Offshore Basics a Z FINAL

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Offshore Basics

A to ZFrom Annuities to

Zogby Expatration Data,

Here is Your Guide to Investing, Living,

Working and Emigrating Overseas

Robert E. Bauman JD

Special Report


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The Freedom Alliance

98 S.E. 6th Avenue, Suite 2 Delray Beach, FL 33483 USA USA Toll Free Tel: (888) 358-8125 Email: info@

sovereignsociety.com Website: www.sovereignsociety.com

Copyright 2010 Sovereign Offshore Services LLC. dba The Sovereign Society

All international and domestic rights reserved, protected by copyright laws of the United States and international

treaties. No part of this publication may be reproduced in any form, printed or electronic or on the worldwide web,

without written permission from the publisher, Sovereign Offshore Services, LLC. 98 SE 6th Ave., Suite 2, Delray

Beach, FL 33483.

Notice: This publication is designed to provide accurate and authoritative information in regard to the subject matter

covered. It is sold and distributed with the understanding that the authors, publisher and seller are not engaged in

rendering legal, accounting or other professional advice or service. If legal or other expert assistance is required,

the services of a competent professional advisor should be sought.

The information and recommendations contained in this brochure have been compiled from sources considered

reliable. Employees, ofcers and directors of The Sovereign Society do not receive fees or commissions for any

recommendations of services or products in this brochure. Investment and other recommendations carry inherent

risks. As no investment recommendation can be guaranteed, the Society takes no responsibility for any loss or

inconvenience if one chooses to accept them.

The Sovereign Society advocates full compliance with applicable tax and nancial reporting laws. U.S. law requires

income taxes to be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or havea residence. Each U.S. person who has a nancial interest in, or signature authority over bank, securities, or other

nancial accounts in a foreign country that exceeds $10,000 in aggregate value, must report that fact on his or her

federal income tax return. An additional report must be led by June 30th of each year on an information return

(Form TDF 90 22.1) with the U.S. Treasury. Willful non compliance may result in criminal prosecution. You should

consult a qualied attorney or accountant to insure that you know, understand and comply with these and any other

reporting requirements.

About the Author: Robert E. Bauman, JD

Mr. Bauman, legal counsel to The Sovereign Society, served as a member of the U.S. House of Representatives

from 1973 to 1981. He is an author and lecturer on many aspects of wealth protection. A member of the District

of Columbia Bar, he received his juris doctor degree from the Law Center of Georgetown University (1964) anda degree in international relations from the Georgetown University School of Foreign Service (1959). He was

honored with GUs Distinguished Alumni Award in 1975. He is the author of The Gentleman from Maryland

(Hearst Book Publishing, 1985), and of the following publications of the Sovereign Society: The Complete Guide

to Offshore Residency, Dual Citizenship & Second Passports(7th ed. 2009), Where to Stash Your Cash Legally:

Offshore Financial Centers of the World(4th ed. 2009), Swiss Money Secrets(2008),Panama Money Secrets (2005),

Forbidden Knowledge(2010), and The Offshore Money Manual (Society, 2000). He also served for nine years as

founding editor of The Sovereign Society Offshore A-Letter, an Internet e-letter received daily by more than 250,000

readers worldwide. His writings have appeared in The Wall Street Journal, theNew York Times,National Reviewand

many other publications.


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Offshore Basics A to Z

Table of ContentsIntroduction

Part I: A World of Choice & OpportunityPart II: Benefits from Offshore Wealth

Part III: Business Benefits Offshore

Part IV: Benefits of International Living

Part V: Dual Citizenships, Second Passports, Expatriation


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INRODUCIONWhy go offshore? The No. 1 reason: Not just because you can, but because you must.

As big government exes its regulatory muscle, offshore investing is one of the last remaining

ways for smart investors to legitimately safeguard their wealth.

At a time when the United States is juggling two wars, a nancial collapse tantamount only to

that of 1929 and a ballooning national debt, you can bet Uncle Sam is desperate for tax revenue.

To make up the difference, the U.S. government now conveniently more aware of the tax

revenue allegedly lost to offshore investing has imposed restrictive tax laws that close loopholes

and increase income-reporting requirements for its citizens living both at home and abroad!

Can you sense the urgency? Regulators are hounding U.S. citizens and residents, trying to make

it illegal for investors who use offshore entities to evade U.S. federal income taxes.

But dont let that deter you from investing offshore! In fact, now more than ever, its important

to go offshore with your money. There are simply too many new global centers of wealth and

power to be ignored. And really, it makes good business sense.

Your hard-earned wealth is at risk and if you want to keep Big Brothers regulatory paws at

bay, you must act quickly.

Thats why my research team and I, together with The Sovereign Society, have assembled this

new report series Bob Baumans Offshore Condemtial. In the coming months, you will learnhow to legally circumvent restrictive tax laws and regulations in order to fully protect your assets

offshore.

The opportunities are bountiful especially if you understand the ins and outs of (legal)

offshore banking, investing and living.

Sure, weve all heard of questionable nancial practices taking place offshore. And your trusted

Sovereign Society experts have spent their careers researching, visiting, evaluating and, in turn,

recommending only the most-reputable asset managers, attorneys, trust ofcers, bankers and

brokers in the most-accessible and privacy-respecting countries around the world.

Rest assured, the vast majority of offshore nancial activity is fully legal. In fact, depending on

your personal situation, offshore banking, investing and currency trading can offer benets that

are only available beyond the borders of your home country.

