attorney, or an offshore LLC to act as the Foundation Council… maybe a limited liability company from Belize to maximize privacy and diversify or plant flags in multiple jurisdictions, taking the best from each and combining it into a worldwide asset protection plan.

U.S. Taxation of a Panama Foundation

As I said above, foreign source and passive income are not taxable in Panama.  So long as the foundation is not operating a business in Panama, you’ll pay no local tax.

Of course, if you do operate a business or sell local real estate you will pay tax to Panama.

If you are living in the United States, you (the Founder) are the beneficial owner of the assets of the Foundation for U.S. tax purposes.  In other words, the Founder is the owner of the assets for US tax purposes (but not litigation purposes) held by the Foundation. Any income generated therefrom will be taxable in the U.S.

As you know, the U.S. taxes its citizens on our worldwide income.  The fact that you are using a Panama Foundation for asset protection does not change the tax code.  The U.S. will want its cut of passive income so long as you hold a blue passport and its share of business income so long as you are living in the U.S.

There are a number of U.S. tax planning options with a Panama Foundation that are outside of the scope of this article.  For example, you might hold an active business in a Panama corporation owned by the Foundation, qualify for the Foreign Earned Income Exclusion, and draw a salary from that corporation of up to $100,800 for 2015 free of U.S. income tax (husband and wife might each take $100,000 for a total of $200,000). Then, you may retain earnings over this amount and defer U.S. tax for as long as you like. See my articles on the Foreign Earned Income Exclusion for more information.

You might also decide to create sub-Foundations and transfer portions of the assets in your primary Panama Foundation to your heirs over time using the gift tax exclusion.  This may reduce your U.S. tax and have other estate planning benefits.

You might decide to purchase precious metal or physical gold within your Panama Foundation.  This can be done in Panama by leasing a local vault and we can introduce you to reputable sources for bouillon if you like.

Or you might invest in an offshore life insurance policy through your Panama Foundation.  These investments usually require $2 million or more and, assuming they are U.S. compliant, may allow you to reduce or eliminate U.S. tax on passive income.

  • These are complex topics and I have just touched on them here.


To recap, the major benefits of a Panama Foundation over other asset protection vehicles are:

  • Exemption from all Panamanian taxes on profits generated outside of Panama
  • Relatively Inexpensive to maintain
  • Separate legal entity with capacity to execute agreements and acquire obligations and property.
  • No shareholders,  members, directors, or officers required
  • Any person or company may create a foundation for the benefit of any third party
  • Assets transferred to the Foundation in a timely manner are out of reach of civil creditors
  • Accounting and audited financials are not required
  • No foreign exchange controls

If you would like to form a Panama Foundation, 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.

Articles on Panama and the Panama Foundation:


Self Directed IRA

Moving Your IRA Offshore with an Self Directed IRA LLC 

Self Directed IRA LLC Techniques of the Super Wealthy Now Available to the Average Investor 

Self Directed IRA LLCs and Offshore IRA LLC Structures Take a Page from Mitt Romney’s Playbook

The most valuable investment we Americans have is our retirement account. Unfortunately, the majority of these holdings have been sitting for years with brokers that pay them little mind while they’ve lost money or, if you’re lucky, been flat and just eaten alive by fees. You can take control of these assets with a self directed IRA LLC or offshore IRA LLC.

Ever wonder how the super-rich generate enormous profits and pay zero tax? They do it by making investments through tax exempt self directed IRAs and using the international techniques below to defer or eliminate U.S. tax.

Click here for a recent N.Y. Times piece on Mitt Romney’s IRA tax planning.

Until recently, these advanced techniques were only available to millionaires and billionaires willing to pay enormous legal and accounting fees to create and maintain their structures. In this article, I pull back the curtain and explain the model in simple English…much to the consternation of my lawyerly colleagues.

Introduction to the Self Directed IRA

While your IRA has been sitting in a limbo imposed by your broker, your investment options have been extremely limited. If you wanted to buy gold, invest in a business, diversify out of the dollar, buy a high return foreign CD like the ones available from Panamanian banks at 8.5%, or purchase international real estate, you were out of luck. You are offered only those sucker bets on your provider’s menu… those with the best commission and fee structure for your advisor… regardless of whether they fit with your objectives.

You do have a choice in all of this. You can take control of your retirement account by creating a self directed IRA and moving that into an offshore Limited Liability Company, appointing yourself as the manager of that LLC, and then making just about any investment you see fit.

Retirement Account: From here on, I will use the terms retirement account or IRA to refer to the various tax exempt retirement accounts, including 401(k), SEP / SARSEP / SIMPLE, ROTH, Keogh, Solo 401(k) and 403(b).

Defined Benefit Plans: A DB plan must be converted into an IRA before it can be taken offshore.

Prior Employer: You can always convert an IRA from a prior employer into a Self Directed IRA, but generally not one held by your current employer. If your nest egg with your current employer is under performing, you’re probably out of luck. There are a number of exceptions to this, such as portions of an IRA that have vested, so check with your HR department.

The traditional IRA LLC or U.S. Self Directed IRA allows you to take control of your investments, eliminates 95% of IRA fees, and gives you access to opportunities otherwise not available to an average retirement account. Taking your IRA offshore opens up a whole world of investment products and tax saving tools that, until now, have been the exclusive purview of the super-rich.

With the Self Directed IRA LLC you manage your investments and choose any type of permissible asset, including gold, real estate, foreign currencies, CDs, etc. With checkbook control, you write the checks from your IRA account, which allows for an immediate response to opportunities and maximum flexibility. You choose and control the deals and decide which investments to make with no one looking over your shoulder.

Offshore IRA LLC vs Self Directed IRA

If you search around on the web, you will find that there are many companies offering Self Directed IRAs, several marketing Self Directed IRA LLCs, but only a few experienced in Offshore Self Directed IRA LLCs. We were one of the originators of this industry and still the market leader in helping people move their IRAs out of the U.S.

You will discover little actionable information on the advanced offshore techniques described below (UBIT Blocker Corporations). The high-dollar law firms hold these close to the vest and offer them only to their preferred clients.

Before discussing advanced techniques, let’s consider the difference between a Self Directed Offshore IRA LLC and a Self Directed IRA.

A Self Directed IRA (without an LLC) is where you place your IRA with a custodian and he agrees to take your suggestions and investment requests under advisement. He generally offers a wider range of options than a traditional broker, but will only invest in offerings that he understand and can review. With a Self Directed IRA, you direct your investment advisor, but you do not control the deals and can’t force your custodian to make an investment that he is not comfortable with.

For example, many advisers feel that OTC stocks, IPOs, mortgage notes, and/or U.S. rental real estate is too high risk for a retirement account and will deny requests to hold these assets. I have yet to meet a self directed adviser that will approve an offshore investment or foreign real estate transaction.

The reason for refusing to make international investments is simple: A U.S. investment adviser has some amount of liability if your investments go south. It’s his responsibility to protect the retirement assets and he is not capable of performing the due diligence necessary to make an informed international investment. To put it crudely, he is not making enough money from your account to spend the time necessary to investigate that type of investment.

By contrast, the U.S. custodian for a Self Directed Offshore IRA LLC performs only two tasks:

1) U.S. tax reporting and

2) placing the IRA assets in your LLC.

After the money reaches the LLC, the custodian is out of the picture, earns no per transaction or investment advisory fees, and need not be consulted before you make an investment. You are the manager of the LLC and have checkbook control. You make whatever investments you see fit. You do the research necessary to make an informed decision. You decide your acceptable level of risk.

Most Self Directed IRA LLC providers offer only U.S. LLCs. These structures allow you to hold domestic commercial and residential real estate, online brokerage accounts, gold and silver coins, tax liens, etc. Onshore Self Directed IRA LLCs are the most common, but are not recommended for foreign investments.

An Offshore Self Directed IRA LLC uses an offshore LLC, rather than a U.S. LLC, to hold the retirement account. This entity opens bank and/or investment accounts abroad and the U.S. custodian transfers cash into that account, thereby moving the assets of your IRA into your offshore IRA LLC. Like-kind transfers of stocks or other assets are not recommended.

