Live and Invest Overseas http://www.liveandinvestoverseas.com Our Expertise Unlocks The World Sun, 02 Aug 2015 11:39:49 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.3 Foreign Earned Income Exclusion – An Expat’s Tax Escape http://www.liveandinvestoverseas.com/taxes/foreign-earned-income-exclusion-an-expats-tax-escape.html http://www.liveandinvestoverseas.com/taxes/foreign-earned-income-exclusion-an-expats-tax-escape.html#comments Sun, 02 Aug 2015 11:39:49 +0000 http://www.liveandinvestoverseas.com/?p=12579 Reduce… Even Eliminate Your Tax Burden Most U.S. expats realize that the United States taxes its citizens on their worldwide income. They understand, too, that every U.S. citizen must file a U.S. tax return every year, regardless where he chooses to reside. What many don’t recognize, though, is that an American abroad can use a [...]

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Reduce… Even Eliminate Your Tax Burden

Most U.S. expats realize that the United States taxes its citizens on their worldwide income.

They understand, too, that every U.S. citizen must file a U.S. tax return every year, regardless where he chooses to reside.

What many don’t recognize, though, is that an American abroad can use a foreign corporation, in a zero-tax jurisdiction, to legally and legitimately reduce U.S. tax on his business income.

Your first line of defense as a U.S. expat is the Foreign Earned Income Exclusion (FEIE), which excludes from U.S. income tax the first US$100,800 of wage or self-employment income earned by a U.S. citizen “residing” in another country. (Technically, you’re “residing” abroad if you’re outside the United States for at least 330 days during any 365-day period. Go here for more on that.)

However, this is only the start of strategies available to you as an American abroad to reduce or even eliminate your annual tax bill.

For example: You can use the FEIE to reduce or even eliminate U.S. federal income tax on wages paid by either a U.S. corporation or a foreign corporation. Realize further that it doesn’t matter if you are the owner of the corporation… the FEIE applies as long as you are an employee of the company, even if it is your own company.

You reap the benefits of the FEIE if you’re self-employed, as well, operating a small business outside the States, say, or working as an independent contractor for a U.S. or foreign corporation but performing your work, again, outside the United States.

Remember, though, that the FEIE applies only to federal income tax. If you’re using it as the beginning and the end of your international tax management strategy, you’re still liable for Medicare, Social Security, and FICA… which amount to about 7.5% a year. And your employer is required to match your Medicare, Social Security, and FICA contributions, so your situation is costing him about 7.5%, as well.

Plus, if you’re self-employed abroad but operating without a corporation, you’re liable for 100% of FICA and Social Security… and you can suffer a reduction of your FEIE based on business expenses you claim.

In other words, the FEIE is a great start. But, again, you can do more.

To maximize the tax benefits of residing abroad and (legally) minimize your total tax obligation in the United States, here’s what you want to do:

First, form an offshore corporation in a zero-tax jurisdiction, register that company with the IRS, and open a foreign bank account in its name.

Second, draw a salary of up to US$100,800 from that foreign corporation. As long as you qualify for the FEIE, and the company’s income is derived from active, not passive, business, you will have no U.S. federal income tax liability on this income.

Voliá. The properly registered and domiciled as foreign corporation is not responsible for Medicare, Social Security, or FICA.

Furthermore, you are now not self-employed; you are an employee of your offshore corporation, and therefore not subject to self-employment taxes either (that is, no Social Security, no Medicare, no FICA).

Plus, all the expenses of the offshore corporation are now additional deductions and do not reduce your FEIE.

And… operating this way, you might be able to retain some or all of the offshore corporation’s earnings in excess of the FEIE. Careful planning in this area can allow the deferral of U.S. income tax on active business income inside the corporation.

Kathleen Peddicord

P.S. Piece of cake, right?

In fact, this international tax stuff can get complicated. Lief and I have been searching for competent, reliable, and, critically, affordable guidance for more than a decade. One guy wrote five- and six-page memos in response to every (we thought simple) question we asked. Then he sent a bill for thousands of dollars per page.

We couldn’t understand the advice… which was beside the point, because we couldn’t afford it anyway.

These days, after a decade of searching, we’ve compiled a team of friends and contacts that I’d argue represent the best minds in the offshore world. We ask them a direct question… they give a direct reply.

The good news for you is that our entire team of preferred offshore diversification experts will be joining us for our upcoming 2015 Lief Simon’s Global Asset Protection and Wealth Summit. This is a unique opportunity to explore all your best options to manage your tax burden, to protect your assets, and to diversify your life, your investments, and, indeed, your future and that of your family.

You can read more about the program we’ve put together here.

