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 . The Weekly Update news bulletin offer news and commentary regarding a number of issue which are of interest or concern to clients. Such topics may include offshore company formation, trusts, banking, investing, real estate, expatriate matters, residency & second passport matters, and other topics concerning the Dominican Republic & Panama. |
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. Many clients have reported problems opening accounts with certain banks or investment firms simply because these firms will not even mail application forms or other general information to the residents of some countries. More specifically, the US is one country most will not mail to, but some others include Canada, the United Kingdom, Australia & France. Why is this so? Well, for starters, most European banks or brokers do not want to be harassed by the US Internal Revenue Service and have made the internal policy decision not to accept any US clients at all. Bankers from both Switzerland & Germany most notably have been very forward about saying this. In cases whereby we are discussing a bank or investment firm located in a country with either special EU membership, or is a member of the British Commonwealth, then the other countries mentioned above would be effected as well (or more correctly those persons with an address in those countries). Specifically of course I am referring to banks or investment firms located in places such as the Isle of Man & Ireland. . It is then very important to understand how to work around such roadblocks. Stated more plainly, it is important to understand the very big difference between citizenship and residency (and how to use this to your advantage). Hopefully, the following will clarify the two and allow you to make some decisions as to the best future course of action for your own situation. . Citizenship quite simply refers to the passport you hold or travel with. Since many countries honor and recognize dual citizenship, one option is of course to seek another citizenship, which may be more favorable to you with respect to travel or whatever other issues you may have (without giving up your existing passport). For example, if your current passport does not permit extensive visa free travel, and this is of importance to you, then there is an obvious benefit in having a passport that does. For US citizens, it is important to note that while the US passport does permit extensive visa free travel, it is also the worst passport in the world to own with regards to taxation matters. The US government does feel it has the right to tax both US citizens and legal residents alike (holders of Non US passports & US residency or Green Cards take note) on worldwide income. This is regardless of where the person is living. Ironically, the US recognizes dual citizenship, despite what rumors you may have heard to the contrary. If they did not, they would force the surrender of passports and notify the related countries in cases of foreign persons becoming new US citizens (which is what Germany does, as Germany strictly prohibits dual citizenship). It is interesting to also note that the US truly does not care about whatever other passports new citizens formally held, providing they pay up. That is to say, providing they pay into the US tax system, and continue paying. In this regard, they are truly democratic and without prejudice (taking tax money from all equally). . Let us take the issue of US passport holders first, who do not have a travel problem, but who do have a major tax problem. The obvious answer is maybe to travel as an American (should you wish to, just stay out of Arabic countries) and bank as another citizen. That is to say, acquire a second citizenship – second passport from a country that does not tax you on income outside of that country or does not tax you if you are a non-resident (which we will discuss in a moment). So, when you travel, you are Mr. or Mrs. United States passport holder, but when you do your banking or other business, perhaps you are Mr. or Mrs. Grenada (for example). There are some less expensive back door alternatives that are possible, should you not wish to go through the trouble or expense of a second passport (although getting a second passport certainly does not hurt). . European and many other citizens have it a little easier than US passport holders (citizens) in that their own country may fairly differentiate between being a citizen and being a resident. That is to say, RESIDENCY refers to where you legally live. Therefore, you may hold a Swiss passport (Swiss Citizenship), but you may be a legal resident of say the Dominican Republic, Ecuador, or somewhere else. Therefore, Switzerland may say, since you are not living full time as a resident of Switzerland, you are not obligated to pay tax to Switzerland. The logic is, you are not using the things you would normally pay tax for, so why should you pay? Things like salaries and costs for police, fire, road maintenance, schools, etc., etc. If you have no tax liabilities in the Dominican Republic, or a local tax rate that is a fraction of what it is in Europe (say 15% in the Dominican Republic vs. 60% in Europe), then you have effectively cut your taxes very legally by simply moving someplace else. This of course only applies if you are a citizen or passport holder of such a very fair country in Europe or somewhere other than the United States, that is. . Americans unfortunately do not have it so easy, but there still are a few wrinkles to the above mentioned second passport option. Namely, I am referring to permanent residency outside of the US. Does this mean you can legally eliminate US tax liabilities by obtaining permanent residency someplace else? The answer is