The offshore IRA LLC now has control over the retirement account and can, for example, decide to invest in physical gold in Switzerland, a brokerage account in Andorra, and a rental condo in Panama.

We are expats who live what we recommend. We use only offshore IRA LLCs for our personal savings and only offer offshore IRA LLCs to our clients. Our market niche is offshore planning and structuring… we keep it simple.

Self Directed Offshore IRA LLC Rules

The bottom line is that the manager of an Offshore Self Directed IRA LLC (you) must follow all of the same rules as does an investment advisor. Remember that you are managing the investments for the benefit of the IRA and must always do what is best for the account… just like a professional investment adviser is expected to do.

The key to success is to avoid self-dealing (see rental real estate below for examples).

Other basic rules are as follows:

  • You must have a U.S. licensed IRA custodian make the investment from your IRA in to your LLC.
  • Your custodian must report account activity each year to the IRS.
  • The IRA must be the owner of the LLC.
  • You can’t borrow from the plan.
  • You can’t pledge your IRA as collateral for ANY purpose
  • Debt must be through a non-recourse loan.
  • Your custodian must provide an annual valuation of IRA, an annual report to IRS, and handle State filings as necessary.
  • You must maintain adequate books and records to evidence your use of funds and investment returns.
  • You’re prohibited from investing in life insurance contracts and “collectables” such as rugs, works of art, stamps and coins.
  • You may not lend to any disqualified persons, such as your immediate family or a business if you own more than 50% of the stock or are an officer, director or highly compensated employee of that entity.

Real Estate Basics – Buying My Dream Home with My Self Directed IRA

The number one question I get is on real estate. Can I purchase my dream home in Belize through my Self Directed Offshore IRA LLC?

If you want to live in that property immediately, the answer is no.

You can purchase rental real estate, but once you move in, or make use of it, the total value becomes taxable as a distribution under the terms of your retirement account.

When considering a particular transaction, always remember the basic rule of no self-dealing. If you receive a benefit from a transaction (in this case, use of the property), you have a problem and a taxable event.

Of course, there are a number of ways you can plan ahead, which is a must if your IRA invests in real estate. If you wish to purchase a rental property and live in it when you hit retirement age, keep the following in mind:

1) You have the option to distribute your IRA’s holdings a little bit at a time.

At age 59 ½, you can begin distributing 10% of the property from your IRA each year. To make this work, ownership must be properly reflected on your title each year. This will allow you to spread the tax burden from distributions over a 10-year period. Once 100% of the property is distributed, you can move in without any tax consequence or IRA penalties.

2) You can convert some or all of your IRA to a ROTH.

Yes, you’ll pay income tax on the amount you convert, but this may make sense if you plan to add to the account over the coming years.

3) You may elect to begin distributing shares of your property before retirement age by making a 72T election.

The 72T method (‘substantially equal payments’) enables you to avoid the penalty for early IRA withdrawals by making fixed distributions over time.

The 72T exception offers a choice of methods, which you can use to tailor the timeline of your distributions. This system is based on your life expectancy (or, if you elect, on the joint life expectancy of you and your beneficiary), and whichever method you choose must be continued for at least 5 years or until reaching age 59 1/2.

I will come back to real estate and show you some advanced techniques. But first, let’s consider the Offshore IRA LLC structure.

The Self Directed Offshore IRA LLC Structure

It is not difficult to run your IRA like a big time investor. Here’s all you need to know.

First, let’s consider the traditional Offshore Self Directed IRA LLC structure.

Step 1, we move your IRA account from your under performing broker into a custodian experienced in Self Directed IRAs (the self directed custodian above). This gets you to a Self Directed IRA.

Step 2, we get to an Offshore Self Directed IRA LLC by having your new custodian invest all of your IRA assets in an offshore LLC we create. You are appointed as the manager of this LLC and the only signor on the offshore bank account. Once the funds go from the custodian to your Offshore Self Directed IRA LLC, you have checkbook control and can manage the account as you see fit.

In addition, the Offshore Self Directed IRA LLC allows for partnering with yourself and/or other investors. For example, you and three partners might decide to purchase and operate a large rental property.

If you’ve stuck with me this long, you’re ready for some advanced offshore planning techniques. The following section on UBIT is the secret behind how the uber rich make tax free or tax deferred investments through their IRAs.

Advanced Offshore IRA Techniques – Using Leverage

The second most common question I get, also related to real estate is: Can I borrow money to leverage up my Self Directed IRA LLC and purchase real estate or leverage up a brokerage account? The answer is yes, so long as you do not pledge your IRA assets to secure the loan. In other words, you must use an unsecured loan.

If you use borrowed money, you must be ready to deal with Unrelated Business Income Tax (UBIT) and IRS form 990-T. When an IRA purchases real estate using a non-recourse mortgage loan, the debt financed portion of the property’s profits are subject to UBIT. Similarly, if an IRA-owned property is sold while a percentage of ownership is debt financed, the profits derived from the debt financed percentage are subject to Unrelated Business Income.

For example, if you purchase a home for $100,000, with $50,000 from your IRA and $50,000 from an unsecured loan, and your net rental income is $2,000 per month, $1,000 per month of that income will be subject to UBIT and $1,000 will flow tax free into your IRA. If you then sell the property for $150,000, about $25,000 of the profits from the sale will be subject to U.S. tax.

Unrelated Business Income Tax (UBIT)

If you have a sizable IRA and plan to invest with leverage, offshore planning offers a solution to UBIT. Take a page from Mitt Romney’s Bain Capital playbook and use an Offshore Blocker Corporation.

Basically, Mr. Romney was able to grow his Self Directed IRA LLC to over $100 million through the use of leverage, UBIT Blocker Corporations, savvy investments, and international tax planning. To read more about his use of these structures,

click here for the NY Times and here for a very partisan article by the Huffington Post.

  • Again, these articles are from 2012, the last time Mr. Romney was forced to disclose his financial records. These techniques are just as valuable today as they were then.

International tax planning and UBIT Blocker Corporations have been utilized by the largest American charities, such as Boys and Girls Club, for years and provide an important tax shield to nonprofits. I note that charities and retirement accounts are both U.S. tax exempt entities and must follow many of the same tax laws.

  • Commentary: Offshore Self Directed IRA LLCs and UBIT Blocker Corporations are legal tax mitigation techniques. It is beyond me why the use of international planning is so demonized in the media or why anyone would want to pay a cent more in tax than the law requires. Click here for an article on the Boys and Girl Club.

The use of offshore UBIT Blocker Corporations takes some explanation. If you don’t want to read the minutia, just know that we are experienced in planning and building complex international structures and will be happy to work with you to structure your affairs in a tax efficient and compliant manner.

Generally, an IRA is exempt from U.S. federal income tax on its passive investment income and pays tax on most other types of income. This taxable income is referred to as Unrelated Business Taxable Income (UBTI). UBTI is defined as any net income derived by a tax-exempt entity from an unrelated trade or business that it regularly carries on.UBTI does not include dividends, interest, capital gains, and most rents from real estate.

UBTI includes a pro-rata share of rental income from real estate that is subject to “acquisition indebtedness.” Basically, the percentage of income that is treated as debt-financed is the percentage of the acquisition cost that is financed by borrowed funds. So, as stated above, if one-half of the purchase price of an asset is borrowed, one-half of the income from the asset may be subject to UBIT.

Also, if an Offshore Self Directed IRA LLC invests in a business, the IRA’s share of the profits derived from that business is likely UBTI. If Indebtedness is incurred by a partnership or limited liability company of which the IRA is a member, the IRA will probably have UBTI. Partnership income from international hedge funds and active businesses is likely the source of Mr. Romney’s UBTI and the reason he requires UBIT Blocker Corporation(s).

However, debt incurred by a corporation is not viewed as debt incurred by a shareholder for this purpose. In other words, a corporation can take on debt which will not count against its shareholders (your IRA) and thereby not generate UBTI.

Because debt incurred by a corporation is not treated as debt of its shareholders, and there is an exclusion from UBIT for dividends received from a corporation, an investment in or held through a corporation generally does not result in UBIT.

