ETD: 817 SPECIAL REPORT "To Be Or Not To Be (Offshore)"
E-Tailer's Digest
etd_post at gapent.com
Thu Sep 9 02:33:10 GMT 2004
E-Tailer's Digest --- Everything for the Retailer
Issue #0817 September 9, 2004
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] "To Be Or Not To Be (Offshore)"
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[1] Greetings.
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Hi All:
Today we have a recycled special report "To Be Or Not To Be
(Offshore)." It ties in with our discussion on where to incorporate and a
follow up to Richard Woolnough comments on incorporating in Bermuda.
I personally have incorporated in Delaware and Nevada and offshore in the
Caribbean. It's not too difficult, and there are advantages and
disadvantages to each alternative. BTW, "offshore" has negative
connotations. The new term is "global."
I highly recommend that you contact David Leperance if you are serious
about offshore tax savings. He has a wealth of information, and is very
honest - he doesn't take you on as a client unless it makes economic sense
for you. There are a lot of resources available online. Do a search on
Google and look for "dual citizenship" or "offshore tax savings."
I'm in Las Vegas the rest of this week, then heading to London on Saturday
and will return the following Wednesday. So, I sure could use some more
special reports. So, if anybody has something of interest to list members,
please pass it on and we will publish it and it will remain for posterity
at our Special Reports site
http://etailersdigest.com/resources/Specials/index.htm The article should
be 1,500 to 2,000 words on anything to do with retailing/etailing.
Let's hear about your business, which will remain for posterity at
our "Members: Who Are You?" site.
http://etailersdigest.com/resources/members/index.htm And we have a form
there for you to tell us about you. As I said when I first proposed this
idea, we have "known" each other for a long time, yet we often don't know
anything about each other. So, tell us who you are and what you do.
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com
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[2] SPECIAL REPORT "To Be Or Not To Be (Offshore)"
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+ + + + + S P E C I A L R E P O R T + + + + +
"To Be Or Not To Be (Offshore)"
George Matyjewicz
Many citizens of tax-burdened countries like the U.S. are under the
impression that you can setup an offshore corporation and avoid paying
taxes. Simply register an International Business Corporation (IBC) in one
of the tax havens like Nevis, Belize, BVI, Panama, Ireland and others, pass
all your income through that IBC and no US taxes. Or maybe you need to
live “offshore” for 180 days to comply. These tax havens around the world
offer very low tax rates or no taxation at all for companies incorporated
within their borders but conducting their business outside such jurisdictions.
Wrong! The Internal Revenue Service (IRS) got wise to the tax havens and
instituted rules and regulations that will tax citizens on all income
earned anywhere in the world. According to Canadian Barrister & Solicitor
David S. Leperance, "Every other major country has tax rules that
say, 'If you reside here, then we start talking about taxation.' The U.S.
says 'Even if you haven't even visited the U.S. in years, we will still
tax you and your estate, because you have the original tax sin of being an
American citizen.'" David is a world-renowned expert in dealing with
individuals who are acquiring residency or citizenship to fulfill tax or
estate planning objectives, and has written many papers on these subjects.
To qualify for an offshore deduction you need to be out of the US for 330
days a year. A U.S. citizen who moves offshore and establishes a foreign
tax home can save income tax on the first $75,000 to $80,000 in
income. This may be all they need to do if they can deal with their
additional income, capital gains, gift and estate tax liabilities in other
ways.
There are two ways a citizen can move out of the U.S. and gain significant
tax and asset protection benefits.
1. Remain a U.S. citizen but establish a foreign tax home.
2. Become an expatriate where someone not only establishes a home outside
the United States, but who also gives up U.S. citizenship.
Generally, expatriation is worth a serious look if you have more than
$350,000 in annual income or, if you are married and have an estate of
greater than $3 million or $1.5 million if you are single.
Some of these tax exiles are heading to the traditional tax havens in the
Caribbean, Central America and Europe. But a significant number of people
are looking elsewhere; at Ireland, New Zealand, the United Kingdom and
Canada. The choice of where to head is driven by the type of lifestyle the
person wants to maintain. The other crucial factor is the type of offshore
strategy that an individual wants and needs to adopt.
SECOND COUNTRY PASSPORTS AND/OR ECONOMIC CITIZENSHIPS
Second Country Passports and/or Economic Citizenship programs do carry a
price tag, but in the right situation, a second citizenship may pay for
itself many times over. Many folks are purchasing economic citizenships for
tax, privacy and security reasons.
In considering economic citizenships, a simple but critical point to
understand is that passports are the travel documents issued by a country
to its citizens. First you become a citizen, then you get the passport.
Some enterprising "consultants" are actually trying to sell "passports for
non-citizens". This is an oxymoron, but, no doubt they have managed to
separate some people from their money.