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Global Asset Protection Through Real Estate Diversification http://www.liveandinvestoverseas.com/real-estate/global-asset-protection-through-real-estate-diversification.html http://www.liveandinvestoverseas.com/real-estate/global-asset-protection-through-real-estate-diversification.html#comments Fri, 31 Jul 2015 23:35:17 +0000 http://www.liveandinvestoverseas.com/?p=12580 Why Real Estate Is The Best Asset Protection Tool I missed out on the Great Recession. In fact, since I moved abroad in 2001, those recession years actually produced my highest income. My home in Punta del Este, Uruguay, jumped in value during the U.S. housing crash, as did our beach house in Brazil. My [...]

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Why Real Estate Is The Best Asset Protection Tool

I missed out on the Great Recession. In fact, since I moved abroad in 2001, those recession years actually produced my highest income.

My home in Punta del Este, Uruguay, jumped in value during the U.S. housing crash, as did our beach house in Brazil. My Brazilian reais jumped almost 39% against the U.S. dollar, and my Uruguayan peso-denominated CDs paid over 9%, while the pesos themselves also gained in value.

Meanwhile, during the depths of the recession, I bought a foreclosure condo in Arizona.

I don’t mean to give the impression that Brazil and Uruguay are better bets for investment than the United States. I don’t know if that’s true… or how long it will remain true if it is.

In fact, when the Brazilian market flattened unexpectedly a couple of years ago, that cheap condo in Arizona jumped almost 73% in value. So in this case, the Scottsdale market outperformed both Brazil and Uruguay.

I like to sound brilliant as much as the next guy. But, in all honesty, I’ll have to reluctantly admit that my good fortune was not a result of any special talent on my part.

In fact, I didn’t accurately predict any of those economic swings.

The reason I came though the recession as I did was because I was internationally diversified.

Benefits Of Being Internationally Diversified

I could write a 50-page paper on the benefits of international diversification. But here are a few down-to-earth examples that I’ve taken advantage of personally.

Residency: Owning property often qualifies you for residency (I’ve obtained residency in three foreign countries). Having a foreign residency means there’s another place you can call home, if you ever choose to. This provides a great feeling of security.

Banking: Residency also opens the door to the country’s banking and financial services network. This allows you to keep some of your funds securely outside your home country and may also give you the chance to diversify outside your home currency.

Retirement fund security: I know that my retirement funds in the United States can be the target of lawsuits and creditors. This won’t happen if you’re in a company-sponsored plan. But those IRA funds are at risk. Today, half of my retirement funds are invested abroad. They’re in properties, foreign banks, and foreign investments in a number of countries. So, while my IRAs in the United States could be attacked, I’ll always have a backup nest egg abroad to live on.

Insulation from lawsuits: Lawsuits are a huge problem in the United States, where we have 5% of the world’s population and 90% of its lawsuits. As with my retirement funds, having property and assets abroad insulates at least part of your life savings from American lawsuits.

Investment opportunities: Two-year CDs in my bank in Uruguay pay 9%. In Colombia, my savings account generally pays between 4% and 6%. So my savings are not only in another country, but they’re earning a rate of interest that I can’t get back home.

Why Real Estate Does The “Diversity” Job So Well

Among the significant number of tools employed to achieve offshore diversity and asset protection, real estate is my favorite. Here’s why:

You don’t have to report it to the IRS. While my foreign bank accounts must be reported to the Treasury Department, there’s no reporting requirement for real estate. This means it can be more private than most any other vehicle.

It produces significant income. Real estate is one vehicle that can actually produce income. My rental apartment in Medellín produces enough to live on in Medellín. Aside from income, the property usually appreciates in value.

It has its own intrinsic value. Unlike paper money, stocks, or electronic funds, your property has its own intrinsic value. So, as we like to say, the value can’t go to zero.

It gives you a brand-new life experience. Diversifying your life experience is not a financial issue, it really enhances the quality of your life. Having a home overseas—even part time—is like getting an entire second life experience in a single lifespan.

Granted, precious metals—physically held by you—are also nonreportable to the IRS, and they also have intrinsic value. But you can’t live on a gold coin, and you can’t rent it out to produce an income.

I don’t believe that real estate should be your only diversity or asset protection tool. But it’s easy to see why it’s my favorite.

Efficiency And Good Planning

Today I’m fairly diversified. I’d give myself a “C+”. Maybe not what it could be, but a whole lot better than having all my eggs in one basket.

But it took 10 years to reach this level of diversity.

I’d have been much better off if I’d had a plan to begin with. I’d have been quicker about it, and more importantly, I could have accessed some of the world’s moneymaking opportunities sooner.

How To Get Started Today

If I had it to do over again, I’d invest three days in Lief Simon’s Global Asset Protection and Wealth Summit.

Why? Because Lief will have the world’s top experts on offshore diversification in attendance.

