Becoming a LLC? Offshore CO? Tax Havens?!?

[narres]

I came across this information and thought it could be useful to the US marketers
who are thinking about moving to greener pastures.


The Best Tax Haven Getaways
Christina Valhouli

Avoiding taxes, however, is no longer just a question of hopping on a plane and heading somewhere tropical. The U.S. government has been cracking down on tax exiles since 1996, making it increasingly difficult for individuals, as well as corporations, to get away with nonpayment of taxes. (Citizens of other nations, however, have it easier. The U.K. has very liberal laws that allow British subjects to spend up to half a week, every week, in Britain and still qualify as a tax exile, which greatly reduces but does not eliminate income tax.) Many countries that once provided cushy welcomes for tax evaders have been read the riot act and rolled up the red carpet.

For people who think that they can still zip off to Panama or Switzerland to avoid paying taxes, think again. Beverly Hills, Calif.-based international tax lawyer Gary S. Wolfe says that while countries such as the Caymans do not impose taxes, that does not apply to U.S. citizens or residents. "The mistake that Americans make is that they go offshore and think that they don't have to pay any taxes," he says. "The reality is that U.S. citizens are taxable anywhere in the world."

Because of that, some U.S. citizens instead choose the legally and emotionally difficult course of expatriation. But according to John Ambrecht of Ambrecht and Associates, a Santa Barbara, Calif.-based estate planning and trust adviser, the IRS won't make it easy on you. Even if you choose to give up your passport to become a citizen of, say, St. Kitts, it can take up to ten years before the U.S. no longer has jurisdiction over your U.S. taxable income.

To complicate matters further, tax ex-pats may find their re-entry into the U.S. denied, which can be difficult in case of medical or family emergencies, or just simple nostalgia for home. "We have seen some people move to New Zealand [for less than the ten-year period], and then when they want to come back, it's a real problem," says Ambrecht.

What Ambrecht does recommend, however, is using such offshore havens to help with tax planning or asset protection in order to minimize taxes, not to avoid them--particularly if you want to leave money to your family without getting in trouble with the IRS.

"You can create situations where certain income is not included in your U.S. taxable income but is considered foreign-sourced income," he says. "While you still have to report the income, you get it excluded as U.S. taxable income if you have planned correctly. Additionally, if you have planned correctly and you have assets in strategic jurisdictions, you can protect these assets from U.S. creditors."

In other words, avoiding the IRS isn't easy.

[MrSuccessful]

Do any of you use a tax or accounting software program to assist with keeping track of your income/expenses?

[Ganceann]

Do any of you use a tax or accounting software program to assist with keeping track of your income/expenses?

Excel is fine to monitor income and expenses... you just need to set it up for your own needs. For example, a basic spreadsheet with income, expenses and summary + a detailed sheet for each main source of income/expenditure if you wanted. It can include invoices as well if you invoice clients and if you don't, you just need to make sure to include the dates to help sort out monthly accounts and financial year end accounts.

[john247]

Do any of you use a tax or accounting software program to assist with keeping track of your income/expenses?

Download Dynacom Accounting Startup Edition 10 Free - The free Startup edition of Dynacom Accounting includes all the accounting basics to manage a business efficiently - Softpedia

[kinitex]

Has anyone ever heard of...

Offshore Online Banking Accounts and Company Formation Services - Confidential - Low Costs

They have some very interesting packages where they basically setup everything for you for about $1 grand and you don't even have to travel to the place to have it setup. I've e-mailed them and they recommend Dominica as the best option for this nature of business.

[Ashley]

^ Thanks Kinitex..

Maybe I'm just being stoopid but cant work this out in my head..

If I formed a Dominican company, got all my monies sent there, surely because I'm in the UK I have to still 'earn' money, so do I register as the director or a company abroad or do I invoice my own company when I wanna have some spending money or what? Can't quite work it out that's all.. since of course I can't be earning 'no money' or the government will start to ask question, esp when that Lambo I ordered shows up lol..

Any help would be great - Maybe it's just because I haven't had my coffee yet but I just canny work it out.