So why go offshore nancially? There are a lot of reasons, but heres a rundown of the more

popular ones:


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Taxes: Tax havens the new politically correct phrase is offshore nancial centers are

jurisdictions that offer tax incentives to foreign investors. Some are independent countries while

others are colonial territories, principally of the United Kingdom.

Favorable tax rates in an offshore jurisdiction are designed to promote a healthy investment

environment that attracts outside wealth. For a tiny country with very few resources and a smallpopulation, bringing in foreign investors can dramatically increase economic activity.

And these benets dont extend solely to individuals. Many foreigners also enjoy tax-exempt

status when they form a legal entity, such as an asset protection trust, private interest foundation,

limited liability company or an international business corporation.

Such entities shield investors from incurring the higher tax rates of their home countries.

Additionally, investors can transfer assets from their personal estates to the offshore entity safely,

without worrying about asset seizures or other domestic nancial troubles.

Privacy:Many offshore jurisdictions have long standing nancial secrecy laws, along with strictcorporate and banking condentiality. Whats more, they are not subject to the laws that may

apply in the investors home country.

Diversication:It is wise to spread your investments among diverse domestic sources. But it is

equally smart to diversify offshore where investment options are even greater. Management of

offshore bank and investment accounts can be considerably more exible, increasing investor

access to protable international markets and major stock and currency exchanges.

In this special report, well take a closer look at the many advantages and some disadvantages

associated with offshore investing and asset protection. Use my decades of experiences to

assist you in deciding whether offshore investing is right for you. The answers may surprise you!

Robert E. Bauman, JD

The Sovereign Society

A former member of the U.S. House of Representatives from Maryland, Robert Bauman is a

senior writer and legal counsel for The Sovereign Society.


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Part I: A World Of Choice and Opportunity

More than 90% of the people in the world spend their entire lives in a home country or (as the

political scientists call it) their nation-state.

From cradle to grave, these people are rmly rooted in their home country as thoughno alternative exists. They are reared, educated and employed there. Most are loyal to the

government and pay their taxes on time. They start families, operate businesses, invest money

and retire there until, ultimately, the cycle comes full circle and they are laid to rest.

These unquestioning folks unconsciously anchor every aspect of their lives to the nation-state in

which random fate by birth has placed them. You may say this is understandable; automatic even.

However, when you remain a slave to that which is automatic what is expected and orthodox

you close yourself off from a world of opportunities that could benet every aspect of your

life.

Opportunities that, if taken, will:

Positively impact your prosperity and wealth.

Enable you to increase your familys security and well-being.

Reduce and even eradicate your exposure to punitive taxes.

Free your business to prot and grow.

Greatly reduce your cost of living enabling you to live very well (perhaps even better) on less

Nothing But Te ruth About Offshore

B ut you cannot enjoy such benets by staying put because these opportunities are not available

to you in the country you call home. To access and take advantage of these possibilities, you

must look beyond your home countrys borders you must go offshore.

In spite of what you may have heard, offshore is not the dirty word you may imagine. Rather,

it stands for a world of opportunity and choice.

Investing offshore (and in plain sight) can bring you incredible peace of mind particularly

when you do it the right way and on the up-and-up so Big Brother doesnt unleash the

bloodhounds.

Unfortunately, many of the most popular misconceptions surrounding offshore investing are

perpetuated by the ofcial tax collectors of every major government, including the U.S. Internal

Revenue Service (IRS), and in the U.K. by Her Majestys Revenue and Customs.


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The tax collectors even have their own taxpayer-nanced propaganda arm, the Paris-based

Organization for Economic Cooperation and Community Development (OECD). And these

taxmen themselves are aided by the leftist media, journalists and pot-boiler ction writers

people who sell offshore sensationalism, not facts.

For years, the IRS and big spending leftist U.S. politicians hungry for even more tax revenues have delivered reason after reason as to why they claim its wrong and immoral for Americans

to go offshore nancially.

Tax-free jurisdictions, in particular, are often at the focus of these irrational attacks.

It began with the (now failed) war on drugs excuse, since drug kingpins were alleged to be

hiding millions offshore. No proof was offered. Then, after the Sept. 11, 2001, terror attacks, the

terrorists cash was said to be hidden offshore a claim that was later disproved . Next, it was

the Enron scandal, the Parmalat bankruptcy, the Liechtenstein bank records theft and even the

Bernie Madoff swindle.

Unfortunately, too many people get their world view from these prejudiced distorters; thus, the

common perception of offshore has been unjustly tainted by rumors, exaggeration, lies, and

misrepresentation.

In reality, the truth about offshore is very different. But rst lets dene the word. Its not just a

place that can be seen from a beach.

Offshore is any place outside the borders of your home country.

If you live in England, the United States of America is offshore. So is Switzerland, Austria,

Panama or Singapore. Live in the U.S. and the U.K., and the Channel Islands and the Isle of Man

are offshore, too.

None of these offshore jurisdictions resemble the distorted pictures painted by the IRS and the

sympathetic leftist news media. In truth, if you bank or do business in these places, or many

others like them, your activity will not only be legitimate and legal -- but probably far more

protable than had you stayed at home.

And Yes! Its Legal!

As of this writing, it is legal for U.S. persons to:

Have and use an offshore bank account.

Invest offshore in stocks, bonds and other investment properties.

Create and donate assets to an offshore asset protection trust or family foundation.


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Form and operate an international business corporation (IBC).

Purchase offshore life insurance and annuities that allow deferred taxes.

Invest in offshore mutual and hedge funds, precious metals and real estate.

Acquire dual citizenship and a second passport.

End U.S. citizenship voluntarily and thus remove oneself from the U.S. tax system.