You’ll meet bankers, offshore strategy experts, real estate professionals, developers, and experts in the world of offshore metals acquisition and storage. Not to mention tax, currency, foreign residency, and asset protection experts.

The only reason I’d attend is because these guys are not academics, and this is not simply a training exercise. It’s action-oriented.

So you can actually come away with an offshore bank account… or you can start down the path to residency… or you can invest in real estate… or buy rare and strategic metals with your own private offshore storage.

In other words, you can actually get something done.

But, most importantly, you can come away with a plan, a plan tailored to your own personal needs and preferences, a plan that will let you wade into these waters at your own pace and expand in accordance with your own timetable.

The Global Asset Protection and Wealth Summit is money well spent.

To learn more about the agenda for the event—along with what it costs and all applicable discounts—follow this link to see the specifics for the Global Asset Protection and Wealth Summit.

Or, to see the complete backstory on why offshore diversification and asset protection are of such interest today, follow this link to get the whole story.

Lee Harrison
Editor, Overseas Property Alert

Continue Reading: Dental Tourism In Latin America

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Dental Tourism In Latin America http://www.liveandinvestoverseas.com/mailbag/dental-tourism-in-latin-america.html http://www.liveandinvestoverseas.com/mailbag/dental-tourism-in-latin-america.html#comments Fri, 31 Jul 2015 23:34:32 +0000 http://www.liveandinvestoverseas.com/?p=12581 “Kathleen, I am not yet a member but love to read your letters, especially the mailbags. I am single retired woman living on a limited income and reading the wonderful stories from you makes me realize that I have to move even though it is very scary to attempt this all by myself. I will [...]

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“Kathleen, I am not yet a member but love to read your letters, especially the mailbags. I am single retired woman living on a limited income and reading the wonderful stories from you makes me realize that I have to move even though it is very scary to attempt this all by myself. I will do it.

“Now I am in need of good dental work abroad. My cost for implants here in United States is completely out of my price range and it makes it impossible to maintain good health here. Please could you help me find affordable solution abroad?”

–Val L., United States

Top medical tourism choices right now include Panama, Ecuador, and Colombia. Many friends have had great experiences in all three of these countries, including for dental work that cost as little as one-fifth what it would have cost to have had the same work accomplished in the United States.

P.S. Yes, a move overseas on your own can be intimidating. But I’ve known many dozens of single women of all ages who have done it… and who are today living lives they love in exotic, exciting, and, yes, affordable places across the globe. Yes, you can do it, too.

Continue Reading: Global Asset Protection Through Real Estate Diversification

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Buying and Owning Foreign Property http://www.liveandinvestoverseas.com/how-to/buying-and-owning-foreign-property.html http://www.liveandinvestoverseas.com/how-to/buying-and-owning-foreign-property.html#comments Thu, 30 Jul 2015 12:30:33 +0000 http://www.liveandinvestoverseas.com/?p=12469 Should You Own Property Overseas In Your Own Name? Trying to figure out the best way to take title to a piece of real estate you’re buying overseas can get complicated. First, you have to remember probate. Every country has it. Take title to a piece of property in your own name, and your heirs [...]

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Should You Own Property Overseas In Your Own Name?

Trying to figure out the best way to take title to a piece of real estate you’re buying overseas can get complicated.

First, you have to remember probate. Every country has it. Take title to a piece of property in your own name, and your heirs will become well versed in the particulars and complications of probate in whichever country that piece of property lies.

So, while titling real estate in your personal name can be the simplest thing in most cases, it’s generally not the best solution long term. Even if you don’t care about probate (after all, you’ll be dead… your heirs can figure it out), there are other reasons to use an entity to hold foreign real estate assets.

In some cases, it can be the only option.

Croatia was a good example of this a decade ago, before this country joined the EU. Back then (which is when I invested here), Croatia imposed a restriction on the foreign purchase of real estate… a form of reciprocity. For you to be able to buy property in Croatia, Croatians had to be specifically allowed to buy property in your home country.

This created a real challenge for Americans, because, in the case of an American buyer, Croatia wanted to see a letter indicating that Croatians could buy property not only in the United States but specifically in the state the would-be buyer called home. Good luck with that. The workaround was to use a Croatian corporation to take title to your Croatian property.

However, holding Croatian property in a Croatian corporation is a disadvantage, as, if you’ve owned a piece of property in this country for three years or longer, you’re exempt from capital gains tax when you sell it… as long as the property has been held in your own name. Hold the property in a corporation and you’ll be charged capital gains taxes no matter how long you’ve owned it before selling.

Another reason to use an entity to hold a piece of real estate overseas is liability. Putting the property in a single-use entity can limit your exposure should a tenant slip in the shower, say, and crack his skull open. It also makes it harder for a claimant in another country to attach the property to any settlement.

