20 OFFSHORE FINANCIAL AND INVESTMENT STRATEGIES OFFSHORE MANAGED COMMODITY ACCOUNT
This is another way to invest in a diversified portfolio of commodities
not available in the United States. Through your offshore corporation
or trust, which can provide additional asset protection, you can establish
an offshore managed commodities account and be making excellent
returns in precious metals, foreign currencies, financial futures,
and commodities markets worldwide, including the United States.
These can be investment pools offered by offshore specialists who
have developed such programs. In the current economic climate,
commodities are worth investigating. You will want to carefully review
any investment proposals and their tax implications. For a personal introduction
to an excellent offshore brokerage firm, e-mail me your
contact particulars, and I will place you in touch immediately and
free of charge.
OFFSHORE INVESTMENT FUNDS
There are thousands of investment funds worldwide, many of which
exclude U.S. citizens and residents for a couple of reasons. The funds
do not want to spend time and money complying with U.S. securities
laws to gain the additional business, and even if they did so, their operations
would become subject to the all-imposing U.S. government
and its myriad laws. They would also be exposed to the predatory
whims of the U.S. litigation industry, which constitutes 94 percent of
all lawsuits filed worldwide, thanks partly to mentality and partly to
the ease of suing on a contingency basis in the United States.
Even if these funds avoid doing business in the United States, the
long arm of the Internal Revenue Service still has a far-f lung reach
into its own taxpayers’ affairs including whoever they might be doing
business with. Having U.S. customers can be plain troublesome.
On the f lip side of this sad tale, the U.S. government has created
investment protectionism through laws and policies designed to discourage
average investors from venturing abroad with their money.
These policies are designed to keep the money on Wall Street, and in
American banks.
As a result, investment choices are limited for Americans, but the
news is not all bad. Many top-performing offshore funds exist, all producing
greater returns than their domestic counterparts. Although it
is illegal for Americans to purchase them directly, you can still get
into these productive investments indirectly and gain all the benefits.
By using the offshore strategies illustrated here, you can invest for
better returns worldwide, and legally, just as the rich and powerful always
have. While gaining valuable investment diversification, American
investors also can achieve asset protection and engage some real
tax reduction strategies.
Investing in international funds, like the mutual fund, is an easy
way to participate without buying into foreign companies directly.
But, that would be too simple, and the IRS has other ideas about what
they want to do, which is to subject you to the unfavorable Passive Foreign
Investment Corporation (PFIC) rules. These regulations constitute
a penalty and a means to curtail investing overseas. In this way
over time, the IRS can hit you with a punitive interest charge that can
ultimately wipe out all your gains, and in some cases, even your principal.
You want to avoid this at all costs.
Instead, you can invest in funds that are not corporations, but taxneutral
limited partnerships or limited liability companies, thereby allowing
you to pay your taxes on your prorated portion of the income
or profit, and not break the law.
Other options are presented in this book, such as investing
through a tax-protected offshore retirement plan, variable annuity, or
portfolio bond. Other offshore vehicles could be structured for the
same purpose, allowing you to legally invest in the offshore investment
funds of your choosing.
International fund sources such as Standard & Poor’s and Fund-
Insite are listed in Part Four on page 268, “Financial Information and
Business Opportunities,” along with competent financial advisors lobarb_
cated in the Appendix who can give you straight-up advice on proceeding
legally and avoiding the pitfalls. Take a close look at some of
the offshore funds and compare them with your experience and
knowledge of investing domestically.
Another option for investing in international funds, and for that
matter, back into U.S. markets, is through your offshore or Swiss
bank. But, a word of caution here: So convinced is the IRS that every
taxpayer with a foreign bank account is trying to cheat on taxes, they
have implemented the qualified intermediary (QI) regulation, under
the Administrative Procedures Act, in hopes of capturing more tax
dollars. In an effort to stop Americans from investing back into the
states anonymously from offshore, they have imposed far-reaching requirements
on foreign institutions, expecting them to disclose the
identity of any U.S. account holders.
The idea is to prevent “U.S. persons,” as the IRS defines them,
from investing back into the U.S. markets through an intermediary
such as a foreign bank or financial institution without disclosing their
identity to the IRS. The penalty for not complying is a 30 percent
withholding tax on foreign-source earned income, including the entire
investment and its cash flow. And, how is the IRS going to enforce
these actions and collect this money? Sadly, this would only work
through the “qualified intermediaries,” who will receive compensation
to act as auditors and agents on behalf of the U.S. government.
Fortunately, not all banks are going to jump on this bandwagon to
play pseudo tax cop and risk their image and reputation.
You can get around this problem, but get solid professional advice
before starting, so that legally you are completely in the clear.
Offshore investments funds are an easy way to diversify your investments,
and invest in equities overseas, typically with a nominal initial
investment. Minimum requirements to open an account can be as
low as $5,000.
PRECIOUS METAL CERTIFICATES
An excellent program for acquiring and safely storing precious metals
is known as the Perth Mint Certificate Program (PMCP).