With the strangulation of nancial and personal freedom in the United States and other nations,

the truth is that now is the time for offshore wealth preservation and prudent asset protection

planning.

That means the transfer of at least some cash and assets into the hands of offshore asset managers

in jurisdictions that have established histories of sound management of investments and

currencies.

Manage Your Life as You Do Your Investments

Prudent investors spread their bets across a diverse portfolio of different types of funds, equities,

bonds and currencies. This approach ensures that if the value of one investment slips, the rest of

the portfolio averages and offsets the loss.

Viewing offshore planning with a portfolio approach can deliver similar benets and protection

for you and your assets.

If your personal and nancial life is not invested totally in only one nation, dependent on only

one set of laws, ruled by only one set of conditions and circumstances, you have gained the

broad power and exibility to pick and choose available gains while keeping your losses to a

minimum.

This approach means spreading your activities across two or more jurisdictions and governments.

This allows you to minimize damaging impacts. And it lets you nd and enjoy the lowest taxes

and greatest freedoms governments can deliver.

But this may also mean removing yourself from your home governments negative inuence and

control to the greatest extent legally possible which you have a legal right to do.

A Word on Patriotism

In 1775, the British sage, Samuel Johnson, gave the world a memorable aphorism:

Patriotism is the last refuge for scoundrels.


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I want to make something perfectly clear: It is not unpatriotic to create a nancial relationship in

another country based on your own personal needs.

In this age of globalism, millions of people from all over the world are voting with their feet

that is, not only doing business offshore but choosing to make their home in a country otherthan their place of birth.

There is no ofcial count of Americans living offshore, but even if the U.S. government is not

counting, others are. Estimates made by organizations such as the Association of Americans

Resident Overseas put the 2008 number of non-government-employed Americans living abroad

anywhere between 4 million to 7 million, a range whose low end was based loosely on a 1999

government trial count.

If the data collected in seven Zogby Polls conducted between 2005 and 2008 are fairly

representative of the last decade, then at least 3 million U.S. citizens each year are moving

offshore.

More interestingly, the largest number of relocating households is not those with people in or

approaching retirement age but those with adults ranging from 25 to 34 years old.

Wealthy Americans also are leaving in increasing numbers, and many of them are choosing the

only way out from under the U.S. tax system: Expatriation or formally ending their U.S.

citizenship.

Theres more to say on that, but rst, its important to truly understand the benets the offshore

world has to offer.


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Part II: Benefits Of Offshore Wealth

The Sovereign Societys founders and members believe that individuals are born sovereign, not

as chattels of governments.

Sovereign individuals share the conviction that peace and prosperity will be optimized when everyindividuals property is rightfully his or hers to keep, control, and dispose of as each sees t.

We believe that individual liberty is the highest good for any society. The goal of The Sovereign

Society is to encourage and help individuals achieve and maintain individual sovereignty over

their own lives and assets.

We also believe that those who try to separate and distinguish property rights from human

rights commit a fundamental error property rights are among the most important of all

human rights. Every human needs material goods to exist and prosper. Persons and their families

cannot live without the means to sustain life.

We all have the right to supply our needs by using what we earn and own our Lives,

Liberties and Estates, as John Locke put it free from the disturbance of others. We believe,

as did St. Thomas Aquinas and Aristotle before him, that the Natural Law recognizes in every

person this right to property.

Reliable ests

Because we owe a duty to our members and readers, over the past 13 years we at The Sovereign

Society have devised reliable tests to evaluate offshore jurisdictions and their acceptability.

Among the factors we consider concerning a tax haven or offshore nancial center (as they

now prefer to be called) are:

The degree of guaranteed freedoms.

Government and political stability.

The fairness of the judicial system.

The availability of legal entities such as trusts, nancial privacy laws and a regime of low-to-

no taxes.

All of the other factors become meaningless, however, if the government of the country in

question lacks stability or worse, is openly hostile to free-market economics -- suppressing

the freedoms of their own people and especially of foreigners who live or do business there.

Remember, all tax havens are not nations. Many are colonies or territorial possessions of other

nations like Bermuda, which is a partial self-governing overseas territory (colony) of the United

Kingdom. The Cayman Islands and the British Virgin Islands bear the same status.


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6 Good Reasons to Go Offshore

In one of my popular books, Where to Stash Your Cash Legally: Offshore Havens of the World

(2010), I explained the reasons for going offshore:

1. Investment diversication. Today, many of the worlds best investors and money managerswill not do business with U.S. citizens directly. They have made the choice that it is easier

to do business with the rest of the world than to comply with the draconian rules of the U.S.

government.

By going offshore you can gain access to these U.S.-restricted investments. Less than 2,000

foreign securities are traded on U.S. markets, representing a tiny percentage of the securities

traded on other world markets. The only practical way to buy these offshore shares is through a

foreign bank or broker.

2. Higher returns.There are opportunities in the traditional nancial markets, such as offshore

mutual funds and London-traded investment trusts that generate much higher returns than are

generally available in U.S. markets.

3. Currency diversication.Investors who want to stabilize portfolios can protect their wealth

against the falling U.S. dollar by simply holding other currencies (such as the Japanese yen or

Swiss franc). While U.S. investors can purchase foreign currencies through a few U.S. banks,

offshore banks generally offer higher yields, lower fees and lower minimums.

Foreign currency opportunities are plentiful like earning nearly 13% on the declining U.S.

dollar versus the euro in one recent year. For decades, the U.S. dollar has been losing value vis-

-vis stronger currencies. In 1970, a single U.S. dollar would purchase 4.5 Swiss francs. Since1971, the franc has appreciated nearly 330% against the U.S. dollar.