NO. However, by obtaining a permanent residency status someplace else, this in and of itself opens the two to door things. First of all, remember that we said many banks or investment firms would not mail application forms to a US address? Well, many will gladly mail to Panama, Costa Rica, Brazil and a host of other places on the planet. Many banks and investment firms also (especially those in Europe) differentiate between citizenship and residency. For that reason, many will gladly open an account for a resident of Costa Rica, the Dominican Republic, etc., etc. (whereby they would not for a US resident). So, by having a residency document from someplace else, you now possibly become available as a client whereby they would not touch you before. Therefore, it is important to understand the difference between being a citizen of the US and being a legal resident of the US (or somewhere else), and using this information when asking about such accounts. . In addition to this, many banking systems around the world (US included) are not sophisticated enough to differentiate between citizenship & residency. For example, US banks will code your account with a social security number, or without. The meaning is, if you are a US citizen or legal US resident (foreign passport holder with a green card) the logic is you have a social security number. If you do not, then you are a foreigner, period. So, perhaps either you are a 1 or are a 0 as far as the computer system is concerned (for example). The same may be true in Ecuador, Panama, Hong Kong and a whole lot of other places. So, perhaps when opening your account as a resident, this will get you coded the same way as a local citizen in the computer system. As a result, your account does not appear on the computer-generated list when the foreign government comes a calling to check up on it’s own citizens that have accounts (for tax purpose of course). Now you know. . The next question many have is, “If I can achieve some sort of privacy or non-reporting with an account in my name alone, why bother with an offshore company, foundation, etc.”? The answer to this has to do with asset protection and estate taxation matters. It is always true that the better circumstance is to have as little in your own name as possible with regards to protection from lawsuit or divorce. It is very sad, but very true, especially if you live and work in the US. If you own a home, if you own a car, if you own a business or even if you simply are a manager in a company, you are at risk. Americans love to sue in court so they can “get paid”. In many cases, the lawsuits are phony. Take the car accident victim that feigns illness or the employee that claims sexual harassment because they have a personal grievance with the boss. There are many cases when such things are legitimate, but how easy is it to concoct a story and sue in court for a financial award? Not very difficult at all, and even worse, not often very hard to find a judge or jury to agree with the plaintiff even if strong evidence is lacking. So, the idea of protecting yourself in this way is merely an act of self-preservation, nothing more. Having your assets out of reach in another country is a very good idea. Having your assets out of your name and in another country is an even better idea. . The other benefit of a Foundation or Company has to do with estate taxation and inheritance. Let us say you do have a bank account or other assets in your personal name, and something happens to you. There exist all kinds of red tape, forms, death certificates, etc. And even if you do provide all the proper documents, your information and assets may be made public (some countries may require a public notice in the newspaper) and you may wait a ridiculous amount of time before the assets are released. Then of course comes the issue of estate tax in your home country, should there be estate tax (some countries do not have estate or inheritance taxes, such as Grenada). A Foundation or Company however, is perpetual. In other words, even though the president or other party may pass away, the Foundation or Company goes on with a new President (or other party with power of attorney). Setting this up properly allows you spouse, children or whomever to take control and access the funds without any fuss or fanfare (and without any disclosure either). . In summary, for those clients that have expressed concern about the OECD and all the other nonsense going on today, understand that it is a very big and diverse world out there. Lots of pretty flags with different colors, lots of other ideas and points of view also. Individual politicians, countries, organizations and unified groups have all taken their turn at attempting world political (and economic) control at one point or another throughout history. Eventually, it all falls apart because human beings are such creatures that they resent being corralled or dictated to with regards to the benefit of someone else at their own expense (or another country). Some rebel right away, while others wait for the hole in the fence and escape later on. The OECD and the US want to enforce policies and ideas on other countries for their own benefit (tax collection mainly to fuel the expensive social welfare systems they have themselves created, which will go bankrupt sooner or later). Some smaller countries are not in agreement, nor are they interested. . . John Schroder of Ascot Advisory Services has presented this information to clients as a service and is wholly responsible for its content. Ascot Advisory Services assists with offshore company & foundation structures, offshore banking matters, residency & second passport matters, and other related services. For additional information: Tel. 809-334-5387 or 809-756-1917 Email: info@ascotadvisory.com |