[kinitex]

Yes you would invoice the company, or just draw a wage from the company to yourself personally and pay UK taxes on that wage and pay ZERO taxes on the income made on the company. So you would be working for your company from the UK and drawing whatever wage you want, but you are taxed on that wage.

So those of you that make under $100k a year, this isn't really plausible. But for those 150k+ this starts to look more and more interesting.

I got some replies back, and apparently you don't even need to have the bank account in Dominica, you can have it in any country you wish. I am waiting to hear back from them about more details on this.

[NCMedia]

Make sure you do your diligence a lot mate. Dominica does not offer citizenship packages for free. It's $350K and a long wait to get full res/cit.

Getting your money out of the country and paying yourself a wage is great and all, however you do not have access to the rest of the money, and at the end of the day this is tax evation not tax avoidance. i.e. You bank in Dominica along with your biz homebase, you earn here/uk/us/canada, you pay yourself, money builds in dominica, you now have $xxx,xxx there < now what? You can't expect to draw small salaries x 10 people then take their cash for a fee year to year (well I guess you can but that's not really smart).

There's a big difference between stacking your chips abroad vs. getting access to them tax free later = almost impossible. If you want to jump on skype or a phone call I can give you my deepest research so far. There's numerous companies that will setup your shell corp/be your mediator/keep your name out of stuff, and those that charge very little are usually the ones to watch out for so be careful and keep doing diligence.

Also if you are serious about this stuff - talk to AT LEAST 5 sources, at least. 5 immigration laywers, 5 tax advisors/specialists, 5 accountants - or a mix there of. They are all still running a business don't forget. After my 3rd or 4th call and doing my own research I found that some people had no clue what they were talking about and or I knew more than they did so make sure you don't come short on knowledge or believe just one source.

Also do your research on the bank(s) very well, international banks are notorious for shady shit, going under, not giving you proper customer support virtually, etc.

[diveup]

Very interesting information, I haven't seen some of the places mentioned above anywhere discussed, though I have a buddy who owns a company in Secychelles for some time now. Will get back with solid info.

[kinitex]

It seems as though this can be done 100% legally if setup right.

There is a lot involved in getting it setup, and there are annual fees involved (they will differ from place to place).

You can incorporate here in Canada and pay 15%, and then about 20% depending on the wage you draw.

So if you make say $300,000 a year, and draw a $60,000 wage you would pay roughly $12,000 on that wage, and then 15% on the remaining $240,000 = $36,000.

So you have roughly a year end income tax owed of $48,000.

I have looked into setting up an offshore company with an offshore bank (A Canadian bank) 100% legit and the annual cost comes out to around $12,500. The tax rate for international income is 2.5%. So the tax on the remaining $240,000 would be $6,000.

That leaves me with $12,500 in fees, $6000 on corporate taxes, and $12,000 on my wage im drawing for a total of roughly $30,000 in taxes.

So at $300,000 a year we have an $18,000 savings in tax, but keep in mind your money is offshore in another country.

If you are making less than this, I just don't see it being worth it to go offshore.

Over $300,000 and you can see how that 15% and 2.5% + fees really start to seperate themselves.

This is just one example.

[andrew_writes]

I formed my LLC in Delaware but you can also do it in Nevada. No business taxes. I only pay $90 per year to my registered agent.

You still have to pay the Feds at the end of your accounting cycle though. Sorry.

[Catseye]

Another great information source is Simon Black AKA sovereign man.
His website is Sovereign Man: Finance, lifestyle design, Offshore Business and Expat news ? (not an affiliate link)
He has a newsletter you can sign up for at his site and he sends out an excellent article every day.
I believe he also sells subscriptions to a private members forum.
I have not signed up as I am a long way from being ready to relocate.

He is also hosting a 3 day event in Panama on the subject of this thread.
All of his overseas banking, legal, real estate advisors will be present and available at this event.
I'm sure details can be found on his site or by googling his name...