So, the UBIT Blocker Corporation works by taking the income out of the taxable category of business income or income from leverage and placing it in the nontaxable category of a dividend. But, why must it be structured offshore? Simple, if the blocker corporation were in the United States, its income would be taxable in the U.S. at the corporate rate of 35%. Only after paying corporate level tax could the entity distribute a dividend to your IRA. By forming the UBIT Blocker Corporation offshore, in a country that will not tax its income, no U.S. tax need be paid by this entity.

Remember: We are talking about an offshore corporation wholly owned by a U.S. tax exempt retirement account. We do not consider the tax consequences of an active business owned by a U.S. citizen or resident.

Offshore UBIT Structure

Now let’s say you want to invest in a business or hedge fund that will generate ordinary income, and thus UBTI. We need to add a UBIT Blocker Corporation to the mix by placing an offshore corporation between your Offshore Self Directed IRA LLC and your investments.

To allow for this type of investment, we form a UBIT Blocker Corporation in an offshore jurisdiction that will not tax your blocker company. That UBIT Blocker Corporation is a wholly owned subsidiary of your Offshore Self Directed IRA LLC. Your IRA LLC invests money in the blocker corporation and the blocker corporation invests in those projects that are likely to generate ordinary income / leveraged income / UBTI.

In some cases, each investment is held in its own offshore LLC, which flows through to the blocker corporation. These LLCs might hold the shares of an active business, a hotel property, and a yacht that you purchased with three friends to be rented out for fishing and other events. The example above would require an Offshore Checkbook IRA LLC, a UBIT Blocker Corporation, and possibly three offshore LLCs to hold three major investments.


Converting your IRA in to a Self Directed IRA LLC gives you complete control over your most important investment account. Taking that Self Directed IRA LLC offshore allows you to access tax tools and investment models previously available only to the super wealthy.

Please contact Premier Offshore Investor at info@premieroffshore.com or phone us at (619) 550-2743 for a confidential consultation and to learn more about the strategies described above. We will be happy to review your situation, answer any questions, and create a custom solution that fits your needs.

[button url=”/free-confidential-offshore-consultation/” style=”default” skin=”theme_color” size=”small” target=”_self”]Contact Me[/button]   [button url=”IRA-Application/” style=”default” skin=”theme_color” size=”small” target=”_self”]Get Started Now[/button]

open an offshore bank account in Cayman Islands

Offshore Bank Account

Offshore Bank Account: US Tax Compliant Offshore Banking Options

The First Step to Freedom

Offshore Bank Account Offshore Banking
An Offshore Bank Account will allow you to diversify your investments, facilitate asset protection, and is the first step in moving you and/or your assets abroad. Offshore banking facilities are the first piece of the puzzle when forming an offshore  corporation, offshore Self Directed IRA LLC, or international trust.

When it comes to selecting an offshore bank and offshore banking jurisdiction, I recommend only the safest and most secure financial institutions in the world. I have strong personal relationships with secure offshore banks that offer my clients the highest level of privacy, stability and safety. Many of these relationships have been more than a decade in the making and are founded on face-to-face meetings, years of transactional history, and mutual respect.

Note: You can usually open your offshore bank account from home and via courier based on our review, due diligence, and recommendation. Some banks still require an in person meeting, but these are rare.

I regularly review the best offshore banking opportunities for international business, private banking and investment products and recommend those I believe to be best suited to your individual situation. New banking options and opportunities are covered regularly in my free newsletter.
[contact-form-7 id=”2973″ title=”sign-up-for-all-page”]

All the banks I have chosen to work with meet my high standards on confidentiality, have an excellent reputation, offer a wide range of financial products, and equally importantly, operate in countries with political and economic stability.

There are many benefits of an offshore bank account for investment management, business operations, tax planning, and asset protection. Some of these benefits include:

  • A wide range of investment products and funds are available from offshore banks, especially from those with offshore banking private client groups, which are not accessible from the U.S.
  • You can usually choose to hold your money in any major currency, which can result in the significant appreciation of your account. If, for example, your account is in Swiss Francs and the CHF rises relative to the USD, you will have an effective gain.
  • Interest rates at offshore banks are significantly higher than American banks. For example, large U.S. banks are paying around than ½ of 1%, while the smallest internet banks are approximately 1.05%. In Panama, established banks like Banco Universal are offering 1 year CDs at 4%, while newer banks are paying as much as 4.5% on a 2 year CD. From time to time, we have found Credit Union (Cooperative) CDs at 8.5%. Offshore Banking Rates quoted are as of the posting of this article and subject to change.
  • A well planned structure should ensure that your offshore bank account is not taxed by local government agencies. To maximize tax efficiency, you want to incorporate in one tax efficient country, hold your offshore bank account in second tax exempt country, reside in a third business friendly nation, an hold a passport from a fourth homeland. These are the four primary puzzle pieces to building a life and business abroad.
  • A major component of the Foreign Earned Income Exclusion’s residency test is that your corporation and offshore banking are, at least in part, outside of the United States.
  • If you have a U.S. tax debt, the IRS can seize bank accounts located in the United States, Canada, the UK, and France. If you are living and working abroad, and have a U.S. tax issue, care should be taken to avoid your accounts being levied while you negotiate a settlement with the Service.
  • An offshore bank account is an indispensable tool for those conducting international business. Many international customers prefer to send payments to non-U.S. banks and avoid the American bureaucracy all together. I expect this phenomenon to become even more prevalent as new FACTA regulations come in to affect.
  • An Offshore bank account can be combined with a U.S. account. If your clients are in the U.S., you might need to maintain a merchant account and bank account in the U.S., either in the name of your offshore company or a U.S. LLC. Credit card processing rates and depositing of checks are much more efficient in the States and wire transfer rates can be prohibitive on small transactions. Careful tax planning is required in this situation, but the savings can be significant.
  • Civil creditors in the U.S. may be able to freeze your U.S. bank accounts while a dispute is pending…and empty them if is a judgment is entered against you. Moving funds in to an offshore account before a problem arises is the key to offshore asset protection.

The most common question I get on offshore banking is whether these banks are safe. As stated above, I have worked for years to forge relationships with only the best and most secure banks in the world.

With that in mind, I would like to point out that offshore banks are often significantly more stable than American banks because they operate under much tighter regulatory and lending regulations. To quote from one of my recent newsletter articles: “According to the August 2012 issue of Global Finance, only 5 U.S. banks are in the top 50 for safety. Of these, the first, Bank of New York Mellon, doesn’t appear until #29, followed by CoBank ACB at #32, U.S. Bankcorp at #37, Northern Trust Corp at #39, and Wells Fargo at #48…The United States is not even the safest jurisdiction in North America. Canada…has seven banks in the top 50, compared to our five.”

An offshore bank account is a fundamental piece of your international diversification puzzle. It’s especially important in times like these when currency controls and government regulations are getting ever more intrusive, slowing down international business and transactional flow. An offshore bank account allows you to internationalize your business and to place part of your wealth outside of your country, so that you never risk having the government freeze or confiscate all of your assets.


Offshore Merchant Accounts

Are you looking for a legal way to manage your business profits abroad? Moving your business offshore? We can help you structure your business, banking and credit card processing offshore.

Here are a few of the benefits of an offshore merchant account:

  • Diversify your credit card processing out of the United States
  • Maximize privacy and protection of your offshore corporation by adding an international merchant account
  • If you’re having trouble obtaining or keeping a US merchant account, you may benefit from moving offshore
  • Offshore processors offer accounts for controversial business or one categorized as high risk (such as pharmacies, travel clubs, telemarketing, etc.)
  • An internet based business that can process and operate from anywhere, why keep your cash in the US?
  • Accept multiple currencies and protect against currency fluctuations

Large, safe, financial institutions in Asia, Europe or the Americas will hold your bank account and process your credit card transactions. Alternatively, we can use a US based ISO with an offshore processor who will deposit directly into your foreign bank account.

Offshore credit card processing will help your business remain up 24 hours a day and 7 days a week. We can arrange for offshore and online credit card processing, an online merchant center, and speedy order processing and fraud management with a 24 hour support system.