Whatever your goal—being able to actually take title, minimizing probate, or limiting liability—you have to weigh it against the costs, both direct and, especially, tax, of various entity options. Structuring a purchase properly can reduce or even eliminate your associated tax burden. Using the wrong entity can do the opposite.

I’m in the process now of closing on the purchase of a piece of property in Portugal. My go-to structure for holding foreign property is a Nevis LLC. In this case, that won’t work. Well, it will work. I could use a Nevis LLC to take title to this apartment, but doing so would create tax penalties in Portugal—specifically, at a minimum, higher transfer and property taxes. This is because Nevis is on Portugal’s long black list of countries and jurisdictions it identifies as “tax havens.”

My Portugal attorney and I have considered the following better options. I could:

  • Put the property in my own name…
  • Use an entity from a country not on Portugal’s black list…
  • Use a Portugal entity.

I see putting the property in my own name as the failure option. It’d mean my kids would have to go through probate in Portugal. As I said, I’ll be dead… and therefore not around to help them. I’d like to save them the trouble, time, and cost of the whole experience if I can. This is why I title property in my name only when no other option is available or when the alternatives all create such additional tax burdens that I just can’t stomach it.

Forming an entity in a country not on Portugal’s black list could mean creating tax obligations in that country, as the list includes most (though not all) countries that take a jurisdictional approach to taxation. One country that taxes on a jurisdictional basis and that isn’t on Portugal’s black list is Nicaragua. I considered this option but set it aside for a practical reason. I don’t have an attorney in Nicaragua I’m comfortable working with right now. The time and effort required to carry out the due diligence to understand any possible complications, implications, or consequences of placing this piece of property in Portugal in a corporation in Nicaragua are more than I want to deal with right now on my own (that is, without an attorney I trust to help).

Basing the entity in a country that takes a nonjurisdictional approach to taxation might create only a small tax bill, but it’d probably also create a big administrative hassle. If I had an entity in a country not on Portugal’s black list that I was using for something else, I could roll this purchase into it. However, it doesn’t make sense to set up a new entity in a jurisdiction where I’d have to pay taxes (and, maybe more burdensome, meet the local tax filing requirements) while I’d also be paying taxes on the same income in Portugal… and the United States. The amount of the investment isn’t enough to warrant it.

Living, Retiring, And Owning Property In Algarve, Portugal

Living, Retiring, And Owning Property In Algarve, Portugal

I could use an entity based in a tax-friendly jurisdiction in the United States, such as Nevada. However, that would defeat one of the reasons for investing offshore in the first place. A frivolous lawsuit in the United States (where frivolous lawsuits are an industry) could create a claim against any U.S. assets, including the entity in Nevada that owns the property in Portugal. Good luck, Mr. Frivolous Lawsuit Complainant, getting the keys to the property. However, on paper, it’d be a risk. Using a U.S. entity to hold foreign assets is almost never a good idea.

That leaves a Portugal entity. Using a Portuguese corporation reduces the initial income tax consequences for a nonresident but probably not enough to offset the cost of forming and maintaining the structure. The amount of the investment is relatively small. In addition, putting the property in a Portugal corporation doesn’t eliminate probate in Portugal.

However, the Portuguese entity could be owned by my existing Nevis holding structure. That would eliminate the probate concern.

Again, deciding on how to take title to a piece of property overseas can get complicated. You can be tempted to tell your attorney to put the property in your own name because that’s the easiest thing to do. Maybe, you might tell yourself, you’ll make a change down the road when you have more time to figure out the best holding structure.

Resist. That can be a costly mistake, as, in some countries, the purchase and transfer costs aren’t insignificant, and changing the name on the title (from your personal name to that of a corporation, for example) means paying those costs again. It’s as though the property is being resold.

Lief Simon

P.S. I’ll spend time on this important topic during my upcoming Wealth Summit. Top advisors from key jurisdictions will be joining me, and, with their help, I’ll talk through more details and examples to help you think through your options and identify the best holding structure given your circumstances and objectives.

My team opened registration for my Wealth Summit—taking place Oct. 21–23 in Panama City—last week.

I believe a handful of VIP places remain available. Get in touch here now to claim one.

Continue Reading: Accessing Pension Income In Belize

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Accessing Pension Income In Belize http://www.liveandinvestoverseas.com/mailbag/accessing-pension-income-in-belize.html http://www.liveandinvestoverseas.com/mailbag/accessing-pension-income-in-belize.html#comments Thu, 30 Jul 2015 12:00:36 +0000 http://www.liveandinvestoverseas.com/?p=12470 “Kathleen, I have been taking your course and really hope it works for us. We have picked Belize. “We wanted Costa Rica, but decided it would be just too hard to do what we want there. Belize is English. I spent the last 20 years living in a place where everyone spoke French and do [...]