[tecksell]

Well, I wouldn't advise coming to the UK. Just about anything and everything is taxed in some way or another. Plus, VAT is about to go up again (yay)

It very nice in the Dominican Republic (If you choose the right place)... went there on holiday this summer for the first time. I would go again.

[Catseye]

Got this email today, thought you might find it interesting...
Topic is: Is Panama Dead?
Enjoy...
Chris

Sovereign Man

Notes from the Field

Date: November 30, 2010
Reporting From: Katoomba, New South Wales, Australia

There are an overwhelming amount of offshore tactics and jurisdictions that people can choose from-- corporations in the Marshall Islands,foundations in Panama, insurance structures in Switzerland, bank accounts in Dubai, trusts in Nevis, holding companies in Labuan, property in St. Kitts, etc.

With just a bit of professional help, you can build your own offshore strategy and apply a selection of these tactics to legitimately reduce your tax burden, safeguard your assets, and reduce any single government's control over your life.

Unfortunately, a lot of people jump the gun and don't seek professional help. With little preparation, they head to a place like Panama and get talked up by some attorney on why they need a bank account, corporation, or foundation.

What most people fail to realize is that the local attorney may be an expert in Panamanian structures, but s/he has no clue about tax consequences and reporting obligations in your home country.

As such, many people unwittingly end up with structures they don't need and reporting obligations they don't know about. I've seen this with my own eyes and written about it extensively.

Panama's New Tax Treaty

Today, I suspect most of that will come to an end. Panama's foreign minister is set to sign a treaty with Tim Geithner known as a tax information exchange agreement. I should pause for a moment to explain what this is, and what this isn't.

Countries frequently engage into tax accords to ensure that an individual, corporation, trust, or other legal entity from one country that does business in the other doesn't get taxed twice.

To give you an example, Australia has one such treaty with Malaysia; according to the treaty, an Australian corporation that does business in Malaysia would be subject only to Malaysian taxes, not Australian taxes. Similarly, a Malaysian individual working in Australia would be subject to Australian taxes, not Malaysian.

These are known as double tax treaties or comprehensive tax treaties. Full of rules and loopholes, these treaties can be astutely applied to legitimately save individuals and entrepreneurs a boatload on their tax liabilities.

(my lawyer could dazzle you, for example, with obscure passages that legitimately reduce certain capital gains taxes using Australian companies, or cut down on individual taxes in Palau, etc.)

What Panama and the US are signing, however, is not a double tax treaty, it's a tax information exchange agreement (TIEA). This is an administrative protocol in which the two signatories agree to share data relating to bank accounts, ownership of corporations, and trust beneficiary information.

Because TIEAs are technically international treaties, they become law in both countries, often superseding the countries' existing laws on financial privacy. By signing this agreement, Panama has effectively renounced the financial privacy that has long been a hallmark of its banking system.

Once the agreement is ratified, the US government will effectively have unlimited authority to request financial details of US taxpayers it suspects of having accounts in Panama. I've read the treaty, and there are a few points that I'd like to underscore:

1) The treaty is clearly one-sided, designed for the US government to obtain information from the Panamanian financial system about US taxpayers, not the other way around;

2) the requesting party (i.e. US government) does not need to provide detail on the targets of its requests;

3) the requesting party does not even need to have an immediate use for the information being requested, such as an imminent lawsuit or criminal tax investigation;

4) information about beneficial ownership of corporations and foundations is also fair game;

5) the sharing of information is retroactive-- they can request information from years ago as long as the records exist.

To be fair, the information that's being exchanged is, in principle, what taxpayers should have already been reporting. For example, I've written frequently that the US government requires its taxpayers to report information with respect to certain foreign companies on form 5471, or foreign bank account information on form TDF 90-22.1.

It's this same information that the government is after, and for anyone who has been making the appropriate disclosures, this TIEA is of little consequence.

For those who may not have been filing the forms, however, there's no need to panic: complying late is much better than not complying at all, and it's definitely better to step forward voluntarily than to wait for them to find you through the TIEA.

My suggestion is to engage a tax legal professional who can help you get compliant-- there are a number of advisors who can help, and I have already provided premium members with the contact information to one of my own tax professionals who was on yesterday's teleconference.