The PMCP is a Western Australia (S&P AAA investment rated)
government-guaranteed program where you can invest in gold, silver,
or platinum, in either coin or bullion, with your holdings represented
by ownership certificates. The certificates are easy to both purchase
84 BUILDING A SOLID OFFSHORE FINANCIAL FORTRESS
and liquidate. The precious metals in question are safely stored in the
Perth Mint, and have been since 1899, located in politically and economically
stable Western Australia, and are fully insured by Lloyds of
London at the expense of the mint. The certificates may be in increments
of as little as $50 each and can even be held by an Individual
Retirement Account (IRA), a foreign trust, or an offshore corporation.
The ownership relationship of the precious metals is with a government
vault, not a foreign bank. The certificates are issued in the
name of the purchaser and each certificate has a number. They are
nonnegotiable and transferable. The certificate fee is low. The mint
uses a system of code numbers to ensure client confidentiality and security.
The Perth Mint is accredited by the London Bullion Market Association,
the New York Commodities Exchange, and the Tokyo
Commodities Exchange. As an additional benefit to U.S. and Canadian
taxpayers, the mint does not maintain any corporate presence in
either the United States or Canada. Minimum investment of U.S.
$10,000 required.
For complete information, refer to Asset Strategies International,
Inc. in part Four, “Financial and Investment Services.”
GOLD-BACKED ELECTRONIC CURRENCY
There is an alternative payment system to the federal banking system
that deserves discussion and lends itself nicely to asset diversification,
providing asset protection and consideration of the geopolitical aspects
with regard to your banking and investments.
Banking provides a wide variety of services; one that we all use
daily without thinking twice is the ability to make and receive payments.
Banks are also where we store our money for short and long
periods, believing it is safe. Unfortunately, security is as much perception
as reality.
With the advent of high technology and computers, a new era has
emerged. The digital age has posed new opportunities and also new
threats to previous ideas and methods. The government and the banking
system are working hard to rid us of cash, a commodity that empowers us
as individuals by allowing us anonymity and sovereignty, and replace it
with a digital system that can record all financial transactions. Right
now, “they” are even considering eliminating the U.S. $50 and $100 bills.
Gold-backed electronic currencies are an interesting alternative
to traditional banking. They allow the customer to make and receive
payments online. And the funds on account are backed 100 percent by
gold or other precious metals of the customer’s choice. In the United
States, we were taken off the gold standard by the U.S. government in
1971, so that our U.S. dollars are backed by nothing more than the
“good faith and credit of the United States government.” Basically,
this promise is a big IOU, and only as strong as the issuer. Money
printed today under this system is essentially fiat money that has no
value backing it. In countries where fiat currencies have been issued,
there have been tremendous cases of runaway inflation. And, to compound
the matter, the promisor in this instance, the U.S. government,
is trillions of dollars in debt already.
The gold-backed electronic currency provides the user with a
cash-payment system backed up by gold, silver, and other precious
metals, at the choosing of the customer. The value of the account f luctuates
with the value of the precious metals being held. In today’s economic
climate, it is a favorable environment to be holding gold and
other precious metals. They are the best hedges against what we have
today, a declining U.S. dollar, inflation that promises to rise dramatically
in the near future, a shaky national real estate market, rising interest
rates, the depletion of worldwide oil reserves, rising gas prices,
war with no end in sight, terrorism, and huge private and public national
debt. Independently of each other, these influences put positive
upward pressure on precious metals. Combined, they have sent
gold and other commodities soaring in the recent past, and it could
just be the beginning. And, even if precious metals were to drop, the
truth is, you still have a real asset with real value, whereas the person
holding printed currency has something of no hard value but really
just a promise.
This new payment system works internationally, 24/7, and protects
you from your cash being stolen. It allows you to move money
across borders instantly without red tape and eliminates the usual collection
problems and costs associated with other forms of payment
like checks, cashier’s checks, drafts, credit card processing, and so
on. Plus, it circumvents fraud.
The initial step to establishing an account can be completed online
within minutes, and an account number will be assigned and
ready for use. Many conveniences, cost savings, and security measures
are built into this system. It is also one of the simplest and fastest
means to buy and hold gold and other precious metals. Now you can
join the many individuals and businesses worldwide that are benefiting
from a secure payment system and alternative to the traditional
banking system and the weakening U.S. dollar.
For additional information on the gold-backed electronic
currency and how to sign up free within minutes, visit www.
barberf inancialadvisors.com.
EURODOLLAR BONDS
Eurodollar bonds are a secure means to invest offshore. Eurodollars
are simply U.S. dollars on deposit by American banks with a foreign
counterpart or one of their foreign branches in Europe. As these deposited
U.S. dollars are held overseas, they are not regulated by the
Federal Reserve Board or the Securities and Exchange Commission
(SEC), and thus they are a popular investment. Eurodollars are issued
in the Netherlands and Delaware by international finance subsidiaries
of giant transnational corporations. Both the principal and
interest are fully and unconditionally guaranteed by the issuer and
are not subject to U.S. withholding taxes. Often, they can be exchanged
for common stock in the parent company, and the stock can
be sold tax-free. Similarly, U.S. dollars that are held by foreign banks
in Asia are known as Asiadollars.