  • Credit card transactions are authorized within seconds and automated receipts are sent to the merchants and customers simultaneously.
  • Offshore credit card processing services are capable of providing reduced charges with AVS (Address Verification System) and fraud screening systems.
  • The transaction process rates depend largely on the form and volume of the business.
  • Multicurrency accounts available.



[contact-form-7 id=”2721″ title=”APPLY FOR AN OFFSHORE MERCHANT ACCOUNT NOW”]

Offshore Bank License

The world of offshore banking is a diverse and complex landscape of licensing, compliance, correspondents, and regulation. Bottom line is that the barriers to entry have increased significantly in the last 4 years.

To get started building a new offshore bank, corporate capital will be at least $1 million, and more likely $5 million.  Once you take reserves and capital ratios into account, the capital required to start an offshore bank today is significant.

  • Note that there are exceptions to the rule. Captive banks require minimal capital but may not market to the general public (see below).
  • Countries like Comoros are new to the offshore banking world and offer licenses with minimal capital requirements. However, the same accounting and ratios apply and negotiating a correspondent account for an underfunded bank will be a challenge.


Still want to form an offshore bank? Here’s how to get started…

The offshore bank formation process begins with the selection of the best jurisdiction(s). Next we search for an existing license. If one is available, we will negotiate the purchase on your behalf. If not, we will begin the application process for a new license.

While we will review 25 jurisdictions in the analysis stage, the most common are (in alphabetical order, not by preference):

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


As I said above, the corporate capital required to form a small offshore bank is $1 million to $5 million. Some jurisdictions, such as Panama, are much higher.

When I refer to the amount of capital required, I mean the amount of cash on deposit that will be required before the license is granted. Capital required will vary by country, your intended business model, and many other factors.

The corporate capital I recommend during the analysis stage may vary from what the law states as the minimum required. For example, Belize’s banking statute lists minimum capital of $3 million for an international license. Based on my experience, I believe a new licensee will require $5 million… that the central bank will only approve a new license with $5 million in capital regardless of what the statute says. On the other hand, Dominica’s statute says $1 million, which is usually the amount needed.

And certain jurisdictions focus on specific types of banking business. For example, Cayman Islands might be the preferred local for an investment / private bank, while Belize might be the best for a FACTA compliant deposit taking bank.

Another issue to consider is that countries treat offshore and general licenses differently. For example, Panama will allow a new market entrant to open a full service (Class A) bank. However, only a company with an existing license from a major jurisdiction will be granted an international license (Class B) in this country.

Some countries, such as Dominica, have only one class of license. And others offer three levels: general, international, and captive.

  • A captive offshore bank license will require less capital than an international license and is typically used by related companies or multinationals for internal lending. A captive may only do business with persons or companies listed in the license and pre-approved by the central bank.
  • An offshore or international  bank license allows the bank to do all manner of banking and investment business. The only limitation is that you can’t accept clients from the issuing country. So, if you form an offshore bank in Panama you can’t have Panamanian clients. Panama corporations and foundations owned by foreigners are fine.
  • A general bank license allows you to offer both international and domestic banking services. Because a country is more protective of its own, the requirements for a general license are higher than a captive or offshore bank license.

Then there is the regulatory scheme to consider. A bank from Dominica is regulated both in Dominica and by the Eastern Caribbean Central Bank. The country issues the license and the ECB governs its operation. Others, such as Cayman and Vanuatu, operate independently… are regulated only by their respective government agencies.

Finally, time to market might be a consideration. If a new license is available, you might be up and running in a few weeks or months. Depending on the country and business model, a new license can take anywhere from 6 to 26 months.

If you would like to retain Premier to assist you to acquire a bank license, or to form a new bank in an offshore jurisdiction, we offer two tracts.

1) if you already have a banking license (you wish to form an offshore subsidiary of a parent bank) and you have determined the best jurisdiction for your subsidiary, we can provide you quote for the formation.

2) If you don’t have a license from another jurisdiction, we charge a consulting fee to work through the analysis and planning stage – selecting the best jurisdiction, building the board of directors, capital reserve analysis, etc. Once the groundwork is complete, I will provide you an opinion letter and action plan to move the project forward in the most efficient and effective manner possible.

If this is of interest, please send us an email to info@premieroffshore.com.

For more information, please review my articles on offshore bank licensing and operation. I’ve been working in offshore banking for over a decade, so there are a few older posts floating around the web. My 2015 articles on the topic are:

Second Passport

New Life and New Passport

Second Passport Programs, Economic Citizenship and Passports by Investment

Second PassportLet’s face it; American passports are not what they once were. In fact, Americans are giving up their citizenship and seeking second passports in record numbers. For example, the U.S. embassy in Switzerland reports that hat it had processed 411 renunciations in the first nine months of 2012. This compares to 180 Americans giving up their passports in 2011.

While the number of Americans that turn in their passports is a small fraction of the estimated 35,000 to 40,000 U.S. citizens living in Switzerland, the rise in such renunciations is causing concern. “At the moment this phenomenon is bigger in Switzerland than anywhere else in the world,” the U.S. ambassador told the Handelszeitung newspaper. “U.S. passports are becoming less attractive due to the implementation of stricter U.S. laws.”

One of the major motivators pushing Expats and others to give up their U.S. passports is the Foreign Account Tax Compliance Act (FATCA) that requires banks worldwide to report the financial assets and transactions of their U.S. clients. The burdens this law places on international banks is enormous and most have decided compliance is impossible. The bottom line is that it’s not financially feasible for an international bank to maintain a team of experts to ensure compliance with this convoluted law…which means those with U.S. passports will be unceremoniously dumped by their banks.

If you are considering taking the drastic step of renouncing your U.S. citizenship, keep in mind that you must first have a second passport in hand. When you give up citizenship in one country, you must already have citizenship in another…otherwise, you will be without a country and without travel documents.

NOTE: Residency is not the same as citizenship. Many clients contact us with the plan of obtaining residency in countries like Belize or Panama, then giving up their citizenship. This will leave you without a passport and may have other draconian consequences.

There are four methods for obtaining a second citizenship and a passport:

  1. If you have distant relatives in countries like Ireland, Poland & Italy, you might qualify for citizenship by ancestry.
  2. If you marry someone and become a resident of just about any country, even the U.S., you can obtain citizenship after a few years.
  3. If you are a long term resident of a country like Belize, Paraguay, or Panama, you can qualify for citizenship. 3 to 10 years.
  4. You can purchase economic citizenship and a second passport from St. Kitts, Dominica and Austria.

If you are looking to opt out of the U.S. system any time soon, the only option is to purchase economic citizenship. A second passport by ancestry is open to very few and has become much more difficult in recent years. Citizenship by marriage may upset your current spouse and citizenship by residency will take years to complete. For example, the constitution in Uruguay requires 3 years minimum, and Panama is about 10 years. Even if you qualify for citizenship through residency, a second passport is not guaranteed. Passports are granted by order of the President and often require a “contribution” to his election fund.

I recommend St. Kitts over Austria is because of the high cost of Austria, because Austria imposes a residency requirement and because St. Kitts is just so much more efficient to deal with compared to the bureaucrats in Austria. An Austrian passport can cost upwards of $1 million plus legal fees, while a St. Kitts passport will cost $250,000 plus legal fees.

St. Kitts Second Passport Programs

Second Passport

St. Kitts and Nevis are two islands in the Eastern Caribbean that became independent from England in 1983 and have a history of providing privacy, asset protect, and the best second passport available. This country of 51,000 is a member of the United Nations, its primary language is English, and its currency, the Eastern Caribbean Dollar, is pegged to the United States dollar at 2.7 to 1. Click here for additional information on the Eastern Caribbean Community.

Your St. Kitts passport will provide you with visa free travel to over 100 countries, including Canada, Great Britain, Hong Kong, Liechtenstein, Ireland, Sweden, Switzerland and Schengen States of the European Union. For a list of these countries, click here.

Your St. Kitts passport will also provide an easier path to residency in a number of countries, such as Monaco, Switzerland, Andorra, United Kingdom, and Bermuda, Cayman Islands, Bahamas and other Caribbean countries.

