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
.
FIND/BUY RELATED BOOKS!
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.