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“Kathleen, I have been taking your course and really hope it works for us. We have picked Belize.

“We wanted Costa Rica, but decided it would be just too hard to do what we want there. Belize is English. I spent the last 20 years living in a place where everyone spoke French and do not want to have to start retirement in another language. So Belize is in the running. We are going in October to check it out.

“My question is this: Does Belize have problems with garbage? Also, can we send our pensions to a Belize bank and live and shop in Belize dollars? Should we keep a U.S. credit card for bigger purchases?”

–Jennifer W., United States

Garbage can be a problem in Central America in general, worse some places than others. It’s a bigger problem in more populated areas, especially in Belize City, for example. You’ll need to pass your own judgment on how big a problem it is in the place where you’re thinking about settling.

You’ll have to check with whoever is paying your pensions to find out whether they can be direct deposited into a Belize bank. If you are talking about Social Security, the answer is yes, it can be.

Next, yes, you could withdraw cash from your Belize bank account and spend those Belize dollars locally. And, yes, you could transfer other funds from the United States to Belize as needed.

Finally, yes, you should keep a U.S. credit card. In fact, we recommend keeping two when you move overseas, no matter where you move. You should always have a backup.

***

“Kathleen, I just saw your story in the Washington Post! I am proud of you!

“You had a lot of influence on our moving to Transylvania six years ago. We are very happy and have traveled to over 50 countries from here.

“Thanks to you!”

–Guy and Maria J., Americans in Romania

Continue Reading: Buying and Owning Foreign Property

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Going Offshore: What Type Of Entity Will You Need? http://www.liveandinvestoverseas.com/how-to/going-offshore-entity-needed-corporations-llcs-trusts-and-foundations.html http://www.liveandinvestoverseas.com/how-to/going-offshore-entity-needed-corporations-llcs-trusts-and-foundations.html#comments Wed, 29 Jul 2015 12:30:07 +0000 http://www.liveandinvestoverseas.com/?p=12407 Corporations, LLCs, Trusts, And Foundations—A Layman’s Guide A reader wrote last week asking me to name the best jurisdiction for setting up an offshore entity. I can’t answer that question, at least not simply, especially for a U.S. person. We U.S. people have complicated tax rules to consider and remember no matter where we and [...]

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Corporations, LLCs, Trusts, And Foundations—A Layman’s Guide

A reader wrote last week asking me to name the best jurisdiction for setting up an offshore entity. I can’t answer that question, at least not simply, especially for a U.S. person. We U.S. people have complicated tax rules to consider and remember no matter where we and our money go.

Before trying to identify where might be the best place for you to open an offshore entity, first consider what type of entity you need—a trust, a foundation, an LLC, or a corporation? The answer to that question will point you in the direction of the jurisdictions that might suit best.

I can’t answer the question which jurisdiction is best, but put the same question to an offshore attorney, and he’ll generally have quick and specific recommendations, typically one or two countries. Ask another attorney or offshore professional, and he’ll likely do the same, naming, maybe, two different jurisdictions from the first guy.

Who’s right? Neither. Most offshore advisors find a couple of favorite jurisdictions and stick with them. It allows them to become intimately familiar with the specifics of the entity rules for those countries. In other words, most offshore attorneys specialize when it comes to jurisdictions.

The truth is, though, that most countries are essentially the same with regard to functionality and asset protection. Pricing varies, and some countries carry more cache than others making it easier for you to impress your friends at the country club with references to your Cayman Islands corporation, for example. But I’d say don’t worry about what your friends think. Choose a destination because it works for you.

A jurisdiction can work because it’s the jurisdiction the attorney you’re working with (and trust) uses. A jurisdiction can work because it’s close to where you want to bank or do business. Most of my colleagues in Asia, for example, use Hong Kong or Singapore for their offshore entities. Being in a similar time zone can be an advantage sometimes.

Here’s a primer to help get you started…

Going Offshore: Corporations And LLCs

First, note that not all countries offer LLCs.

The important thing here is that anywhere you consider for a corporation or an LLC should be a no-tax jurisdiction for companies not operating in the country. The list of such countries is long and includes Belize, Panama, BVI, Seychelles, Hong Kong, Singapore, Nevis, Bermuda, and Anguilla.

Also, you shouldn’t have to hold annual shareholders meetings if you don’t want to. If these are required, at least be sure you can hold them outside the country. You dGoing Offshore-Corporationon’t want to have to fly to the country for shareholders meetings, and, bottom line, you want the administration involved with sustaining any corporation to be minimal.

Most countries require only one or two directors for a corporation, and most don’t require said directors to be resident in the country. Panama is an exception; it requires three directors. This can be a headache if your intention is to set up a company with you and your spouse as the only shareholders.