Most importantly, there is no residency requirement to obtain a second passport from St. Kitts. You are not required to live in St. Kitts and there is no travel, regular meetings with immigration representatives, or other annoying requirements.

Processing Time: In most cases, you will receive your St. Kitts passport in 2 to 4 months after submitting your application.

There are two programs that will lead to a second passport in St. Kitts:

  1. Citizenship through real estate investment in St. Kitts, and
  2. Citizenship by making a donation to the St. Kitts Sugar Industry Diversification Fund.

St. Kitts Passport by Real Estate Investment

The minimum investment in St. Kitts real estate is $400,000 per applicant. If there are two related applicants, such as a husband and wife, you can invest $800,000 in a single property.

Government fees for the St. Kitts real estate investment program are as follows (updated for 2012):

  1. US$7,500.00 for due diligence background checks and processing fees for the main applicant;
  2. US$4,000.00 for due diligence background checks and processing fees for each dependent of main applicant who is over the age of sixteen years;
  3. On approval in principle of an application through a real estate investment

i.   US$50,000.00 for the main applicant

ii. US$25,000.00 for the spouse of main applicant;

iii. US$25,000.00 for each child of the main applicant under eighteen years of age;

iv. US$50,000.00 for each qualified dependent of the main applicant above the age of eighteen years, other than his or her spouse.

4. Application processing fee is $250 per applicant

Legal fees are in addition to the costs above and vary significantly by applicant. Typical real estate and related expenses are as follows:

  • Purchase and Sale Agreement – 1% of the Purchase Price
  • Memorandum of Transfer – Approximately 1% of Purchase Price
  • Surveyor’s Fees – Approximately US$327.00 per acre
  • Government Fees – Registration fee of US$2.70
  • Assurance Fund – Purchase price divided by 500
  • Alien Landholding License Application – US$1,500.00 per applicant
  • Stamp Duty (on select properties): 2.5% – 6% of purchase price

In addition to the high transaction costs, there are a number of issues with the St. Kitts passport by investment program. For example, you must purchase a “program approved” property, which means the cost will be higher than for a non-approved comparable property.

Second, if you give up your citizenship and sell the property, it will lose its approved status and your sale price will be lower. In other words, you can’t sell the property to someone seeking economic citizenship, so the number of potential buyers and the sale price will be significantly reduced.

Third, real estate taxes and upkeep on a property you do not occupy may be prohibitive. The Comptroller of Inland Revenue assesses a property tax of 0.2% per year on market value.

Fourth, St. Kitts does not charge a capital gains tax when the property is sold. Instead, they have a 12% transfer tax due on the full sales price. So, even if you are selling the property at a loss, a 12% tax is charged on the transfer.

Fifth, I said that $400,000 is the minimum investment per application. However, this assumes you can find an approved property you wish to purchase in this price range. Many single family homes are significantly more expensive than this minimum investment and large homes can be in the millions on St. Kitts or Nevis.

In my experience, clients who will spend significant time in St. Kitts opt for the investment option and purchase a single family home. Those who will visit the island from time to time opt for the condos provided by Marriott (for additional information, click here) and the rest will prefer to acquire a passport by donation.

St. Kitts Passport by Donation

Second PassportIf the preceding page on the St. Kitts passport by investment option left you dazed and confused, as it does many clients, there is an easy solution. You can purchase your St. Kitts passport by making a “donation” to the Sugar Industry Diversification Fund (SIDF).

Under the SIDF Citizenship-by-donation option there are four cost structures based on family size:

  1. $250,000 for a Single applicant,
  2. $300,000 for an applicant with no more than 3 dependents (two children under 18 and a spouse),
  3. $350,000 for an applicant with no more than 5 dependents (four children under 18 and a spouse), or
  4. $450, 000 for an applicant with no more than 6 dependents (five children under 18 and a spouse).

In this program you simply pay the fees, gain economic citizenship and are handed second passport…with no strings attached. This is the recommended program for clients who do not plan to spend significant time in St. Kitts or Nevis.

The costs above do not include legal, due diligence, application, agent, and other professional fees. A single applicant should expect to pay out around $350,000 to complete the process.

Dominica Second Passport Program

Second Passport

Dominica is another Caribbean island that has been making a name for itself in the offshore world for the last several years. Its passport is not as travel friendly as St. Kitts, but the costs are much lower.

Officially the Commonwealth of Dominica, this island is in the Lesser Antilles region of the Caribbean Sea, south-southeast of Guadeloupe and northwest of Martinique. Its 290 square miles has a population of about 71,000. Dominica has been nicknamed the “Nature Isle of the Caribbean” and is generally considered one of the most eco-friendly and beautiful islands in the regions.

A second passport from Dominica will cost a family of four (applicant, spouse and two children under 18-years-old) of $200,000, plus $25,000 for each additional child under age 25. With filing, registration and professional fees, applicants can anticipate a total cost of $300,000. In other words, a family of four can obtain economic citizenship and second passports from Dominica for less than the cost of a single passport from St. Kitts.

Dominica offers three options to obtain a second passport:
[ws_table id=”2″]

Dominica’s application and other fees are also significantly lower than St. Kitts.

  • Application fee – US$1,000 per investor (Non-refundable)
  • Processing Fee – US$200 per applicant (Non-refundable)
  • Naturalization Fee – US$550 per applicant
  • Stamp Fee – US$15 per applicant

Considering legal and other costs, an individual applying for economic citizenship and a second passport from Dominica should expect to part with about $165,000, including the donation of $100,000. This is about half the fee charged by St. Kitts.

The Dominica passport allows visa-free travel to more than 60 countries, including the United Kingdom and CARICOM nations. Click here for list of visa free countries. Dominica imposes no residency requirements to obtain, nor maintain, citizenship and there are no taxes imposed on citizens who do not reside in Dominica; however, those who do reside in Dominica are subject to substantial taxes on worldwide income.


Second Passport

The only countries that offer official citizenship and second passports without residency requirements are St. Kitts and Nevis and Dominica. There are a number of websites offering “grey market” passports, but, buyers beware! The vast majority of these are scams.

For example, I am often asked about offers of passports from Paraguay and Dominican Republic costing $25,000 to $50,000. The constitution of Paraguay requires 3 years of residency before citizenship can be granted and the average timeline is about 4 years (3 years of residency and 1 year processing). The Dominican Republic does not offer a passport for purchase or investment program. Anyone promising immediate passports for purchase is either selling forgeries or skirting the system and running a risk of discovery and cancellation. If you give up your U.S. passport and your second passport is invalidated, you are truly up the river without a paddle.

Contact Us for a Second Passport

Feel free to contact us with questions regarding second passports and economic citizenship in St. Kitts and Dominica. We will be happy to answer your questions and streamline the process.

Phone us at (619) 550-2743 or email info@premieroffshore.com for a private consultation.

International Tax: Offshore Tax Strategies

U.S. Tax Planning and Compliance for Expats, Investors and Businesses
International Tax & Offshore Tax

If you are living, investing or working abroad, international tax planning and offshore tax reporting can become extremely complex. In the article below, and throughout this site, I will attempt to explain and simplify the offshore tax compliance rules for U.S. citizens.

Unfortunately for the American abroad, the United States is one of the few nations on earth that taxes its citizens on their worldwide income regardless of where they live. If you have a U.S. passport, you are locked in to the Internal Revenue Service until death or you renounce your citizenship.

I strive to provide high quality and actionable tax information on this website and will continue to research and write on the topic of international tax and offshore tax compliance in the months to come.

Please signup for my newsletter for the latest on international tax and business issues with just a little spin and good humor. The taxation of offshore structures and American Expats is an ever evolving subject and, as an American expatriate myself, one that is near and dear to my heart.
[contact-form-7 id=”2973″ title=”sign-up-for-all-page”]

Premier Tax and Corporate, Inc. provides the following services to American Expats and U.S. citizens with international corporations, offshore LLCs or asset protection trusts:

  • Offshore tax reporting for trusts and corporations,
  • Offshore tax reporting for offshore self directed IRA LLCs,
  • International tax research and compliance,
  • U.S. personal income tax return preparation for those with international tax considerations,
  • Representation before the Internal Revenue Service,
  • IRS debt settlement and IRS problem resolution,
  • Offshore tax reporting of Foreign Bank Accounts (FBAR), and
  • International tax planning for U.S. citizens who live and/or work abroad.

