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  Professional offshore incorporations and offshore banking services since 1996

Offshore Asset Protection for the 
European Community


We have compiled this information as a Q & A section.

How does the client establish an 
Tax Proof Offshore Structure (TPOS)

Our clients have many different reasons for setting up an TPOS. Some for asset protection (of real estate, securities, retirement accounts, cash, etc) or simply for the purpose of investing in an environment that gives them the tax benefits that offshore investing does.

We offer to our EU clients an Tax Proof Offshore Structure, which is a combination of a

  • International Business Corporation (IBC) in Belize, Panama, BVI, Seychelles, or Gibraltar - you choose  whose shares are held by a

  • Private Interest Foundation (Panama) , and a

  • Belize Offshore Trust is used as the sole beneficiary of the Private Interest Foundation and lists all of the clients beneficiaries.

This structure allows you to legally invest through the IBC in many different global markets without the burdensome capital gains taxes. The structure also provides some of the basic entities necessary for the protection of assets such as real estate, securities, domestic businesses, and just about any other asset you can think of. There are a number of other tax deferral techniques through offshore structuring that can be utilized through your business or consultancy income, sale of real estate, real estate rental properties, retirement plans, and many other forms of income.

The basic structure we recommend consists partly of a Panama Private Interest Foundation. The Foundation main purpose is to hold the shares of the  IBC.

Why do we not recommend that the client hold the shares of the IBC? 
If our client maintains ownership of the IBC, then the IBC is considered under tax laws to be a "Controlled Foreign Corporation" (CFC), and therefore the client would be required to pay tax on the capital gain income resultant from the investment activity of the IBC. If the client does not own the IBC (the foundation owns the IBC), then they are not required to pay tax on the capital gains of the IBC.

Why use a foundation instead of a Trust? 
Before the new trust laws established in 1996, we used a foreign trust as the entity which held the shares of the IBC. The new trust laws required that any assets held in foreign trusts be reported and taxed. The solution is the Private Interest Foundation. Today, we use this foundation regularly in virtually all of our clients offshore structuring.

How does the client maintain control over the assets held in the IBC? 
Under the Panama Private Interest Foundation laws, the client controls the foundation as the "Founder/Protector", thus controlling all of the assets owned by the foundation, including the IBC. The foundation does not have an owner, only a Founder (Protector), a Foundation Council and beneficiaries of the foundation which are listed in the Testamentary Trust. The founder/protector creates a letter of wishes, which will designate the Testamentary Trust as the instructional guide to specify beneficiaries of the foundations assets. Upon the clients death, the assets held in the foundation will be distributed to the appropriate beneficiaries as the client has listed accordingly, without legal delays or deductions.

Why does the client not have to report assets held in the testamentary trust? 
The trust is not funded until the clients' death. If the trust is not funded, then there are not any assets in it that can be required to be reported.

Does the client have to report assets held in the foundation? 
The law does not require that the client report any assets held in a foreign foundation.

How does the client stay protected and completely confidential? 
Our goal is to offer our clients complete confidentiality. In order to do this correctly, there cannot be a trace of any of the clients information on any of the public records when registering the Private Interest Foundation or Panama IBC. This is why we offer nominee board of directors for the IBC as well as a nominee foundation council for the Foundation. We give the client pre-signed, undated letters of resignation from the IBC's nominee board of directors and the Foundation's nominee council. This provides the client the opportunity to remove the IBC's nominee board of directors or the Foundation's nominee council and appoint a new board of directors or council at any time. According to the by-laws of the foundation, the "founder/protector" is not required to be registered publicly and therefore the founder/protector document can be kept private and confidential.

How can the client get funds back to their domestic country without tax liability? 
There are several techniques the client can use to repatriate funds without the tax liability. One way to repatriate a large amount of funds at one time is to obtain the funds in the form of a loan from the IBC. The client can arrange the loan in the form of a balloon note payable in 20 years, then renegotiating the loan when the loan matures. This is a completely legal transaction. Normally the loan would be backed by real estate equity, shares in their business, or some other form of collateral. The way to repatriate small increments of funds is through a corporate Debit Card. The customer can use the card to withdraw cash from any ATM or for any purchases, like any other debit card. The advantage to this offshore corporate Debit Card is that it does not require a large security deposit as for a credit card, and the transactions at ATM's, banks, or merchants are not traceable to the client, as the only information revealed through the transaction is the corporations information.
Obvious, a corporate credit card is available.

Another option, for large amounts, (over $500,000) is by a back to back loan.

