Using Offshore Tax Havens for Privacy & Profit

19 Jul

Self Directed IRAEditorial Review

Why invest abroad? Today, growing numbers of investors are convinced that the U.S. is no longer the land of safety or opportunity when it comes to investments. They recommend that you research the country to which you entrust your holdings as carefully as you do your broker, banker, bond ratings or any investment.

Using Offshore Tax Havens for Privacy & ProfitEach country has different regulations, taxes and exchange restrictions – as well as limitations on personal freedoms of speech, privacy and petition of grievances – that will affect your decision about where to put your earnings. In this updated and revised edition of Using Offshore Havens for Privacy and Profit, Adam Starchild brings you up to date on the changes that have occurred in the high-stakes world of international investments, outlines the pros and cons of popular offshore havens and shares invaluable insights earned through a lifetime of financial planning. Expand your investment opportunities by finding out what the world’s smartest investors have been doing all along.

Using Offshore Havens for Privacy & Profit: Revised and Updated Edition

About the Author

Adam Starchild is the author of more than a dozen books and hundreds of magazine articles on international business and finance.

A tax haven is a jurisdiction where particular taxes, such as an inheritance tax or income tax, are levied at a low rate or not at all. It may also refer to a state, country, or territory which maintains a system of financial secrecy, which enables foreign individuals to hide assets or income to avoid or reduce taxes in the home jurisdiction. Earnings from income generated from real estate (i.e. by renting property owned in an offshore jurisdiction) can also be eliminated in this way. If taxes (if any) are paid in the tax haven jurisdiction, companies can avoid taxes in their home jurisdiction because the tax had already been paid in the lower tax rate jurisdiction. Some taxes (such as inheritance tax on the real estate, VAT on the initial purchase price of the real estate, or transfer tax, annual immovable property taxes, and municipal real estate taxes) cannot be avoided or reduced, as these are levied by the country the real estate where the property is located, and hence need to be paid just the same as any other resident of that country. The only thing that can be done is picking a country that has the smallest rates on these taxes (or even no such taxes at all) before buying any real estate.

Individuals or corporate entities may establish shell subsidiaries or move themselves to areas with reduced or no taxation levels relative to typical international taxation. This creates a situation of tax competition among jurisdictions. Different jurisdictions may be havens for different types of taxes, and for different categories of people or companies. According to FBAR lawyer reports, sovereign jurisdictions or self-governing territories under international law have the power to enact tax laws affecting their territories, unless limited by previous international treaties.

A 2012 report by the British Tax Justice Network estimated that between US$21 trillion and $32 trillion is sheltered from taxes in unreported tax havens worldwide. If such wealth earns 3% annually and such capital gains were taxed at 30%, it would generate between $190 billion and $280 billion in tax revenues, more than any other tax shelter. If such hidden offshore assets are considered, many countries with governments nominally in debt are shown to be net creditor nations. However, despite being widely quoted, the methodology used in the calculations has been questioned, and the tax policy director of the Chartered Institute of Taxation also expressed skepticism over the accuracy of the figures. Another recent study estimated the amount of global offshore wealth at the smaller—but still sizable—figure of US$7.6 trillion. This estimate included financial assets only: “My method probably delivers a lower bound, in part because it only captures financial wealth and disregards real assets. After all, high-net-worth individuals can stash works of art, jewelry, and gold in ‘freeports,’ warehouses that serve as repositories for valuables—Geneva, Luxembourg, and Singapore all have them. High-net-worth individuals also own real estate in foreign countries.” A study of 60 large US companies found that they deposited $166 billion in offshore accounts during 2012, sheltering over 40% of their profits from U.S. taxes.

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