Our U.S. licensed Enrolled Agents are located around the world, including USA, Panama and Belize. We are uniquely qualified to plan, maintain, and prepare U.S. returns for your international business, asset protection trust or other offshore structure.

Please contact us at info@premieroffshore.com or by phone to (619) 550-2743 for a confidential consultation regarding any international formation, tax preparation, IRS dispute, or compliance issue.

Offshore Tax Benefits

There are three primary categories of offshore tax benefits available to Americans:

  1. Personal and business offshore tax breaks for entrepreneurs and employees living and working abroad. For more information, download my 120 page International Tax and Business Guide.
  1. Maximizing the tax benefits of your retirement account by moving it offshore. See: Offshore IRA LLC
  1. Tax planning available to offshore businesses setting up branches or divisions in low tax countries. See: Offshore Business Planning

We focus on Americans living, working and investing abroad. This site and my writings are intended for small to medium sized businesses, expats, and for those looking to diversify their holdings out of the United States.

Offshore Tax for ExPats Living and Working Abroad:

Let’s start with the bad news: If you are an American living and working abroad, you are taxed on your worldwide income and required to file U.S. tax returns each year.

Now for the good news: There are a number of offshore tax breaks available to the American Expat that may eliminate or defer all of your U.S. taxes if you know how to qualify for them and know how to claim them.

These international tax breaks and techniques are described in detail in my 120 page ExPat Tax and Business Guide, 2015 Edition, available as a free download. I will cover the basics below.

The most important tool in the Expat’s offshore tax kit is the Foreign Earned Income Exclusion. If you are outside of the United States for 330 of 365 days, or if you are a tax resident of another country, you can earn up to $100,800 in wages / salary / ordinary income free of Federal Income Tax in 2015. This amount increases a bit each year. Wages can be from your employer or from your own corporation if you are self-employed.

Take it or Lose It: If you don’t file a U.S. return, and the IRS audits you, you might lose the Foreign Earned Income Exclusion. This means that, even though you qualified for the exclusion, 100% of your income will be taxable in the U.S. because you failed to file your returns on time. If you are behind on your IRS filings, and the IRS has not yet caught up with you, contact us immediately… you may still qualify for the Foreign Earned Income Exclusion.

If you and your spouse are operating an offshore business together, both of you can use the Foreign Earned Income Exclusion and draw a combined salary of up to $201,600 free of U.S. Federal Income Tax. If that business is incorporated in a country that does not tax foreign source income (for example, because your clients are in the U.S.) you might be able to operate completely tax free… no U.S. taxes and taxes from your country of residence.

Note that I said you might be free of “Federal Income Tax.” If you are operating a business without a corporation, you will be hit with self-employment tax at about 15%. To eliminate this, you must 1) qualify for the foreign earned income exclusion, 2) operate your business through an offshore corporation, and 3) draw a salary from that corporation of up to $100,800.

In addition, some U.S. states will attempt to tax your worldwide income. For example, California does not have a Foreign Earned Income Exclusion and is quite aggressive in pursuing Expats who can’t prove they have moved out of the State permanently and taken up residence in a foreign country. Care and planning are required to eliminate these state tax issues and the burden of proof is on you.

Finally, what if you earn more than $100,000 or $200,000 of net profits in a year? You have two choices to reduce or eliminate U.S. taxes on earned income that exceeds the Foreign Earned Income Exclusion:

  • Contribute to a U.S. compliant tax deferred retirement account, such as a Solo 401k, and/or
  • Retain the profits in your offshore corporation tax deferred until you take them out in one form or another.

Both of these offshore tax options require that you a) qualify for the Foreign Earned Income Exclusion and b) utilize an offshore corporation. Care should be taken when creating these international tax structures to minimize U.S. and local taxes while remaining in compliance with an ever evolving tax code.

Tax Neutral Offshore Structures:

International trusts and offshore corporations owned by Americans living in the United States are tax neutral.

  • It doesn’t matter if the income to your foreign corporation is from international (non-US) clients. If you do not qualify for the Foreign Earned Income Exclusion, the profits in your offshore corporation are taxable in the U.S.
  • An International trust is funded with after tax money. This means you have already paid tax on the money you put in an international trust. Also, the profits earned within an international trust are taxed in the U.S. to the settlor.

These structures have complex reporting requirements, but should not increase or decrease the U.S. tax obligations of a resident.

Offshore Self Directed IRA:

IRAs and other forms of tax advantaged savings accounts are the most valuable investment tools Americans have. But they’re generally underperforming, largely ignored by the brokerage firms that manage them, and few realize their full potential.

When you move your IRA in to an Offshore Self Directed IRA LLC, you take control over its investments. If you add an offshore corporation to your IRA structure, you can maximize returns. Here’s how:

The general rule is that investment income in your retirement account is either tax exempt or tax deferred, depending on the type of account utilized (IRA, ROTH, 401-K, etc.). However, there are many situations where a sophisticated retirement account will incur tax, losing its default preferred status. The more common examples of taxable income are:

  1. If your IRA makes leveraged real estate investments, a portion of the profits will be taxable.
  2. If your IRA uses leverage (margin) to buy and sell stocks, a significant portion of the profits earned will be taxable.
  3. If your IRA earns profits from an LLC or partnership, that income will be taxable at trust rates.
  4. If your IRA invests in a fund that utilizes leverage, a portion of the profits from the fund will be taxable.

However, sophisticated investors with high-dollar lawyers don’t pay these taxes. In fact, the uber-rich “one-percenters,” like Mitt Romney, have been making use of a loophole in the tax code for years.

NOTE: Mr. Romney was able to grow his IRA to $100+ million tax free or deferred using offshore IRA planning techniques. For an article on this topic, click here.

I have decided to break the lawyer’s vow of secrecy and disclose these offshore IRA techniques on this website and in my free newsletter. These strategies are not complex, just closely guarded.

The basic loophole in the US international tax code is this: by taking your IRA offshore and adding an offshore corporation to your structure, you can usually convert the taxable income listed above into tax exempt income, thereby eliminating the IRA tax. For a more detailed article on Offshore IRAs, click here.

Late Filing of Offshore Returns

If you have an unreported offshore account, corporation, or trust, getting into compliance can be a tricking matter. As expats ourselves, we know what you are going through and can advise you on the best course of action.

If you have not filed for a few years, and have no offshore issues, getting right with the Services is not a big deal. You file your returns, set up an installment agreement if you owe money, and get on with your life. Sure, there are interest and penalties to deal with, but it won’t be all that bad.

Add an offshore account to the mix and everything changes. The IRS has decided to make examples of expats. We are on their hit list and, believe me, they’ll take every dollar they can from you.

The IRS has collected hundreds of millions from expats since 2009 and will continue to come to the well as long as they can.

If you file late, penalties can be hundreds of thousands of dollars per year. You must take offshore filing, compliance, and negotiating very seriously, regardless of the amount of tax you owe. It’s the penalties, not the tax, that will get you.

If you have an international tax issue, you need an expert on your side. You can’t throw yourself on the mercy of the Service and hope for the best. You might find your most precious asset sitting behind bars.

You do have options. For example, the 2014 Offshore Voluntary Disclosure Program allows U.S. expats to file and avoid penalties under very specific circumstances. Before you apply, we need to prepare or amend your last few years of returns. With that information, we can determine if you qualify and the best path forward.

  • This page was last updated May of 2015. The 2014 program is still in effect, but no one knows for how long. Time is of the essence.

If you have an international tax issue, please contact us at info@premieroffshore.com for a confidential consultation.

You may also be interested in the Tax Debt Portal on our sister site, Escape Artist. This portal has over 40 articles on dealing with the IRS and is focused on expat tax debt relief.