4. Safety and security.Twenty years ago, the United States experienced a wave of bank and

savings-and-loans failures at a rate unmatched since the Great Depression. From 2008 to 2010,

a government-prompted U.S. housing crisis, subprime mortgages and unregulated derivative

investments combined to produce another American banking crisis unparalleled since the Great

Depression of the 1930s. Trillions of taxpayer dollars were required to bail out several major

U.S. banks and insurance giant, AIG. As of this writing, the end is not yet in sight.

In contrast, the offshore banks recommended by The Sovereign Society did not require hefty

bailout packages because they were not (and are not) exposed to risky investments such assubprime mortgages, Third World debt and highly leveraged derivative investments. Indeed,

we take pride in the fact that for a decade we have warned against using certain offshore banks,

specically UBS of Switzerland and others like it.

Our recommended offshore banks are well-capitalized and conservatively managed and they

welcome American clients at a time when many offshore banks do not.


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5. Asset protection.Lawsuits have reached epidemic proportions in America and are edging up in the

United Kingdom. If a creditor gets a judgment against you in the state where you live, that judgment

may be easily enforced. In contrast, if you invest or bank in a suitable jurisdiction Switzerland, for

instance your cash and assets can be congured so theyre essentially judgment-proof.

The prudent use of offshore havens provides U.S. persons with a greatly enhanced ability toprotect assets from the threat of lawsuits, civil forfeiture, business failure, divorce, domestic or

foreign exchange controls, repressive legislation, lengthy probate and political instability.

Going offshore also helps to slip under the radar of the U.S.s vast asset-tracking network,

which permits private or ofcial investigators to easily identify the unencumbered assets of a

potential defendant.

6. Financial privacy.Many people want protection from the prying eyes of business partners,

estranged family members and identity thieves surng the Internet. And nancial privacy can be

the best protection against frivolous lawsuits that end with big judgments if you dont appear

to have enough assets to justify the time and expense of an attack in the mind of a plaintiffsattorney, you wont be seen as an easy target. Simply put, assets stored offshore are off the

domestic asset-tracking radar.

The United States is one of the few nations lacking a federal law that protects bank or securities

accounts from disclosure except under dened circumstances. Many disclosures that would

be illegal in other countries under international agreements (such as the European Privacy

Directive) or national laws that guarantee nancial secrecy (as in Switzerland or Panama) are

commonplace in the United States.

Nation-States as Service Providers

When considering offshore opportunities, my advice is to examine countries as you would a

prospective service provider. Be objective and judge in the same way you would any potential

commercial deal, personal service, or investment. Consider these factors before making a decision:

What exactly does the government offer or, even better, guarantee you?

What are the terms and conditions (i.e., laws) that govern doing business there?

What benets will you receive in return for investing there?

Does the government offer tax exemptions for offshore income and local offshore business

operations? This last factor is a must.

A suitable offshore jurisdiction should:

Be politically and economically stable;1.

Impose neither currency nor exchange controls;2.


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Have consistent low- to no-tax policies;3.

Levy no taxes or other charges on foreign capital;4.

Have in place favorable, modern trust laws;5.

Provide statutory nancial privacy guarantees;6.

Have an experienced professional and service community;7.

Have an established, modern banking system;8.

Maintain a fair and honest legal and judicial system;9.

Have a government sympathetic to offshore business;10.

Be geographically suitable and compatible;11.

Be part of the modern Internet and telecommunications system.12.

Offshore Banking: A First Step

The rst step in adding an offshore dimension to your nancial affairs is to open a bank or an

investment account in a country outside your home nations borders.

For most of the 20th century, offshore banking was the preserve of the super-rich because the

fees and legal costs were so high.

Today, in spite of ofcial government policies that try to discourage offshore banking, offshore

banks and their services are accessible and affordable to even those of relatively modest means.

Now, after dramatic changes in international banking and communications, even a modest

offshore account can be your quick, inexpensive entry into the world of foreign investment

opportunities.

A foreign bank account can be employed as an integral tool in an aggressive, two-pronged offshore

wealth strategy. The rst goal is to increase your asset value by cutting taxes and maximizing

prots. The second goal is to build a strong defensive asset protection structure. As I will show you

in these pages, the possible variations on these important themes are nearly endless.

Offshore banking is big business worldwide. Recent estimates calculate that US$3 trillion to

US$5 trillion is stashed in nearly 40 offshore banking havens that impose no or low taxes, have

less onerous regulations, guarantee privacy and cater to nonresidents. One-third of the entire

worlds private wealth is stashed in Switzerland alone!

Your offshore bank account is not just a place for safekeeping cash. One of the great advantages

of an offshore bank account is the ability to trade freely and invest in foreign-issued stocks,

bonds, mutual funds and national currencies that are not available in your home country.


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If need be, set up your own trust or foundation in the nation where you choose to locate your

offshore banking or in another tax haven nation. Even if you use this route, banks will ask you

to certify who the benecial owners of the legal entity really is, even though this may not be a

matter of public record.

Yet another way to obtain banking privacy is to get lost in a crowd.

Why not establish your offshore account in a major banking nation where privacy is better

protected than in the U.S.? A good choice might be the United Kingdom or Switzerland. Such

nations have highly respected private banks. IRS ofcials are less suspicious of accounts held in

these established institutions.

You might choose a country where you have family ties, or one with an active international

nancial role, such as Hong Kong, Singapore, or Austria. In London or Vienna, your bank

dealings will not be deemed especially noteworthy, since thousands of Americans hold accounts

in these places.

If you create your own privacy haven out in the open, instead of going to a small bank in some

exotic, far-ung locale, your money and your privacy usually will be much more secure.