For more information on Eurodollar bonds, contact Mr. Thomas
P. Azzara in Nassau, Bahamas (see Part Four: “Financial and Investment
Service Contacts”).
OFFSHORE PHYSICAL STORAGE;
OFFSHORE SAFE DEPOSIT BOX
The best place to store physical items of value is outside your own
country, such as the United States. It is a bit inconvenient, but it is also
a great deal safer. It would be challenging, depending on the country
and the bank or vault where the valuables are stored, to get a court
order forcing the bank or other vault to open up.
A safe-deposit box is not reportable, as would be a safekeeping
or custodial account with a bank, which will hold assets in their care
per your instructions, including in sealed packages. These accounts
are only reportable if their value, like a foreign bank account, exbarbceeds an aggregate value of $10,000 in a year. But, by using a safedeposit
box for this purpose, you would avoid the necessity of filing
Treasury Form TD F 90-22.1 and acknowledging it on Schedule B of
your U.S. tax return no matter how high the value of the contents.
Smaller items like stock certificates, bonds, any negotiable instruments,
bearer bonds, bearer share certificates, jewelry, precious metals,
cash, important documents, collector items, hard-to-replace items,
copies of trust papers, wills, and evidence of asset holdings (e.g., gold
certificates) are best placed in an offshore safe-deposit box of a reputable
bank. Banks in Switzerland, Liechtenstein, and Austria are
ideal. But, as a first step, or for items not so sensitive, or on a temporary
basis, an American may want to hold some items in a safe-deposit
box in Canada for convenience.
Although the degree of security and privacy is not the same, say, as
in Switzerland, it would still be outside the United States and better
than your local bank. If travel is a problem, you could give an entrusted
family member, friend, or associate a limited power of attorney authorizing
their access to the box for the purpose of putting things in it and
removing them per your instructions. Naturally, trust is the key factor
here, and it raises the risk level.
This is also important in the event of your death, as the bank
would be required by law to seal the box, and it would become part of
your estate. Your beneficiaries may not be allowed to access the box in
such event, until the Internal Revenue Service gets a chance to look
inside. They might try to seize anything that appears not to have been
reported as required by law, including going after the contents of any
hidden accounts, anywhere. Keeping the safe-deposit box outside the
United States keeps its contents out of their reach. At least easy reach.
This move could also allow rightful beneficiaries the time to gain
legal access to the box through the foreign jurisdiction rather than
under the authority of U.S. laws.
This also applies to offshore physical storage facilities, often as secure
as a bank’s vault, which could be used for similar items or maybe
more voluminous records and possessions (see Via Mat Management
AG, in Kloten, Switzerland, and Safes Fidelity, S.A. in Geneva, Switzerland,
in Part Four: “Financial and Investment Service Contacts”).
A better way to allow beneficiaries access to a safe-deposit box or
other secure facility on your death, would be to have the box rented
by your offshore corporation. Since the corporation is usually for perpetuity,
and regardless of a shareholder’s death, it will continue, and
the status of the safe-deposit box will remain the same. Access to it
could be secured by a director or officer, or the major shareholders.
So, a beneficiary could already be in such a position, or a director or
officer could authorize a beneficiary to have the right to access the
box. A corporate resolution could be furnished to the bank, and it
would be required to comply. Of course, this authorization could be
withdrawn or changed at any time. The corporate approach also removes
it a step from creditor claims. This can be done in the United
States as well, but it wouldn’t be as airtight.
FOREIGN REAL ESTATE
There are some excellent real estate investment opportunities in foreign
countries, including tax havens and other locales that would
make attractive retirement havens. Property could be purchased in
advance of wanting to move, and can provide rental income in the
meantime. Part Four provides detailed information on two countries
offering Economic Citizenship Programs and over 30 other countries
for possible residency and citizenship. Most of these countries permit
foreigners to purchase real estate. Tremendous real estate opportunities
exist worldwide, and real estate prices are often lower, even much
lower, compared with U.S. prices. Many of these countries are experiencing
good appreciation in the area of real estate. You could easily
establish a comfortable lifestyle while lowering or totally avoiding
personal income tax by exercising the $80,000 annual loophole discussed
earlier. Review the real estate related contacts listed in Part
Four and you can be on the road to discovering your own quaint hideaway.
There are no U.S. reporting requirements in the case of foreign
real estate ownership; keep in mind, however, that foreign public ownership
records are likely. Often, a piece of real estate, like a private island,
will be owned by a local or offshore corporation, and ownership
can be changed simply by transferring the stock. With this structuring,
the stockholder would not be a part of the property records.
I suggest a visit to www.InternationalLiving.com for foreign real
estate opportunities and information of interest to prospective expatriates.
Their contact information can be found later in this section
under “Real Estate.”