Going forward, I recommend a steady, measured approach to crafting your own offshore tax strategy-- there's a right way and a wrong way to use these options. Frankly, the right way is easy when you have the right advice, and you sleep much better at night knowing you're both prepared and compliant.

These are exactly the sorts of topics we discuss in our premium service, and what will be the core focus of our upcoming offshore workshop. (If you're so inclined you can join our premium service, SovereignMan: Confidential here and get access to the recording of yesterday's teleconference where we dicussed the Panama issue at great length.)

Lastly, Panama may still be right for your strategy, even with the TIEA; after all, a number of thriving offshore financial centers (BVI, Cayman Islands, Bermuda, etc.) have TIEAs with the United States.

Remember, banking overseas is not about keeping secrets from the government... they will always find out. Rather, it's about ensuring that the bureaucrats in your home country don't have control over your money.

The best financial centers are not the ones that keep secrets, but the ones that are modern, independent, and well-capitalized. If secrecy is your goal, get out of the financial system-- buy gold and store it in an overseas anonymous vault, or use cash.

Given what's been happening here in Australia lately, that wouldn't be a bad idea. More on that tomorrow.

Until tomorrow,


Simon Black
Senior Editor, SovereignMan.com


Did you receive this email from a friend? Sign Up to receive Notes From The Field.

PS. I'm not affiliated with any links in this document... I just get his daily reports from the field. Chris

[Catseye]

Looking for a new Niche?

A few days ago Simon Black wrote an article about the merits of leaving your home country and becoming an expat. The article was picked up and reposted on this financial blog:

Simon Black Advocates Leaving America As The "Most Effective" Way To Fight The Battle With "The Mob-Installed Government Beast" | zero hedge

The article has received well over 20,000 views and has around 800 very passionate posts.

Really drives home the power of good article marketing in a hungry niche...
That is pretty sweet free traffic over 2 days for one simple article.
Especially when you consider the guy that got the free traffic simply reposted someone else's content.

The story is not quite finished there either. Because it caused such a stir Simon was invited to write another article explaining his position to the passionate mob...
Nice free publicity for his links...

[azura]

bohooo.....another insightful reading...this is the real blackhat imo. i am not in that level.. i'm nubi lol...but there's a lot of reading on how a corrupt gov spin(treat/manage?) their money, how a big business avoid taxes...
and btw, there is a person talked about this offshore bank, payment and stuff to run his replicate business..that is another good reading, he provide source too

[bluffspot]

Ok Norb - I found a somewhat better deal...

Silicon Valley billionaire funding creation of artificial libertarian islands | The Lookout - Yahoo! News

[Blackman]

That's an idea for a new CB product - how to build your own country on the sea.

[Vadym]

Ok Norb - I found a somewhat better deal...

Silicon Valley billionaire funding creation of artificial libertarian islands | The Lookout - Yahoo! News

OMG.

YES
YES
YES

FUCK YES.

The other day I was just thinking about how to survive the whole ice caps melting bullshit and why people weren't making floating cities.

I have a reason to push bizops to stupid mouth breathers with a new vigour, thank you.

PS - also this made me lol:

Thiel made news earlier this year for putting a portion of his $1.5 billion fortune into an initiative to encourage entrepreneurs to skip college.

I'm no longer one of those people who hates on college [since I know I'll take their money eventually and it's a needed meat factory] - but that was lol.

[DomainMagnate]

I also made a huge mistake of neglecting my accounting my first year with IM and made good money ($100k+), so paid a ton of taxes! I got smart quickly after that, found a good accounting and now paying very reasonable amount of tax.
Looked into incorporating offshore back in the day, but basically it's only worth it if you make millions and manage a pretty big operation. Like Norb mentioned in one the posts the main problem with offshore banking is you still need to pay taxes in your home country, otherwise it's tax evasion - which is not something you'd want to risk, remember how they got Capone?

