Offshore Structures 101—Why, Where, And How
This week I’m hosting my annual Offshore Wealth Summit from Paris.
For the first time ever, it’s a virtual event.
My fellow presenters and I are all signing in remotely—me from Paris, them from Panama, Colombia, Mexico, Brazil, Belize, Italy, Portugal, Thailand, the United States, etc.—to discuss strategies for navigating our current crisis environment…
As well as opportunities being created by the uncertainties all around.
It’s All About Your Plan B
Fundamentally, we’re talking about how to conceive a customized Plan B.
How to diversify both your investment portfolio and your life across international borders.
Your Plan B could be as straightforward as opening a bank account offshore where you could hold hard currencies other than your home currency.
At the other end of the spectrum, you could move the bulk of your assets out of your home country, setting up offshore entities—from corporations to trusts—to hold them.
What You’ll Learn In The Offshore Wealth Summit
The four days of this week’s event are anchored by a series of panel-led workshops. First, with the help of attorneys in key jurisdictions, we looked at options and opportunities for residency and second citizenship.
Yesterday, we talked through when and why to form an offshore structure… and how to determine where to base that structure when you decide you’d benefit from one.
Cost is one factor, of course, but you also want to look at time zones (will everyone at the firm that’s formed your entity be asleep when you’re awake, making it difficult to manage filings efficiently, for example), access (the Caribbean is a quick hop away for anyone on the East Coast, while Hong Kong is a trek), reporting standards (Singapore companies require an annual audit), and formation requirements (a BVI company requires one director but for a Panama corporation you’ll need three).
The BVIs (British Virgin Islands) is home to more offshore corporations than any other jurisdiction. Why?
For one thing, they’ve marketed themselves well.
In addition, though, the Cayman Islands—another classic option—charges more in annual fees for an IBC.
There’s no reason for the Caymans (or any jurisdiction) to charge more than any other jurisdiction… other than their belief that their jurisdiction carries more prestige.
Many entities are similar country to country. However, some jurisdictions have also created unique entities… and not all jurisdictions offer all entity options.
The BVIs, for example, doesn’t do LLCs… yet. They’re working on it.
The Key Is To Always Understand Your Reasons & Goals
The starting point for deciding where to base whatever entity you decide you need is to understand the reason you think you need it.
What are you trying to accomplish… and where are the assets or the business that the entity will hold based?
Europe doesn’t like entities from what they consider tax haven countries. Use an entity from one of those jurisdictions to hold property in most European countries, and you’ll face unnecessary additional costs from higher transfer taxes to punitive property taxes.
A trust is a common law structure. Civil law countries generally don’t recognize them. This can make it difficult for a trust to hold title to a piece of property, even if another entity is layered between the trust and the asset.
I formed my first offshore structure 17 years ago. It was a Panama corporation to hold a piece of Panama real estate. Turned out, that wasn’t the best choice… though it took me years to understand why.
I’ve formed dozens of entities in a dozen jurisdictions since. Still, in the discussion I hosted yesterday with two guys who eat, breathe, and sleep offshore entities, I learned a few things. This landscape is constantly changing.
What We’ll Discuss Tomorrow
Tomorrow I’m convening a banking workshop. For the past several years, this panel has been the most difficult to pull together. Many bankers worldwide responded to FATCA legislation by deciding not to do business with Americans.
Easier to kick us to the curb, they figured, than to invest in what’d be required to remain compliant with the long arm of U.S. regulatory agencies.
That tumult has played out now, with most banks, in the end, putting systems in place to be able to manage the reporting requirements that come with American clients… meaning, finally, this year, they feel free to participate in a conversation with me.
I’m looking forward to it. I’m in the market for a new bank in Europe. The customer service at my current European bank isn’t cutting it.
Lief Simon