Offshore Fiscal Paradises
Nearby tax havens like the Cayman Islands, Panama, Barbados, and The
Bahamas have become prominent financial centers rivaling the
industrial cities such as London , Tokyo and New York for
business . The pint sized Cayman Islands now boast more
commercial banks (530) in the commercial registrar than in all
California . The dollars on deposit in these Cayman banks exceeds
$390 billion , which is also more than all the commercial banks
in California.
The Bahamas, just 50 miles off the coast of Florida, was once the
third largest financial center in the world next to New York and
London . Today the Bahamas still ranks in the top ten, just
behind the Cayman Islands. There are more than 390 banks and
trust companies registered here in Nassau.
The Bahamas, the Cayman Islands and Bermuda have no personal
income taxes, no corporate income taxes, no capitol gains taxes,
no withholding taxes, no estate, gift or inheritance taxes, no
sales taxes, no employment taxes, no death duties, and no probate
fees. Guarantees against future taxes are provided by these
governments for periods up to 50 years. Exempt trusts can receive
guarantee up to 100 years.
Question: Do you have contacts in the Bahamas who are
trustworthy? What costs, will I incur in setting up a company in
the Bahamas?
THR: My partners include a mid-size Law firm with an office
here in downtown Nassau and a U.S. tax consultant. These lawyers
have over 40 years of business experience here in the Bahamas.
Costs to form IBC (include Government and
associated fees) - $1000
Cost for registered agent (accountant and registered office, also
2 trustees for trusts) - $500 pa.
Trust instruments (2 deeds) -$300
My advice for steering you in the right direction, forming your
company and opening up a company bank account - $300
ANNUAL MAINTENANCE (registered office,
trustees, registered agent)
paid annually, from the date that the company documents are
issued - $600 pa
Annual Government and associated fees - $250 pa
Our advice to these entities on a annual basis - $200 pa
Our law office will also be the registered
office and registered agent for the IBC. (Their address, fax nu
mber, telephone number, will all
be made available). We use two trusts in the business plan with
a non- U.S. person (the IR code refer to them as non-resident
aliens) to act as trustees.
Lawyers and Banks charge substantially more to do the same thing.
Lawyers also charge extra for drafting the trust instrument. Some
Law firms and Banks charge upwards of $5000 just for the trust
indentures. Administrative fees at the larger local banks can
also make their costs skyrocket. It is my opinion that a trust
indenture drawn by a Bahamian Lawyer or trust company is all but
worthless to a U.S. Taxpayer. They simply are not trained or
knowledgeable in U.S. Tax Law .
Question: Is it necessary to use a trust and holding company in a business plan?
THR: We think so. It is our opinion that you should try to circumvent the United States CFC provisions (IRC § 957(a)). If you are fortunate to find a foreign partner who can own 50% of your offshore company that is one recognized plan. Eleven U.S. shareholders each owning 9% of the offshore company is also a legal and approved structure for avoiding the CFC status. For the U.S. taxpayer who wants to remain independent (without partners), his plan probably should include a company and a trust as outlined in my book.
More FAQ'S from the Tax Haven Reporter
Question: What
extra forms must I file with the IRS after the company is formed.
THR: The Bahamian IBC and Trusts will legally have no income
tax returns to file with the IRS . They will not be CFC's
(Controlled Foreign Corporations). Neither you nor the offshore
managers have to file Forms 3520, 3520-A , 5471 or any other
information regarding the IBC to the IRS.
Question : Who opens the bank and securities accounts for the
IBC's?
THR: Investors will be able to open a bank and security
account for their IBCs so they alone have signature authority
over the accounts - and that's the way most clients want it. We
have arrangements with several of Nassau's Major banks. We can
provide you with the bank's application form, signature cards,
bank brochures etc., so you can open your account without
physically flying into the Bahamas. You can obtain a VISA and/or
debit card from the Bahamas largest bank, too. You will need a
reference letter from your local U.S. banker, but these are easy
to obtain
The Bahamian banks we deal with have been in operation here in Nassau for over 30 years.These banks have subsidiaries in all the other tax havens, including the Caymans', Hong Kong, Monaco, Zurich, Gibraltar, The British Virgin Islands and Jersey in the Channel Islands. One is a giant British bank with more than 2000 offices worldwide. One of the banks has no offices in the United States.
You can choose which ever bank you want. With either of these
banks, clients can open brokers accounts anywhere in the world
and trade under the guise of the Bank's name. The clients IBC
does not appear on the stock certificates, and his anonymity is
totally preserved.
Masking a clients stock market trades is a traditional way
of doing business here in the Bahamas and in the other tax havens
. It is done by most all the major bank and trust companies.
Banks in the Bahamas do not have to file tax returns with the IRS
.
The Bahamian Bank Secrecy Code forbids any bank executive
or advisor from giving information to any outside tax collector,
attorney or foreign court.
Question : What can I invest in offshore ?
THR : There are few restrictions as to what an IBC can
investing. U.S. stocks, bonds and mutual funds are frequently
bought through offshore companies because they are not liable to
U.S. capital gains taxes. Treasury bonds, bank CD's, options,
futures and commodities are also purchased through offshore
companies. No U.S. withholding taxes are payable on such incomes
as long as the IBC does not open an office or carry on other
business in the United 
States .
Using these Bahamian Banks you will be able to trade on any stock
exchange in the world at a cost equivalent to to those incurred
using a discount broker such as Charles Schwab.
You can of course, call your own shots on what stocks and bonds
or mutual funds the IBC purchases. You will pay only the brokers
commission (=3c, per share), plus a nominal fee for having the
stock certificates put in the Bahamian Banks name instead of the
IBC's.
Question: You live in the Bahamas. Who are some of the big
names using that haven as a tax shelter?
THR : Business people from around the globe use the Bahamas
as a tax haven. There are currently over $190 billion dollars on
deposit in Bahamian Banks. Former U.S. citizen Sir John
Templeton (on right), knighted by Queen Elizabeth II of
England, lives in Nassau . Templeton managed over
$20,000,000,000 for clients worldwide. He gave up his U.S.
citizenship years ago, probably to escape the USA's 55% estate
tax on estates over $2.6 million dollars . U.S. treasury
secretary Nicholas F. Brady (P.O.Box N-7776) has a home in Lyford
Cay. Remember it's his branch of the federal government that was
responsible for writing the Treasury Regulations under IRC §951
thru §958 for CFCs back in 1962! There are forty or fifty
Bacardi's (the rum distillers) living in Nassau, billionaire
fashion designer Peter Nygard(on Left), Mike Dingman, Sean
Connery, the list goes on and on. Incidentally, the Lyford Cay
area is a millionaire's row here in Nassau.
Question: How can investors learn more about these tax havens?
THR: My latest addition of TAX HAVENS OF THE WORLD ($75),
and newsletter ($150 for 12 issues) would be most useful in
helping you develop your offshore plan . As an internet
special , customers that order a years subscription to the
Tax Haven Reporter will receive a free copy of Tax Havens Of The
World .
Tax evasion is not illegal in the Bahamas,
since we do not have income capial gains or inheritance taxes.
Tax evasion is not considered suitable grounds for ordering
access to information about an account - from Welcome Bahamas
- pg .71 Our #2 Industry Banking.
While a Bahamian Company may offer tax advantages to non-Bahamian
beneficial owners under certain circumstances, it is essential
that the laws of there own country be carefully considered before
action is taken. Unless adequate planning is undertaken, the tax
advantages may ultimately be lost to the owner. Consideration
must be given to the ultimate disposition of accumulated funds "Touche
Ross International" (Bahamas).
Back To Tax Havens Of The World