Offshore Tax Filing Requirements:

There are a number of international tax filing requirements for offshore corporations and international trusts. Failure to file the required returns may result in civil and criminal penalties and may extend the statute of limitations for assessment and collection of the related taxes.

The most critical offshore tax form is the Report of Foreign Bank and Financial Accounts, Form FinCEN 114, referred to as the FBAR. Anyone who is a signor or beneficial owner of a foreign bank or brokerage account with a value of more than $10,000 must disclose their account(s) to the U.S. Treasury.

The law imposes a civil penalty for failing to disclosing an offshore bank account or offshore credit card up to $25,000 or the greatest of 50% of the balance in the account at the time of the violation or $100,000. Criminal penalties for willful failure to file an FBAR can also apply in certain situations. Note that these penalties can be imposed for each year.

In addition to filing the Foreign Bank Account Report, the offshore account must be disclosed on your personal income tax return, Form 1040, Schedule B.

Other international tax filing obligations include:

  • A foreign corporation or limited liability company should review the default classifications in Form 8832, Entity Classification Election and decide whether to make an election to be treated as a corporation, partnership, or disregarded entity (http://www.irs.gov/pub/irs-pdf/f8832.pdf).

International Tax Preparation Services

We can help you qualify for the Foreign Earned Income Exclusion and maximize the offshore tax benefits of living, working, and investing offshore. Our U.S. licensed Enrolled Agents have decades of experience with offshore tax issues and will be happy to work with you to make sure you do not pay a cent more in tax than is required by law. We can help you save money this year… AND NEXT.

International Tax Preparation Fees

  • Basic personal tax return with W-2 wages and itemized deductions: $695.00 and up.
  • Personal tax return with wages, itemized deductions, and Partnership or S-Corporation income (Form K-1): $725.00 and up.
  • Personal return with self-employment income: starting at $850.00.
  • Personal return with foreign earned income: starting at $695.00.
  • Foreign Corporation and foreign trust informational returns average $950.00.
  • US Corporation and Partnership returns with less than $250,000 in assets or sales: starting at $1,025.00.
  • US Corporation and Partnership returns with more than $250,000 in assets or sales, and thus requiring a balance sheet, starting at $2,250.

Please email us at info@premieroffshore.com or at call us at (619) 550-2743 for a consultation on your international tax preparation or offshore tax compliance needs.


International Trust

International Trust and Asset Protection Trust Structures

International Trust and Asset Protection Trust

An offshore asset protection trust or international trust one of the strongest asset protection vehicles available when done right. The international trust allows you to legally transfer your assets out of the reach of future creditors and place them behind a protective barrier that no one can pierce.

The basis of the asset protection trust is simple enough: assets are conveyed out of your name and into the international trust. You designate the trustee, settlors and beneficiaries and you control the assets in the international trust for the benefit of those beneficiaries.

Only a few jurisdictions have laws that were written to support this level of international protection. They are the Cook Islands, the Isle of Man, Nevis and Belize. All four countries have international trust laws that provide maximum asset protection and are politically and economically stable.

Legal experts agree that the Cook Islands has the most tested case law history, and thus is my country of choice. A very close second is Belize, where privacy is maximized and costs are lower than the Cook Islands. Both of these countries are leaders in the creation and management of the asset protection trust

Advantages of an International Trust

The two major advantages of an international trust are 1) asset protection 2) while maintaining control over your assets. Investments are kept out of the reach of civil creditors because U.S. judges do not have jurisdiction over foreign citizens (your trustees or protectors), nor do they have jurisdiction over an international trust. Local judges cannot legally compel the foreign trustee or asset protection trust to release funds to someone who claims you owe them money (ie. a civil creditor). The Cook Islands, Belize, and Nevis do not recognize judgments that originate in a foreign country. Any of these options can be combined with an offshore LLC for maximum flexibility.

Note: This article refers to civil creditors only and does not contemplate government claims by the the IRS or SEC.

This means that a creditor would be forced to sue you in the country where you maintain your Trust in order to reach the assets. However, Nevis, Cook Islands, and Belize put up significant barriers to initiating or proving such a case and are “defendant friendly,” a state of mind that has not existed in the United States for MANY years.

For example, in Nevis, a creditor must post a $25,000 cash deposit to bring the suit against a Nevis Trust or Limited Liability Company. In the Cook Islands, the suit must prove beyond any reasonable doubt that assets were transferred into the trust in order to defraud the creditor in question (also called a fraudulent conveyance). If the assets were transferred to the trust prior to the debt being created, or before the problem arose, it will be nearly impossible to prove intent to defraud.

In another example, the Cook Islands statute of limitations holds that the time limit for your opponent to claim fraudulent transfer is one or two years after the underlying cause of action, depending on a number of factors. Therefore, when the lawsuit is completed in the U.S., the Cook Islands statute of limitations will usually have expired. Even if the creditor succeeded in the U.S., it is likely their claim will be barred in the Cook Islands.

  • See, there is a benefit to our inefficient U.S. legal system. It allowed the clock to run out of the plaintiff while your assets are safe behind an asset protection trust.

In a final example, a plaintiff in the Cook Islands must prove that your intent in creating the asset protection trust was to defraud that particular creditor – and they must prove this beyond the shadow of a doubt. This means that the issue in question is so obvious, or has been so thoroughly proven, that there can exist no doubt. “Beyond a shadow” might refer to the fact that doubt could be nowhere in the vicinity (completely expelled from the issue), or to the thoroughness of the argument (a shadow being even less substantial than a doubt itself). This is a very tough burden on the plaintiff indeed…one reserved for criminal trials in the United States.

Jurisdiction Diversity – Asset Protection Trust Planning

I believe both the Cook Island Trust and Belize Trust provide the strongest and most tested foundation for an offshore asset protection strategy. The preeminent structure combines the Cook Island Trust or Belize Trust with a Limited Liability Company from Nevis, which allows you to maximize the benefits of both Cook Islands or Belize and Nevis, and further diversifies your international trust structure.

In this structure, assets, such as offshore bank accounts, can be held by the Nevis LLC, and the LLC can be held by the Trust. A U.S. resident (you, the Settlor) can be the manager of the Nevis LLC, while the Trustee of the Trust is an international person. The LLC manager has all legal control over the LLC and signature authority over the bank accounts. Thus, a U.S. resident settlor has control of the assets, has full access to them, and yet owns none of them.

If you, your Nevis LLC, or your Belize Trust or Cook Island Trust, come under attack, you temporarily transfer management duties of the LLC to the licensed and bonded trustee. This trustee will administer your trust and bank accounts per your wishes, which you have provided to him or her well in advance of the problem arising.

When you diversify your structure, a creditor may need to maintain a legal case in both Nevis and Cook Islands or Belize, which will prove extremely difficult and costly, and you are making the most of the benefits of both defendant friendly jurisdictions.

Why not avoid the battle?

The benefits described above are meant to protect you against a very motivated creditor who is willing to go to the expense of pursuing your assets into multiple international jurisdictions. These barriers to attack also mean that a more reasonable creditor plaintiff is likely to assess the costs and probability of success against your international trust and either drop the matter or settle for pennies on the dollar.

In other words, these barriers to litigation created by the asset protection trust act as deterrents to lawsuits and creditor collection action, motivate the creditor to settle, and exhaust your opponent’s determination and resources – pursuing a well-constructed asset protection trust is expensive and disheartening for the creditor. Then, if that fails, the offshore trust or Foundation will provide an impenetrable barrier through which no civil creditor or frivolous lawsuit may pass.

What Asset Protection IS and IS NOT

Now that you have an idea of what an international trust can do for you, let’s talk about what offshore asset protection is and is not.

A properly constructed asset protection plan places a portion of your net worth behind multiple barriers…the more barriers, the greater the protection. It allows you to level the litigation playing field and move out of the creditor friendly United States and into a defendant friendly jurisdiction such as Belize or Cook Islands. An asset protection trust makes you a hard target, which may eliminate the case altogether or put you in a better bargaining position.

Asset protection does not:

1. help you escape your current or reasonably foreseeable creditors. You should not transfer assets out of the United States into an international trust to avoid a current creditor as this may be a fraudulent conveyance.