You will need a registered agent for your corporation or LLC, and usually the attorney or formation company you use to set up the entity can also act as its registered agent. This means you’ll have an ongoing and long-term relationship with that person or group, so choose carefully. Don’t just go with the first group you come across.

Also consider how you will pay the annual (agent and government) fees. Some registered agents can’t take credit cards, which means you’ll have to pay by local check or wire transfer (which can be costly and a nuisance).

Going Offshore: Trusts

Trusts aren’t as straightforward as other entities, as the laws establishing them vary more country to country. You should seek legal advice from an experienced attorney in your home country (especially if you’re an American) before setting up on offshore trust to make sure the trust does what you want it to do and doesn’t create complications for you in your home country.

Assuming asset protection is the primary goal, you want to choose a jurisdiction where the trust is all but impossible to break… and where, if, somehow, a plaintiff does break the trust (put it under “duress”), your trustee can move the trust to another jurisdiction.

Going Offshore: Foundations

Foundations are civil code versions of trusts and can function just like a trust. However, few countries offer foundations. Panama and Liechtenstein are two that do. If you’re an American, note that the IRS doesn’t specifically address foundations, and, from a U.S. tax point of view, a foundation can function like either a trust or a corporation. Therefore, you want to work with an attorney to make sure your foundation is formed in such a way as to be considered as a trust under IRS code. If you want a corporation, don’t use a foundation. Set up a corporation.

I told you I couldn’t give a single answer to the reader’s question I opened with above; however, now I will. If on the spot to recommend one jurisdiction above all the others (there are many), I’d choose Nevis.

Nevis offers trusts, LLCs, and corporations. It’s a fairly easy place to set up an entity. The annual costs are in line with other jurisdictions. And few people can find it on a map.

Lief Simon

P.S. Right now, I’m trying to figure out how to hold the apartment that I’m buying in Portugal. My go-to jurisdiction for this kind of thing is Nevis; however, this doesn’t work in this case, as Nevis is on the Portugal tax authorities’ tax haven black list, meaning holding the property in a Nevis entity would create tax consequences in Portugal (higher transfer and property taxes). I’m seeking alternatives that won’t create tax consequences either in Portugal or in the country where the entity is based. Unfortunately, Portugal’s black list is long…

Editor’s Note: We are taking registrations now for Lief Simon’s fifth-annual Wealth Summit, taking place Oct. 21–23 in Panama City. This event typically sells out.

If you’d like to join Lief and his fellow offshore experts and advisors in Panama for these three days in October to discuss your best options and opportunities for diversifying your life, your investments, your banking, etc., offshore, you should reserve your place in the room now.

Continue Reading: The Cost Of Living In Paris

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The Cost Of Living In Paris http://www.liveandinvestoverseas.com/mailbag/the-cost-of-living-in-paris.html http://www.liveandinvestoverseas.com/mailbag/the-cost-of-living-in-paris.html#comments Wed, 29 Jul 2015 12:00:12 +0000 http://www.liveandinvestoverseas.com/?p=12408 “Kathleen, about the reader who thinks you have to be crazy to live in France… “I like your answer but note that the VAT is 20% and not 21%. On food it is only 5.5%, 10% on restaurant bills. “In addition, it is plain stupid to compare income or taxes. What is important is to [...]

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“Kathleen, about the reader who thinks you have to be crazy to live in France

“I like your answer but note that the VAT is 20% and not 21%. On food it is only 5.5%, 10% on restaurant bills.

“In addition, it is plain stupid to compare income or taxes. What is important is to compare what you get in exchange for your taxes and how far you go on your income.

“I do not know any of my American friends’ children who do not go to a private school. In Paris most of the kids I know go to the public school, which is the best education and free. My son wants to become a doctor. He is now in third year medical school, and the cost is a few hundred euros per year. What about a U.S. medical school?

“This is not to mention the superb health system we have, which any tourist who is sick when visiting has a chance to test. My wife had a small accident when in Florida. She paid US$3,500 to get an X-ray and a few stitches on her nose.

“I hate to tell you about the cost of food in the United States (milk for US$1.79 against 69 euro cents in Paris).

“I could go on like this. I guess this man who wrote to you gets his information on France from Fox News.

“Yours. I love reading your lines.”

–Alain C., France

Continue Reading: Going Offshore: What Type Of Entity Will You Need?

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Offshore Banking In Andorra http://www.liveandinvestoverseas.com/banking/offshore-banking-in-andorra.html http://www.liveandinvestoverseas.com/banking/offshore-banking-in-andorra.html#comments Tue, 28 Jul 2015 12:30:45 +0000 http://www.liveandinvestoverseas.com/?p=12387 My Day In Andorra Andorra Last week, I drove from Paris to Andorra to meet with my bank there. The bank came under investigation by the U.S. FINCen (financial crimes arm of the U.S. Department of the Treasury) because its Panama branch allegedly allowed or helped Venezuelan officials launder money out of Venezuela. As a [...]