BECOMING A NON-RESIDENT U.S. CITIZEN
In order for an American to become a non-resident "qualified individual",
it is necessary to change residency from the U.S. The immediate advantage
is a significant saving in income tax.
As a qualified individual, you would not pay income tax on the first
$72,000 of foreign earned income. Under the U.S. Taxpayer Relief Act 1997,
this exclusion was increased by $2000 per year starting in 1998 and will be
capped at $80,000 in 2002. After 2007, the $80,000 will be indexed to the
cost of living adjustment.
There is second advantage through the wise use of tax treaty provisions
that grant relief on some foreign capital gains, U.S.-source income and
pension income. You can also deduct housing expenses in excess of a base
amount of approximately $7000 a year.
You can become a "qualified individual" under either the bona fide
residence test or the physical presence test. In either case, you must also
have your tax home in a foreign country.
OFFSHORE IS COSTLY
Traditionally, offshore industry has been dominated by the British law
firms that used to charge minimum 15,000-20,000 USD for the formation of a
new company and about the same amount for maintenance of such a company.
Lately, the trend has changed, and now more and more offshore-based law
companies like ILC, Ltd. offer similar services for a much lower cost.
ILC, Ltd. works directly with the governmental officials in the offshore zones.
A WORD OF CAUTION: If you are looking for a new residency, take the time to
research and plan carefully. You do not want to jump out of the U.S. tax
cauldron and into another country’s tax fire. In addition, since this
strategy likely involves other family members as well as personal and
business realities, the plan must be relatively easy to set in motion and
to live with for a period of time.
It must also provide a level of long and short-term comfort to everyone
involved. Leafy tropical islands may seem like paradise to you but your
teenaged children may not share your viewpoint. Family discontent exacts a
high toll on a tax plan.
SECOND CITIZENSHIP'S AND PASSPORTS
Second citizenships can be costly. However, you need to weigh the total
cost to the potential tax savings. For example, second citizenship for a
family in Grenada is $75,000. You need to weigh those costs to your total
joint tax liability to determine the ROI. ILC, Ltd offers information
about second citizenships and passports some of which include
Argentina
A good backdoor to Spain costing US $45,000 and providing fair visa free
travel to over 30 countries. An excellent residency program in one of the
more highly developed nations in the western hemisphere.
Belize
Providing excellent visa-free travel, Belize is also a great tax haven
country. This is a popular program, but the visa-free travel is not as good
as Dominica, Grenada, or St. Kitts / Nevis. US $55,000.
Brazil
A rapid citizenship program costing US $60,000 and providing reasonably
good visa free travel.
Commonwealth of Dominica
A beautiful island nation offering two different citizenship options, one
costing a non-refundable US $50,000 and the other costing US $110,000 with
US $75,000 returned after 15 years. Benefits include a Commonwealth
passport, which allows visa-free travel to over 90 countries. This is
probably the most reputable Economic Citizenship program.
Grenada
This is a great citizenship program offering visa free travel to over 100
countries. However, it is a new and somewhat unorganized government run
program, but is very similar to system adopted by the Commonwealth of
Dominica. Exact prices cannot be quoted, but you can expect to pay around
US $75,000 for your family.
Ireland
The Rolls Royce of offshore economic citizenship programs. Irish passports
provide the best visa free travel possible and even allow you and your
family lifetime rights to live and work in any EU country. However, you
will have to visit Ireland twice, pass an Interpol check, pay US $350,000,
and purchase a minimum of US $150,000 in real estate.
Panama
A good visa free travel full citizenship program costing US $42,500.
St. Kitts / Nevis
This citizenship program was established in 1984 and is one of the oldest
and finest passport programs available. Benefits include a Commonwealth
passport, which allows visa-free travel to over 90 countries. The cost for
this program is US $55,000, however the government also requires an
investment in real estate of US $150,000 to US $200,000.
South African Nation
An undisclosed South African nation offering poor visa free travel, but
almost non-existent citizenship qualification requirements and costing a
phenomenally low US $11,000.
Uruguay
A government run citizenship program costing US $48,000 and provides
excellent visa free travel. However, you will be issued a "non-citizen
passport", must visit the country twice, and must purchase a US $70,000
government bond.
Venezuela
An excellent program costing US $45,000 and providing great visa free
travel, also serves as a back door to Canada.
Some of these citizenships can be process in 60-90 days. Some require a
visit to the country, others do not.
As with anything else, caveat emptor buyer beware. Check out all the
facts before you decide to move offshore or before you obtain a second
citizenship. And be sure to use a reputable resource.
###
Resources:
David S. Lesperance
Barrister & Solicitor
84 King Street West, Suite 202
Dundas, Ontario, Canada L9H 1T9
tel: 905-627-3037
fax: 905-627-9868
e-mail: dsl at globalrelocate.com
International Legal Consultants
http://www.ilc-offshore.com/index.htm
Email: info at ilc-offshore.com
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