2. reduce or eliminate your U.S. tax obligations. You (the U.S. citizen and settlor of the trust) must report your international trust, your international bank accounts, and pay taxes on the gains in your asset protection trust, to the U.S. IRS. U.S. citizens are taxed on their worldwide income, including income earned inside an international trusts and Panama Foundations.

3. allow you to hide assets. Asset protection is not based on secrecy; it is focused on putting up barriers to collection. Even if your creditor had a detailed road map of your structure, they should not be able to reach the underlying assets.

4. work well with U.S. real estate. The an international trust is best suited for offshore bank and brokerage accounts and other assets outside of the United States. U.S. courts have jurisdiction over U.S. real estate, can simply ignore the asset protection trust and demand seizure the property. While it is possible to hold titles to domestic real estate in an offshore trust or offshore LLC, it’s not recommended because it provides limited asset protection and has significant tax consequences.

5. a total solution to estate planning. An international trust will facilitate transfer of international assets upon death, but should be used with a complete estate plan that is compliant with your home countries estate and tax codes.

Investments Held by an International Trust

Diversification into international investments, which are held in an international trust, can reduce portfolio volatility while maintaining returns. Effective diversification requires investing in non-correlated assets.

At any given time, various regions of the world are experiencing unique economic, political, and environmental events. Accordingly, markets in those countries will reflect local conditions and will not be highly correlated with the markets in your home country. In other words, just because times are tough in the U.S., and banks are paying minimal interest, does not mean there are no deals to be found in other countries. This important concept is essential to international estate planning and wealth management.

In addition to providing portfolio diversification, offshore investments held in an international trust provide a high degree of choice and flexibility. A large percentage of the over 80,000 funds traded worldwide are located offshore. Investing in these funds often requires an offshore entity. Operating offshore, and accepting only international structures, allows fund managers avoid US registration and regulation, operate more efficiently, and offering substantially higher returns to investors. Moreover, international funds may be denominated in any major currency providing a hedge or currency diversification.

Not only does international investing provide choice and flexibility, it provides an excellent level of privacy, thus reducing an investor’s potential exposure to frivolous litigation. Investment accounts in the U.S. can be seized by creditors. That is much more difficult offshore… and near impossible if they are behind the protective barrier of an international trust or Foundation.

Offshore investments are efficient not only because of the asset protection and privacy they offer, but also because fund managers can use risk hedging techniques which are not available in some domestic markets.

With this in mind, an international trust may be the only vehicle that a non-U.S. investment manager or brokerage will accept when dealing with a U.S. citizen. The advisor will want to be representing an entity, such as a trust, Foundation, or LLC, rather than directly working for a U.S. citizen or resident.

Asset Protection Trust Terminology

Contempt of Court:

A U.S. court can exercise jurisdiction and control over people and assets in the United States. When a defendant is in the country, but his or her assets are outside of the reach of the court, the judge may attempt to force the defendant to return those assets to their authority.

If a defendant refuses to return the assets, a judge may hold him or her in contempt of court. This means that the court will impose sanctions for failing to comply with the judge’s order. A defendant might be held in jail, fined, or both, until the assets are returned.

If the transfer of assets to the international trust is deemed to be fraudulent, it is likely a U.S. judge will order those assets returned.The only way an asset protection trust can be breached by a U.S. judge, and contempt of court ordered, is in the case of a fraudulent transfer or conveyance.

Legal Cites: Morris v. Morris, Case No. 502005CA006191XXXMB (Circuit Court, 15th Judicial District, Palm Beach County, Florida, 2006), Bowen v. Bowen, 471 So. 2d 1274, 1277 (Fla. 1985), Federal Trade Commissioner v. Affordable Media, LLC (Anderson), 179 F3d 1228 (9th Cir. 1999), and In re Lawrence, 238 B.R. 498 (Bankr. S.D. Fla. 1998).

Fraudulent Conveyance:

A transfer to an asset protection trust will generally be respected if it is done well before a debt is incurred or a creditor files a claim against the settlor (trust founder). If a transfer is made to the international trust after a debt is incurred, or after a creditor’s claim can reasonably anticipated, it may be considered fraudulent.

For example, if you create and fund an international trust on January 15, and on January 20 you injure someone with your car, the transfer of assets to the trust should be respected. This means that it is unlikely the injured party will be able to breach your asset protection trust.

If the dates are reversed, you injure someone on January 15, and fund an asset protection trust on January 20; the transfer is going to be considered fraudulent. A judge will order you to return the assets to pay the claim and, if you refuse, may hold you in contempt of court.

This is a simple example for illustrative purposes. Each State has their own rules, and there are Federal statutes at work. The bottom line is this: Form and fund your asset protection trust as early as possible, well in advance of any claim arising or legal proceedings.

Jones Clause:

This is a clause placed in the international trust to protect you against Fraudulent Conveyances. It tells the trustee to pay any claim that comes in from a certain creditor.

For example, just about any transfer, regardless of timing, that prevents the IRS (see: United States of America v. Raymond and Arline Grant, Case No. 00-08986-Civ-Jordan (S.D. FL 2005)) or State taxing authority from collecting, is going to be considered fraudulent. Thus, I always include a section instructing the trustee to pay the IRS or State Franchise Tax Board. This protects both the drafter (me) and the settlor (you).

In the car accident example above, you could create and fund an international trust after the accident, so long as you added a Jones Clause instructing the trustee to pay the injured party.

Letter of Wishes:

A Letter of Wishes is an informal and confidential letter from the settlor to the trustee telling him how to administer the international trust. Because a Letter of Wishes is not part of the trust, it is confidential, is revocable (most offshore trusts are irrevocable), and can be easily amended.

Transfer Clause:

An international trust can be formed in a number of jurisdictions. For example, a client may prefer Cayman Islands because of the large number of banks and investment advisors available. However, when that trust is attacked by a creditor, Cayman may no longer look so good.

If the trust has a transfer clause, it may choose to move to a more advantageous jurisdiction when it comes under attack, such as Belize or the Cook Islands. In other words, if a creditor seems to be making headway in Cayman, the trust may move to Belize, and the battle will begin anew.

The transfer may be automatic or conditioned on a certain event (such as a claim being filed in Cayman), or the trustee may be given the power to move the trust.

Reminder of the Benefits of an Asset Protection Trust

I would like to close by reminding you of the benefits of an asset protection trust formed in Nevis, Belize or the Cook Islands.

  • It is possible for you to protect your assets and maintain control over bank accounts and investments.
  • There are firm time limits for actions against trust assets.
  • Intent to defraud must be proven to a criminal standard in allegations of fraud.
  • Cook Islands and Belize courts will not recognize or give effect to certain judgments of foreign courts in relation to International Trusts
  • There is no bankruptcy law in the Cook Islands or Belize, and therefore no claw back provisions. A creditor must rely on common law fraud to void a disposition to a trust.
  • Barriers to claims for fraudulent transfer being brought in a Cook Islands or Belize Is court include strict time limits, requirement of proof of fraud beyond a reasonable doubt (criminal standard), and no bankruptcy law.
  • Procedural law prevents ‘fishing expeditions’ by creditors, restricting the use of interrogatories (discovery, etc).
  • Impediments to litigation in Nevis: To file a case in Nevis, the plaintiff must put up a $25,000 cash deposit and hire a local attorney.
  • Assets may be moved between the international trust (Belize or Cook Islands) and the LLC (Nevis).

A Cook Islands or Belize offshore asset protection trust with a Nevis LLC provides the highest level of security for personal assets. Those who most benefit from these international trust structures are persons in high-risk occupations (such as physicians and lawyers), those looking to diversify their investment portfolios, business vendors (particularly those close to retirement), and almost anyone who has saved a significant nest egg and considering moving themselves and/or their assets outside of the United States.

The bottom line is that a properly drafted and maintained international trust formed in Belize or the Cook Islands will tilt the legal scales in your favor by providing the ultimate in asset protection.

Please contact us for a confidential consultation at (619) 550-2743 or email info@premieroffshore.com.