Let us make clear that banking secrecy does exist in many reputable jurisdictions. Tax havens

such as Switzerland, Panama, Nevis, Belize, Andorra, Singapore and Monaco ofcially allow

banking privacy by law, waiving this protection in criminal situations and usually only under

court order.

Unlike the U.S. where bank employees have been turned into surrogate government spies, many

offshore nations impose nes and prison sentences on bank employees who violate the privacy of

account holders.

Absolute Bank Secrecy No More

But you should put one notion to rest right now there is no such thing as a totally secret

bank account anywhere in the world. Even in nations with the strongest bank privacy laws such

as Austria, a bank account holders true name is on record somewhere in that institutions les.

Even if the account is in a corporate name, or the name of a trust or other legal entity, theres

always a paper (or computer) trail to be traced, especially if government agents want to knowabout alleged criminals and their nances.

All offshore banking jurisdictions now have multiple tax information exchange treaties (TIEAs)

with the United States and with many other nations. These agreements allow the offshore

jurisdiction to share tax information with the U.S. or other governments upon a showing of

probable cause that a tax violation may have occurred in the case of an account holder who is

from the requesting country.


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The fusion of German, French and Italian ingredients has formed a robust national culture, and

the countrys alpine landscapes have enough zing to reinvigorate the most jaded traveler. Goethe

summed it up best: Switzerland is a combination of the colossal and the well-ordered. You can

be sure that your trains, letters and banking will be on time.

The tidy, just-so precision of Swiss towns is tempered by the lofty splendor of the landscapes thatsurround them. Theres a lot more here than just trillions of dollars and euros.

2) Panama: Privacy and Prots Offshore

We also recommend Panama as one of the best tax, asset protection and residential havens in the

world.

Only hours by air from the United States, Panama has a century-long history of working closely

with Americans. Panamas real estate boom has cooled, but the multibillion-dollar expansion of

the Panama Canal can only increase economic growth. In many ways, Panama has it all.

Panama combines maximum nancial privacy, a long history of judicial enforcement of asset-

protection-friendly laws, a strong anti-money-laundering law, plus tax exemptions for foreigners.

Thanks to its unique historic and often-contentious relationship with the United States, it

also exercises a high degree of independence from outside pressures, including those from

Washington.

3) Liechtenstein: Worlds Oldest Tax Haven

The very private people here want things low-key. Yet foreigners in the know realize this is

a nancial powerhouse among nations. A constitutional monarchy that has graced the map of

Europe since 1719, Lichtenstein has transformed itself into a world-class tax and asset protection

haven in the last 60 years.

It is here that the worlds truly wealthy quietly do business, and for good reasons. Liechtenstein

still boasts some of the worlds strongest banking secrecy and nancial privacy laws, the

OECD notwithstanding. Plus, it offers world banking and direct investment access through its

cooperative neighbor, Switzerland, and an array of specialized legal structures.

4) Hong Kong: Special Administrative Region of the Peoples Republic of China

Hong Kong remains one of the freest economies in the world. It is also Asias major offshorenancial center with strong common law-based laws governing banking and nance, even

though it is controlled, ultimately, by a Communist government in Beijing.

Beijings rule began in 1997 and has imposed restrictions. But on balance, semi-democratic

Hong Kong remains relatively free a reection of the Beijing governments need for this

historic city-state as a nancial powerhouse and gateway for business with the world.


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If youre doing business in China (or anywhere in Asia), you should consider Hong Kong as your

base of operations, a place to obtain nancing, do your banking, and to create the corporate or

trust entities you may need to succeed in a very tough market.

5) Austrian Republic

Austria is not a haven in the sense of low taxes, but it is a banking haven. Thats because

this nation has one of the strongest nancial privacy laws in the world a guarantee that is

constitutionally protected and can only be changed by a national referendum of all voters. Austria

also offers low-tax residency to a select set of the foreign wealthy who qualify.

Even with its agreement to share tax information using the OECD standard, Austrias nancial

and banking privacy laws provide great security. As a result, its wise to keep Austria near the

top of your potential banking list, especially if your major area of business interest is in Eastern

Europe and Russia.

Offshore Investment Opportunities

In spite of this latest global recession, some of the most protable investments to be made are

found offshore.

As of this writing, there are approximately 1,500 offshore emerging-market investment funds

that manage over US$200 billion in equities. Add to that gure the billions denominated in other

offshore nancial instruments, and the sum total is overwhelming.

International and emerging nation mutual funds offer a simple way for American investors to

prot from the growth of foreign companies. Such funds eliminate the inconvenience associated

with direct ownership of foreign shares.

American investors can also prot from American Depository Receipts, or ADRs. These are

listed securities traded on U.S. stock exchanges. ADRs represent shares of a foreign stock and

are issued by U.S. banks that take possession of the securities. The banks convert dividend

payments into dollars and deduct any foreign withholding taxes. ADRs give investors a greater

guarantee of safety, as participating foreign companies have to meet certain U.S. Securities and

Exchange Commission (SEC) accounting and disclosure standards.

Over the past 20 years, capital markets outside the U.S. have grown rapidly in size andimportance. In 1970, non-U.S. stocks accounted for 32% of the worlds US$935 billion total

market capitalization. By 2009, foreign stocks represented over 65% of the total value of world

stock market capitalization of US$15 trillion-plus.

Until the 2008 recession, top U.S. stocks performed well over the years, but international stock

markets historically have outperformed Wall Street as a whole. The rapid growth of capital

markets around the world has also created abundant opportunities for xed income investors.