Only way to make it work is by living there for over 6 months a year. Are you willing to just move to some small Island nation where you know no one, possibly don't even speak their language, just in order to save money that you can't really spend - because if you decide to buy anything on it back home you'll have to pay the taxes.

It sure sucks having to give a big chunk of your money to the government, but using one of those quick online packages to incorporate somewhere with 0% tax for $1-2k is not gonna help much.

[Noxter]

I also made a huge mistake of neglecting my accounting my first year with IM and made good money ($100k+), so paid a ton of taxes! I got smart quickly after that, found a good accounting and now paying very reasonable amount of tax.
Looked into incorporating offshore back in the day, but basically it's only worth it if you make millions and manage a pretty big operation. Like Norb mentioned in one the posts the main problem with offshore banking is you still need to pay taxes in your home country, otherwise it's tax evasion - which is not something you'd want to risk, remember how they got Capone?

Only way to make it work is by living there for over 6 months a year. Are you willing to just move to some small Island nation where you know no one, possibly don't even speak their language, just in order to save money that you can't really spend - because if you decide to buy anything on it back home you'll have to pay the taxes.

It sure sucks having to give a big chunk of your money to the government, but using one of those quick online packages to incorporate somewhere with 0% tax for $1-2k is not gonna help much.

I'm also in a high tax bracket myself, and wondering what your adviser said to do. Have you done personal IRA (4.4k /y, saving you peanuts), or business IRA (44k /y, saving around 15k on taxes alone)?

Did you make the mistake of transferring funds from a business account (registered corp) to a personal account? Lol. Eww.

[DomainMagnate]

I'm also in a high tax bracket myself, and wondering what your adviser said to do. Have you done personal IRA (4.4k /y, saving you peanuts), or business IRA (44k /y, saving around 15k on taxes alone)?

Did you make the mistake of transferring funds from a business account (registered corp) to a personal account? Lol. Eww.

A lot depends on the location and regulation. The first year I knew nothing about taxes and accounting. I submitted my tax reports late, had almost no expenses to show. Spent a big chunk of that money on buying all kinds of useless crap and living a more comfortable lifestyle than I should have, so after paying the taxes I didn't really have that much left.
This was back in the days when adsense scrapers were the easiest cash ever, I'm sure many of you old timers here remember those gold old days.
I didn't even bother reporting my revenues and setting up a business until I got a few scary letters from the IRS.. whatever you do you don't ever want to mess with these guys.

Now I mainly max out all my savings accounts that provide tax breaks, try to collect all the receipts and expenses that can be somewhat related to business and send everything to my accountant. I pay the accountant about $2k per year. Also since I invest a lot in new projects and buy sites, domains etc. I get to show a lot of expenses and lower profits.

Basically, my best advice, what I've learned for paying less taxes is simply buy stuff and show more expenses! Near the end of the year invest a large chunk of your revenues back into the business - in new projects, buy some domains you know you'll need, buy some sites, order those articles or other services. Personally I reinvest a lot of the revenues by buying a lot of sites (I'm currently in escrow for one ~$10k purchase right now). I've been buying sites for years, but if you're new to it be very careful with that , the vast majority of sites you see for sale on flippa are pure crap and you'll most likely lose money if you just buy them and do nothing, takes some time and effort to find decent stuff.

I've also looked into investing in some offline businesses, but it's a pretty big transition, haven't found many interesting opportunities yet.

Look at it this way: near the end of the year you got your profits and the cash in your bank account and you can either send it to the government or invest it in something that will actually help you get more revenues and grow the business.

disclaimer: regulations vary in different countries, so consult an accountant or tax specialist before making any important financial decisions.

[Noxter]

Well, all that was pretty much a given lol, but thanks anyways.

I do a 50/50 break, so by the end of the year, I try to dump most of my business cash to try and gross into a lower % tax bracket. I try to get around 36 - 38% + write offs (office, apt, car, insurance, gas, tolls, travel, etc.).

My adviser was going to have me setup a business IRA, and throw 44k (which is the max) into it, which will save me 15k come tax return. That money gets taxed regardless though when you pull it out at the age of 59 + all the interest gained. Meh.