Evaluating Jurisdictions for a Corporation

[MatthewB]

I am a US Citizen and owner of a moderately successful IT services company. Given the political, social, and banking climate in the states I would like to move some of my net worth offshore. Opening an offshore corporation and "storing" funds in a company bank account seems a good solution. But I don't really intend to "do" any business with this corporation. The corporation would only exist to provide an additional layer of anonymity and protection from looters. Likely I would invest the funds in simple interest bearing investments such as deposit certificates, reforestation, etc. A fairly low rate of return is adequate for me, and would still be much higher than most conservative investments in the US.

In any event, I would very much value advice on what countries provide the best level of protections, banking stability, etc. for my use case. There are so many relevant details that comparing countries has proven challenging for me. Guidance would be welcome. My intention is to speak with 3-4 qualified professionals to make a final decision on the exact plan so I fully understand the value, complexity, etc. before committing to a course. After some discussion I may up my membership to get access to mentoring.

 

[ih8socialism]

Do you want to move the money before its officially taxed in the US or after taxation?

 

[boomy]

Do you want to move the money before its officially taxed in the US or after taxation?

what that be possible at all?

 

[MatthewB]

Hello iH8. No, these are funds that have already been taxed. My concern in the US is a wealth tax, which is becoming a very popular concept again. So I suppose I'm looking to ensure my retirement funds aren't double or triple taxed, or worse. One of our more left-leaning states has had such a tax on the ballot off and on for some time and each attempt it gets closer to approval. Insert heavy sigh here.

 

[MatthewB]

Boomy, it is my understanding that you could start an offshore corporation, earn income with it, and not pay income tax on those funds until repatriation. But I'm fairly certain that under FATCA rules you'd have to report it if you're a "US Person" which is a broad term to ensure we can tax anything that moves. I can't claim to be an expert on the topic though. My company operates world wide, but I claim my income in the US, and we move our financial assets into the US (though we do have offshore entities for payment purposes).

Amusingly, I'm a person that feels strongly one should pay their taxes. But even I have a point where "don't tread on me" becomes a feeling too. Here's hoping the US doesn't become socialist over the next few years.

 

[ih8socialism]

Totally understandable. I guess your best shot would be some Caribbean country, however the question remains how effective you can hide nowadays from FATAC and the US in general. I think its not an issue getting the money out of the US, since you already paid tax on it, however since the goverment knows already about it I'm not quite sure if you can hide it properly. And then another question pops up, if you put your money into a company, how do you plan to get it out?

Anywas, I am not very well experienced in the US tax law. Depending on the amount we are talking here it might be worth it to contact some good tax consultants.

 

[MatthewB]

I suppose I need to walk this through in my own mind, and I'll write it down hear in case some of my thoughts fall on the stoopid side. For lack of a chosen candidate, let's say I start a company in Belize. My assumption is the company is treated as a Belizean citizen, much like a US corporation. Thus it would have all of the privacy protections of any Belizean person with regard to the US. Meaning, the money is the corporations money, not my own. Unless of course I repatriate it, and even then only profits would be taxable. I could capitalize this corporation with, say, $3M USD, which the company invests in certificates of deposit at, say, 5% interest. Presumably I can draw on my original capital investment of $3M without any gains. But once I am repaid, and start to use that interest income, I'd need to pay proper income tax on it (depending on how it's disbursed to me).

I think most of the above is accurate (though I'd LOVE to know if it is not). My concern being a wealth tax though... Does this shield my investment from a wealth tax, since the corporation is off shore? Does that require an off shore corporation held in a trust? It's a vicious circle. Do I find a jurisdiction and evaluate it's pros/cons for my specific use case? That evaluation has to cover:

• The requirements to start/own a corporation such as residency requirements
• Legal protections in the specific country
• Strength & accessibility of the banking systems available there
• Tax law there (and how it related to the US I suppose)

Or does my use case determine a preferred jurisdiction? I need someone omniscient in these matters to hear my use case and spit out a list of the 3-4 best candidate countries with a nice table of pro's and con's for easy comparison! Where are the all-knowing all-seeing oracles when you need 'em?