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Worldwide bond market capitalization now exceeds worldwide equity capitalization. Non-U.S.

bonds account for more than half of the worlds bond market value. Non-American investors

have realized the enormous prot potential of cross-border investment.

Offshore rusts for Asset ProtectionOne of the very best methods for asset protection is an asset protection trust (APT) located in an

offshore jurisdiction.

A trust is a formal legal arrangement voluntarily created and funded by a person (thegrantor)

that directs another person (the trustee) to take legal title and control of the grantors donated

property, to be used and managed for the benet of one or more other persons the grantor

designates (the beneciaries).

The beneciary of a trust receives income or distributions of assets from the trust and has

an enforceable equitable title to the benets, but does not control trust assets or managetrust operations. An offshore asset protection trust may also include another party to trust

operation theprotector, a person vested with certain powers to monitor the performance

of the trustee.

In recent decades, asset protection using the trust format as a vehicle has gained wide popularity

among people of wealth who are in the know.

The foreign APT is a targeted form of trust created by a grantor resident in one nation under the

statutes of another nation where the trust operations are based. Because the trust is governed

by the laws of the nation in which it is registered or administered, it serves as a shield for the

grantors business and personal assets deecting would-be creditors, litigation, and potential

nancial liabilities, perhaps even an ex-spouse bent on revenge.

Traditionally, the cost of creating a highly complex asset protection trust in a foreign nation has

exceeded US$15,000, plus several thousand dollars in annual maintenance fees. Unless the total

assets to be shielded justify such costs, a foreign APT may not be practical.

A few years ago, BusinessWeek estimated that as a rule of thumb you should have a net worth

of around $500,000 or more in order to justify a foreign asset protection trust. The magazine

cited experts fees for establishing and administering such trusts running as high as US$50,000,

with some demanding a percentage of the total value of assets to be transferred.

While high cost once may have been the rule, the APT costs have changed for the better. These

days, offshore trusts are not just for the very rich. The Sovereign Society has done the research

and recommends several domestic U.S. and offshore asset protection trust providers with

lower costs.


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Offshore Variable Annuities & Life Insurance

Even though the U.S., the U.K., and the European Union continue to tighten tax and nancial

reporting laws on wealth, there still remain protable yet strictly legal ways to protect and invest

assets. One of these is the offshore variable annuity.

This is one of the easiest, least expensive methods to invest in offshore funds. Moreover, you

obtain deferral of taxes until funds are actually withdrawn.

Another advantage your annuity investments can be transferred from one fund manager to

another with no immediate tax consequences. Plus, you achieve signicant asset protection.

According to The Wall Street Journal, Offshore annuities are becoming an investment vehicle of

choice for those who have oodles of money they want to shelter from taxes.

Offshore variable annuity investments typically start around US$250,000, commonly exceeding

US$1 million or more. In contrast, the average domestic U.S. annuity buyers initial investment

is US$25,000 or less pocket change, by comparison. The primary objectives in purchasing

insurance offshore are asset protection, greater wealth accumulation and access to international

investment opportunities.

Because they are located offshore and away from restrictive U.S. laws, foreign insurance

companies can be exible in negotiating fees. But keep in mind that, unless eliminated by a tax

treaty, a one-time 1% federal U.S. excise tax is levied on all life insurance and annuity contracts

issued to U.S. persons by foreign insurers.

Foreign or domestic, a variable annuity is a contract, usually denominated in U.S. dollars,

between you and an insurance company that provides tax-deferred savings. To the extent that thefunds you withdraw from a variable annuity represent deferred income, they are taxed at ordinary

U.S. income tax rates.

A loan against a variable annuity from the issuing insurance company to the owner, or a third

party loan secured by a pledge of the annuity, is a taxable distribution. Certain unsecured loans,

however, may be tax-free. Also, borrowing against an annuity when it is purchased is not taxable

since no deferred income has accumulated.

Offshore life insurance provides these four key benets: 1) tax free build up of cash value,

including dividends, interest, and capital gains; 2) tax-free borrowing against cash value; 3) tax-

free receipt of the death benet; and 4) freedom from estate and generation-skipping taxes. Thesebenets are available in any life insurance policy designed to comply with U.S. tax laws.

Offshore life insurance remains one of few remaining opportunities for offshore estate tax

planning combined with asset protection and tax deferral. And, without major changes in U.S.

federal laws, these advantages will remain for the foreseeable future.


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One of the main advantages of an IBC is that it can be used to pay legitimate business expenses

and it can also be used to plough back prots to be used for business. So long as these prots

are used for business purposes, this avoids most immediate U.S. income tax liabilities. But even

undistributed corporate income may be taxable to the IBC owner.

Certain tax havens, such as Panama, Hong Kongand the British Virgin Islandsmake itattractive to incorporate there, specializing in incorporation and corporate-friendly laws. When

selecting a place to incorporate, consider:

Legal and political attitudes of the jurisdiction toward commercial activities.

Corporate laws that facilitate incorporation and continuing management.

The level and speed of obtainable services.

The cost, both initially and for annual maintenance.

All IBC-friendly jurisdictions have at least two requirements: l) maintaining an agent for theservice of process; and 2) payment of an annual franchise fee or tax. One of the best tax haven

nations for IBC incorporation that I recommend is Panama.


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Part IV: Te Benefits Of Living Abroad

For those of you who chose to leave home and live in foreign country, places that qualify as tax

havens can provide better living and greater prots.

While you may eventually consider obtaining citizenship in the land of your choice, the rst stepis to ofcially qualify to become a resident approved by the government. (Keep in mind that once

you become a citizen of a country, you are no longer an exempt foreigner and become subject

to taxes and other laws.)

