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OFFSHORE INVESTMENTS That SAFEGUARD YourCASH This page intentionally left blank OFFSHORE INVESTMENTS That SAFEGUARD YourCASH ERIKA NOLAN SHANNON CROUCH The Sovereign Society New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto Copyright © 2009 by The Sovereign Society. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. ISBN: 978-0-07-171374-0 MHID: 0-07-171374-3 The material in this eBook also appears in the print version of this title: ISBN: 978-0-07-162114-4, MHID: 0-07-162114-8. All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the ben- efit of the trademark owner, with no intention of infringement of the trademark. Where such desig- nations appear in this book, they have been printed with initial caps. McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. To contact a representative please e-mail us at [email protected]. This publication is designed to provide accurate and authoritative information in regard to the sub- ject matter covered. It is sold with the understanding that neither the author nor the publisher is engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. —From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers TERMS OF USE This is a copyrighted work and The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and its licensors reserve all rights in and to the work. Use of this work is subject to these terms. Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hill’s prior consent. You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited. Your right to use the work may be terminated if you fail to comply with these terms. THE WORK IS PROVIDED “AS IS.” McGRAW-HILL AND ITS LICENSORS MAKE NO GUAR- ANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMA- TION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the func- tions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inac- curacy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise. CONTENTS Acknowledgments vii Foreword Going Offshore: The Only Way to Go ix Introduction The Offshore Advantage— the Beginner’s Guide to the Offshore World xv CHAPTER 1 WHERE IN THE WORLD IS “OFFSHORE”? 1 CHAPTER 2 AN OFFSHORE BANK ACCOUNT: YOUR GATEWAY TO WORLD PROFITS 9 CHAPTER 3 USEFUL LEGAL ENTITIES FOR YOU AND YOUR MONEY 31 CHAPTER 4 OFFSHORE INVESTING: OFFSHORE STOCKS, BONDS, CURRENCIES, MUTUAL FUNDS, AND HEDGE FUNDS 53 • v • vi • Contents CHAPTER 5 OFFSHORE ONE-STOP SOLUTIONS: VARIABLE ANNUITIES, LIFE INSURANCE, AND RETIREMENT PLANS 89 CHAPTER 6 TAXES AND REPORTING: TAX SAVINGS, REPORTING RULES, AND USING TAX TREATIES 115 CHAPTER 7 PERSONAL PRIVACY: IT’S STILL IMPORTANT AND AVAILABLE OFFSHORE 135 CHAPTER 8 ESCAPE TO THE WORLD’S BEST OFFSHORE HAVENS 147 Conclusion The Last Word 169 Glossary 183 Index 193 ACKNOWLEDGMENTS We would like to express our sincere thanks to the following peo- ple for their help with this book: Robert Kephart, Robert Bauman, John Pugsley, Bill Bonner, and Mark Ford for their philosophical beliefs and for their vision that gave birth to The Sovereign Society so many years ago. Their mentorship and support gave us the passion, the opportunity and the experience to write this book. To all of the seasoned international professionals (and friends) Eric Roseman, Larry Grossman, Marc Sola, Colin Bowen, Robert Vrijhof, Thomas Fischer, Michael Chatzky, Mark Nestmann to whom we will always be grateful for sharing their honest view- points, and their secrets. The team at McGraw-Hill for their patience and their belief that offshore solutions do work for the average investor. To all of The Sovereign Society members we have met over the years at events around the world for sharing their successes, failures and their perspectives on wealth. Your desires and first- hand experiences have helped us refine the solutions offered within these pages. And, last but not least, we would like to thank our families, friends and co-workers for their undying support of this project (and of us). • vii • This page intentionally left blank FOREWORD Going Offshore: The Only Way to Go he first thing that should be said to someone who is thinking Tof “going offshore” is that it is like going into major surgery. The outcomes can differ enormously, depending on the skill of the surgeons and what they are trying to accomplish. You may simply want to protect your money from volatility that comes with market crisis, economic instability, and a turbu- lent U.S. dollar. Or maybe you’d like to participate in investment opportunities in other parts of the world. Like a little nip and tuck, it’s easy and relatively safe to do these things. Or you may want to try to protect your wealth from frivolous lawsuits—a more complicated and riskier procedure. You can do some major cost cutting on your taxes, too, but that could be an even more trou- blesome operation. Whatever you’re trying to do, you can be sure that other peo- ple have done it before you—including many of the richest and shrewdest investors in the world. The bad news is that a few of them never got up from the operating table. But that’s why it’s important to decide what you’re trying to accomplish and make sure you have the right people working on it. • ix • x • Foreword The second thing that should be said is that people in offshore destinations are likely to think and act very differently from the people you’re used to dealing with at home. What’s more, because of their odd accents and strange manners, it will be harder for you to size them up. Who’s competent and who isn’t? Who’s honest and who isn’t? You won’t have a familiar frame of reference to help you sort them out. Of course, that’s why you go offshore in the first place: you want something different. Still, you may be surprised at how different it is. And the third thing to remember is that, if you are an Amer- ican, federal laws may apply. We take up that last point like strange meat in a cheap foreign restaurant, aware that it puts a lot of people off. The basic princi- ple is that U.S. citizens are taxed by the U.S. government no mat- ter where they are, almost just as if they lived in the United States. Not only that, but U.S. tax law applies to how they organize their affairs as well, not just the actual tax amount. Whether you are setting up a trust in Jersey or operating a business in East Timor, U.S. tax law may make a difference in what you do. That’s why, as long as you remain a U.S. citizen, you must get advisors who are familiar with U.S. tax law. A lawyer in Europe may tell you not to worry, for example. “There’s no tax on that transaction,” he says cheerfully. But even if there is no tax locally, it doesn’t mean that there is no tax in the United States of America. Or, a trust company may put together a trust that is just what you want, unaware that it will be regarded as a sham transaction in the United States. Foreword • xi The reach of American law and the American tax process is so long and so grasping that some people decide to stop being American citizens. Recently, the U.S. embassy in London was so clogged with people trying to give up their citizenship that there was a six-month waiting list.

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