How can the TPOS be used to reduce taxes from domestic business income?
There are many ways that the TPOS can be used to reduce taxes on business income. One way is to arrange that the IBC invoices the domestic business for services provided. This enables the domestic business to send funds offshore as payment for services rendered by the IBC and at the same time creates an expense that can be used to reduce the domestic business' income, thus paying less tax. For import/export businesses, the IBC can serve as a re-invoicing company, thus creating a middleman between the domestic importer and the foreign supplier. The IBC marks up the cost of the goods to be imported, thus leaving less income for the domestic business, and the difference ends up offshore. Another way for reducing a large amount of taxes is to set up a captive insurance company that would invoice the domestic business (normally used for medical practices) for insurance premiums. The domestic business sends payments for these premiums offshore and at the same time uses these premiums as expenses, thus paying less tax. The funds are then invested however the client chooses once the funds are offshore.

How can the TPOS be utilized to reduce the capital gains taxes on the sale of real estate? Depending on the situation that the client is in and the real estate that is being sold, our legal staff can normally create structures which will help to minimize the tax liability on the sale of appreciated real estate. The process usually involves a domestic corporation that is owned by the Foundation. I will give you an example: Let's assume you own a house that you bought several years ago, you are currently renting it but still owe $50,000 to the bank on the mortgage, and it has since appreciated to ten times the value you bought it for (it is now worth $1 million). You have a prospective buyer, but you realize that greedy tax man is going to keep 30% of your profits (approx. $300,000). You want to create a structure that will minimize taxes on the sale. You establish an TPOS. The Foundation establishes a Local Corp. The Local Corp. issues a bond to the IBC, and the IBC transfers funds to the Local Corp. The Local Corp. then issues you a reverse mortgage on the real estate for $900,000. The funds never actually reach your personal account, because you have requested that the funds go directly to the IBC to purchase a Private Annuity from the IBC with those funds. You sell the house for $1 million. You pay the Local Corp. $900,000 for the mortgage. The Local Corp. pays the IBC $900,000 for the bond. The funds are now offshore and can be invested tax free, and your tax liability has been reduced or eliminated.

How does the client establish an offshore TPOS? 
The first step is to select a name for the IBC and foundation. The client may choose a "shelf" IBC or foundation, we have a list of (pre-existing IBC's and foundations that we have established with our nominee directors, yet they have not been assigned to any client), or the client can make up a name for the IBC and foundation. These names are indicated on the structure application. The application is sent to us by fax, then the actual signed copies are sent by airmail or courier. A photocopy of the clients' passport or photo ID is required and US$3,999 payment for the TPOS can be sent by wire transfer.

The US$3,999 is inclusive of the following:

  • Panamanian Foundation: Formation/Administration/1st Year Fees. 

  • Offshore IBC: same. 

  • Opening of the corporate bank account. 

  • Issue of the Debit or Credit Card (exclusive of the security deposit). 

  • Implementation of the Re-Invoicing Scenario (If Required).

The annual maintenance fees (2nd and subsequent years) are US$2,000.

If the client wants the re-invoicing scenario to be activated, we'll charge a 2% commission on all funds channeled from our structure.

How does a client place trades for investments? 
You can open an on-line trading account. As you invest and have capital gains, the IBC is not required to pay tax on those gains (only on dividends paid, which are automatically deducted before you sell the security).

Why do we recommend the Panama IBC over other offshore jurisdictions? 
There are many reasons why we recommend a Panamanian corporation:

    (1) Panama has the strictest banking and financial secrecy laws in the world, therefore providing legal protection to your assets and your identity through the confidentiality of business and banking transactions. Most other offshore jurisdictions, including the Bahamas, have vowed down to new legislation the U.K. has passed which has removed the bank secrecy laws in British colonies around the globe.

    (2) Panama is one of the world's largest banking centers in the world with banks from all over the world. Panama makes it easy to move funds in and out of the country because it offers very relaxed laws on currency movement from one bank to another via wire or other means (basically absence of regulatory supervision).

    (3) Complete anonymity afforded to owners of Panamanian Corporations through the use of bearer shares of stock.

    (4) The tax exemption status provided to offshore companies. Panamanian law does not require offshore corporations to pay tax on accumulation of assets through business transacted outside of Panama.

    (5) The freedom to appoint nominee directors, officers and council (which can be provided by our "Nominee Directors Service").

    (6) The freedom to appoint directors and officers of any nationality and country of residence.

We offer corporations in many jurisdictions (St.Vincent, Channel Islands, British Virgin Islands, Nevis, and several others), although we normally recommend jurisdictions that offer complete banking transaction secrecy laws. Panama is the most recommended. Also, Panama's currency is the U.S. Dollar, and Panama is the world's largest banking center and free trade zone in Central/South America. Because the large free trade zone is located here, it is very common for businesses to send large amounts of money in and out of the country as well as invoice and re-invoice other companies all over the globe for services rendered or import/export activities thus, there are very few money transfer restrictions by the government or banking community. Hence, we consider Panama an ideal location for our clients to transact offshore business.

This should give you a better understanding of how offshore structuring works. If you have any questions, feel free to Contact us .

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Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, it does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any errors or omissions.

Please go to our Uses of offshore Companies Page where you will find interesting information on the benefits of using offshore companies and trusts for business and personal use, links to information on other locations and details of our products and services.



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