Even though U.S. persons (citizens and permanent residents) are taxed on their worldwide

income, there are many attractive places to live where taxes are reduced on business activities, or

where business may be totally tax-exempt if conducted offshore. These hospitable places exempt

foreigners who live there from taxes because they only levy taxes on income earned within their

borders, under what is known as a territorial tax system.

Many countries provide tax incentives to qualied foreigners who become new residents.

Qualications include a good health condition, no criminal record, guaranteed sufcient income

and enough assets so that a potential new resident wont need a job in the local market.

However, it isnt easy to nd a haven offering both low taxes and a high quality of life that

includes amenities such as excellent medical facilities, easy residence requirements and a warm

climate all within easy reach of major American or European cities.

But a few countries come fairly close to the ideal I described.

For instance, a foreigner living in Italy who receives a xed income from foreign bonds paysonly a at 12.5% tax. Inheritance taxes are at a very low 4% rate. A foreign resident who is

employed in Italy pays tax only on income earned within the country

The Mediterranean island nation of Malta is one of the most attractive locations for foreigners

looking for a warm climate, as well as low taxes. Permanent foreign residents enjoy a privileged

tax status, with only a 15% tax charged on income remitted from outside of Malta, subject to a

minimum tax liability of about US$5,000 per year. Although a residence permit entitles you to

live in Malta, you dont actually have to spend any minimum length of time there.

The Republic of Panamaoffers one of the most attractive locations for tax-advantaged

residence in the Americas. It has a special pensionado program for foreign retirees, providingtax-free living with substantial discounts on the price of many goods and services.

Under its territorial tax system, residents pay no tax on income earned outside Panama. Under

several different immigration programs tailored to attract them, foreigners may acquire residence

as a nancially independent person/retiree or as an investor.

The Central American country of Belizealso offers a special program for foreign retirees much


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like that in Panama, with zero taxes and other incentives. Uruguay is another country to consider

for low taxes and easy residence for foreigners.

For people of great wealth, Austria, Switzerland, and Singaporeare among the nations with

special immigration and tax arrangements for high-net-worth foreigners who wish to live or

retire there. There are countries in many parts of the world where individual arrangements can bemade for tax-advantaged residence.


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Part V: Dual Citizenship & Second Passports

Lets say you decide to establish your new residence in an offshore tax haven. You may want to

consider acquiring dual citizenship and, with it, a second passport.

Dual citizenship simply means that a person is ofcially recognized as a citizen of more than onenation. Under U.S. law this status is fully legal, and it is legal under the laws of many nations.

A second passport, quite literally, could save your life. In some cases a government may block

its citizens from traveling internationally. If it becomes necessary for you to leave and you have

only your home country passport, youre stuck. Thats because your passport is the property of

your government, and it can seize a passport at any time.

At the very least, having a dual nationality and a second passport is a hedge against unexpected

events. The dual status gives you the option of residing in another country away from home

where there may be tax advantages. But those tax advantages are of limited benet to U.S.

citizens who are taxed on worldwide income, without regard to where they physically reside.

You may be able to acquire a second nationality and passport based on your ancestry, by

marriage or because of your religious afliation. If you dont qualify on these grounds, your

principal option for obtaining citizenship is by establishing residence in your chosen country for

a required period of time (usually 5 years) or by obtaining citizenship by investment.

Citizenship by investment, also called economic citizenship, describes the granting of

citizenship by a sovereign country in exchange for a nancial contribution to that country or for

an investment in a business, real estate, or government-designated project in that country.

St. Christopher & Nevis and the Commonwealth of Dominica, both small island nations in the

eastern Caribbean (in an area formerly known as the British West Indies), are now the only two

countries that promote (sell) legal citizenship by investment programs. Both are fairly expensive,

but offer citizenship to the qualied within a matter of months.

In Austria it is also possible, under certain conditions, to obtain citizenship without prior

residence based on a substantial investment, but this is done on an individual basis and is rarely

granted. All of these programs require applicants to pass a rigorous screening process.

EXPARIAION: Te Ultimate Estate Plan

Expatriation has been called the ultimate estate plan. It is a legal, step-by-step process that can

lead to the legal right for a U.S. person (citizen or resident alien) to stop paying U.S. or other

national income taxes forever.

Consider the basic premise of American income tax law: While most other nations tax their


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citizens and residents only on the income earned within their territorial borders, U.S. tax law

using citizenship as the hook applies to income earned anywhere in the world, without regard

to where a U.S. person lives or the source of the income.

While a Canadian, an Englishman, or a Frenchman can escape most or all of their home country

taxes by moving to another country, American taxes follow U.S. persons wherever they go. Butthere is a legal way to escape these U.S. taxes formal expatriation.

If youre a citizen of almost any country other than the United States, its relatively easy legally

to avoid paying taxes. You just need to leave your country for an extended period, usually one

year or longer and establish residence elsewhere. After that time period, you no longer have to

pay tax on your income earned outside your country, although you may still have to pay gift and

estate taxes.

But if youre a U.S. citizen ending your obligation to pay U.S. taxes is much more complicated.

To avoid U.S. taxes legally you must a) leave the United States, and b) terminate your U.S.

citizenship and surrender your U.S. passport. (Before you do that, make sure to obtain a newcitizenship from your country of choice).

This unusual plan requires as a nal step toward tax freedom the formal relinquishment of

citizenship, a right which U.S. citizens are guaranteed by law. This is done by signing an ofcial

relinquishment form in a U.S. embassy or consulate in a foreign country.