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My Day In Andorra

Andorra

Last week, I drove from Paris to Andorra to meet with my bank there.

The bank came under investigation by the U.S. FINCen (financial crimes arm of the U.S. Department of the Treasury) because its Panama branch allegedly allowed or helped Venezuelan officials launder money out of Venezuela. As a result, the bank is to be closed.

I don’t know anything about the who, what, or why of the accusations… and don’t care except that they mean I had to make a trip to Andorra to meet with my banker in person to justify the small amount of money I have in his bank. As I said, the existing bank is being shut down… but a new bank is being formed. If my explanation for the source of my funds passes muster, my account will be moved from the “dirty” old bank to the “clean” new bank.

Andorra is a long way to come from most anywhere else on the planet. It’s a three-hour drive from any of the three nearest airport options in Spain and France. Fortunately, I was already scheduled to be in Europe for a couple of months this summer, so the side-trip to Andorra wasn’t too much of a hassle; for me, it was a four-hour TGV ride from Paris, where I happened to be. A friend also has an account at the bank in question. He had no plans to be in this part of the world before the July 31 deadline for claiming funds and was stressing over what to do.

Eventually my friend was able to speak with someone at the bank who advised him that he didn’t need to make the trip to Andorra. His account had already been cleared. I’m not sure why he’s off the hook and I’m not… but off I went to Andorra.

Five years ago, when the U.S. FATCA law had just been passed and the effects it would have on non-U.S. banks were a hot topic for speculation, a banker I knew from Andorra made a remark to me along the lines of: “We’ll all go back to goat herding before we roll over for the IRS.”

As of this writing, no bankers I know have become goat herders, and I don’t think bankers in Andorra have many other options. This tiny country’s economy is predicated on tourism, banking and, yes, goat herding.

Andorra’s banking industry was built by citizens of France and Spain (it’s wedged between those two countries) looking for a safe-haven option. Andorra is a country smaller than some Argentine ranches I know, with a population of 80,000 people, but it has six banks. Over the past 20 years, several of these banks have expanded beyond the country’s borders to tap new markets. Branches have been opened in Uruguay, Panama, and elsewhere.

As, when it came down to it, returning to goat herding wasn’t a realistic option, Andorran bankers, like bankers the world over, have had no choice but to succumb to growing pressures on the global banking industry. Hence the investigation by U.S. authorities into the alleged Chavez-associated money-laundering activities of the one Andorran bank I was unfortunate enough to choose when opening my account.

FATCA has played out. Banks around the world have made their decisions as to how they’ll comply. The IRS has strong-armed most foreign banks into agreeing to report on U.S. citizens and their accounts. The new target is money laundering. Money generated by and required to fund illegal drug and other criminal activities, political corruption, and terrorism all needs to move around the world somehow. U.S. and other authorities are working aggressively to make it as difficult as possible for those involved in those activities to access and clean their cash. Those of us trying to run simple, honest global businesses are collateral damage. That is, ordinary people are facing increasing challenges as they work to transact legitimate across-borders business.

Banks have always wanted to know where large amounts of money have come from, whether you’re trying to move it via wire or a bundle of bills in a valise. However, some banks today are simply not interested in dealing with businesses that move money from one country to another, even if those movements are legal and reported. They don’t want to take the chance of being accused of laundering money or even of accidentally facilitating it. The risk is great these days. As a banker friend puts it, “One bad apple can bring down the whole bank.”

I’ve seen this and even experienced it personally in recent months in Panama, where banks are shutting down accounts that receive regular (in some cases any) wires from the United States to avoid being scrutinized by U.S. authorities for potential money laundering.

For us regular Joes just trying to diversify where we hold liquid assets, it’s hard to know which banks will or won’t close accounts on the basis of money-laundering concerns. Big banks, small banks, banks in different jurisdictions, big and small… all are facing the same challenges.

What can you do? Don’t keep too much of your money in any one bank… which can make it difficult, I understand, even to open an account at banks with large minimum account requirements.

Lief Simon

Editor’s Note: Last week we opened registration for Lief Simon’s fifth-annual Wealth Summit, taking place Oct. 21–23 in Panama City. This event typically sells out.

If you’d like to join Lief and his fellow offshore experts and advisors in Panama for these three days in October to discuss your best options and opportunities for diversifying your life, your investments, your banking, etc., offshore, you should reserve your place in the room now.