Obviously expatriation requires professional consultations, careful planning, movement of assets

offshore, and acquisition of a second nationality. When thats done and done exactly right

you can leave behind your home country and become an expatriate with a new citizenship and an

established domicile in a low or no tax jurisdiction.

Here are some of the recommended steps to take:

Arrange affairs so that most or all income is derived from non-U.S. sources;

Title property ownership so that any assets that remain in the U.S. are exempt from U.S.

estate and gift taxes.

Move abroad and establish a new home (residence) in a no-tax foreign nation ending your

status as a resident for U.S. income tax purposes;

Obtain new alternative citizenship and passport;

Formally surrender U.S. citizenship and change your legal domicile to avoid U.S. estate

taxes.


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Action Summary

To protect your privacy and wealth, consider taking the following steps:

Establish an offshore bank account in a tax-free, privacy-oriented, nancial-friendly nation.1.

When done correctly, your cash will be secure from almost all U.S.-based claims. But rstcarefully investigate any foreign bank you consider using.

As part of your overall estate plan, create your own offshore asset-protection trust (APT),2.

Limited Liability Company or private family foundation to hold title to specic assets.

Precisely document all nancial transactions so that you always have ready proof that your3.

activities are legal.

Educate yourself about and comply with all laws, rules and regulations concerning the4.

reporting of your nancial activities to government agencies.

Before you act, consult an experienced professional attorney and/or accountant and nd out5.

the U.S. or other tax implications of your plans.

Get a rm and reliable estimate of the cost of what you are planning, both at the start, upon6.

implementation and for the rst few years of operation.

How o Safely Do Business Offshore

Theres some dispute as to whether the late circus and freak impresario P.T. Barnum ever did say,Theres a sucker born every minute.

Whether he did or didnt, the high degree of gullibility of many people calls into question how

widely the good Lord distributed common sense, especially when money is involved.

At various times Ive been asked whether a proposed offshore investment guaranteeing a 20%

monthly return is likely to be reliable. (Are you kidding?) Or whether an offshore bank with

nothing more than a Web page with no identied physical address and no human beings listed as

ofcers, is a good place to stash cash. (Puh-leez!)

When considering offshore investing, its important to do your homework and exercise duediligence in other words, the care that a prudent person might be expected to exercise in the

examination and evaluation of risks affecting a business transaction.

We at The Sovereign Society take due diligence very seriously. We have established procedures

for every person who wants to advertise in or write for our publications, or speak at our

conferences. We review proof of academic credentials, careers, group afliations, company

information (i.e. owners, ofcers), a current annual report, Web site address, physical address


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and location, publications, and very specic details of any proposal.

You would be surprised what you can nd out on the Internet alone. However, we go far beyond

that. We check out all these statements on extensive databases, including all U.S. and state civil

and criminal cases, Interpol for foreign cases, and other reliable sources.

Having access to some of the foremost experts in the eld of offshore banking, investing and

nance is just the beginning. Next, you must determine what types of services would best help

you meet your individual goals

When crafting your personal escape plan, you should:

Conduct your own due diligence.1. Dont rely on appearances, fancy ofces, nice suits and

power lunches. Youre seeing what others want you to see, and it could be a lie. You must

conduct your research into professional service providers and any proposed offshore nancial

activity.

Do comparison shopping2. . A careful comparison of competitors fees and the costs associated

with the involved services is an important step to take when making any major decision.

Obtain independent advice on any proposed legal structure or investment.3. Get competent

counsel that is responsible to you (and only you). Make sure that that counsel has the relevant

experience to realistically evaluate a deal.

Turn your back on tantalizing promises of easy prots.4. The best opportunities require hard

work, signicant risk and a lot of time to develop. Easy money and promoters that guarantee

unrealistic prots (more than 12%15% annually, or steady and consistent prots without

signicant variation in returns) are signs of a con and/or a potential crime.

Dont rely on secrecy.5. Dealing with an offshore promoter who claims that he can help you

hide money from tax authorities is an invitation to blackmail. The promoter knows that

if you break the law, youre unlikely to ask a court to help return your assets when they

disappear. The law is clear. It says that any U.S. person (citizen or resident alien) is liable for

annual income taxes on income earned anywhere in the world. Learn about and comply with

all U.S. IRS reporting requirements.

Diversify.6. Dont put all your eggs in one basket. Prudent investors diversify investments in

stocks, bonds, mutual funds, currencies, and precious metals. And they employ more thanone independent wealth adviser.

Stay informed.7. Hiring a rm offshore to build a legal structure or manage your wealth is only

the start. Youre always responsible for your own wealth, so keep up-to-date about nancial

and world events and keep an eye on those you employ. Theres no substitute for accurate

(and active) knowledge. While The Sovereign Society keeps you straight on tax and other

nancial matters, a good dose


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If its too good to be true, it probably isnt true.8. Believing and consistently applying this

truism is the most important precaution of all. Unrealistic prots, barely believable promises

or a vague feeling that youre being led on are all indications that whatever deal youre

being pitched is best avoided.

While The Sovereign Society keeps you straight on tax and other nancial matters, a gooddose of common sense is also helpful. In the last decade there has been a widespread offshore

cleanup, with an impressive tightening of laws and rules to protect against fraud.

This general move toward greater scrutiny of tax havens undoubtedly will give pause to some,

but it is unlikely to discourage those intelligent enough to understand and employ the real

advantages awaiting investors offshore.

And as for P.T. Barnum, no doubt there were a lot of people born the same minute as you. Let

them be the suckers while you come out on top with the nancial advice you glean from this

offshore report series.

Documents

Offshore Basics a Z FINAL