Continue Reading: FBAR, FATCA, FINCEN Form 114, And Other IRS Reporting Requirements For Americans Overseas

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FBAR, FATCA, FINCEN Form 114, And Other IRS Reporting Requirements For Americans Overseas http://www.liveandinvestoverseas.com/mailbag/fbar-fatca-fincen-form-114-and-other-irs-reporting-requirements-for-americans-overseas.html http://www.liveandinvestoverseas.com/mailbag/fbar-fatca-fincen-form-114-and-other-irs-reporting-requirements-for-americans-overseas.html#comments Tue, 28 Jul 2015 12:00:58 +0000 http://www.liveandinvestoverseas.com/?p=12388 “Kathleen, in a recent e-letter, your writer mentions that U.S. citizens are not required to disclose any overseas real property assets. “Is the writer familiar with FBAR, FATCA, and FINCEN Form 114? “To the best of my understanding, U.S. citizens are required to disclose certain foreign assets, real property being one of them. “Could someone [...]

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“Kathleen, in a recent e-letter, your writer mentions that U.S. citizens are not required to disclose any overseas real property assets.

“Is the writer familiar with FBAR, FATCA, and FINCEN Form 114?

“To the best of my understanding, U.S. citizens are required to disclose certain foreign assets, real property being one of them.

“Could someone clarify what the author actually meant by this article? Here is the reference I’m speaking of:

“‘Third, you are not obliged to report property holdings overseas (in any form—rental apartment, house on the beach, finca, estancia, oceanfront lot, or titled agricultural investment) to the U.S. tax authorities.'”

–Anthony K., United States

The FBAR is a form for reporting offshore bank accounts. It’s the same thing as FINCEN Form 114. That is, those are one form, not two.

The FATCA form you’re thinking of is Form 8938, which is to do with foreign financial assets. Financial assets are paper assets. Therefore, real estate is not a reportable asset for Form 8938. You do have to report any income earned from real estate… and you would have to report any entity you use to hold a piece of real estate. In this case, the real estate would be listed as an asset of that entity, but full details of the property wouldn’t be required.

As your question suggests, dear reader, these and other filing requirements of our age for the American offshore are complicated, confusing, and burdensome. They’ll be an important topic of discussion during Lief Simon’s Wealth Summit, taking place in Panama Oct. 21–23.

Continue Reading: Offshore Banking In Andorra

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French Wine Futures: Exploring St. Emilion http://www.liveandinvestoverseas.com/investing/french-wine-futures-exploring-st-emilion.html http://www.liveandinvestoverseas.com/investing/french-wine-futures-exploring-st-emilion.html#comments Mon, 27 Jul 2015 12:30:52 +0000 http://www.liveandinvestoverseas.com/?p=12315 This Medieval Village Is Soaked In The Tradition Of French Wine St. Emilion, France I spent the night in St. Emilion last week and was tempted to invest in 2014 primeurs of some of the better Bordeaux chateaux, as I’ve done in the past. Chateaux big and small presell their wine from the previous year’s [...]

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This Medieval Village Is Soaked In The Tradition Of French Wine

St. Emilion, France

I spent the night in St. Emilion last week and was tempted to invest in 2014 primeurs of some of the better Bordeaux chateaux, as I’ve done in the past.

Chateaux big and small presell their wine from the previous year’s harvest. The grapes are picked in September, crushed into juice, and dumped into vats (OK, there’s more to it than that, but that’s the gist). Then, before the wine is moved from the vats to bottles, the majority of production is presold as primeurs, or wine futures.

Your preordered wine is delivered to you once it’s been bottled. Typically, Bordeaux wines spend two years in the vats, so you’d expect delivery of 2014 primeurs in 2016 or early 2017.

As I said, I was tempted to invest, but I didn’t have time to go into each wine shop in St. Emilion to see what they had available. The wine is sold through brokers authorized by each chateau. Not every broker has every label available, and they can sell out of the big-name chateaux quickly.

I last purchased primeurs in 2005 and 2006. At the time, 2005 was being touted as an exceptional year. I happened to be in St. Emilion, so I bought several cases as an investment. The girl in the shop where I bought was fantastic. I followed her recommendations, and every one of the primeurs and other wines I bought from her that year have appreciated well. They’ve all doubled or tripled in value.

I was so encouraged by the experience (the actual purchase experience, even before I knew how well my wine futures would eventually pay off) that I decided to invest again in 2006. However, in 2006, I wasn’t able to travel back to St. Emilion, so I went online and placed my order through a French wine website offering a wide variety of primeurs from the best Bordeaux chateaux.

This experience did not go as well as the first. The site was too big and too successful. They oversold. When it came time for delivery, they didn’t have enough allocation from many of the chateaux to cover what they’d committed to.

Long story short, I didn’t get all of my 2006 primeurs, and I recently learned that the website has gone into liquidation. I’m not likely to get any compensation for the missing bottles. The purchase price for the nondelivered wine wasn’t much; however, many of the wines I bought but didn’t receive have more than doubled in value… which was the point. I made the purchase as an investment.

In 2008, we moved from France to Panama, and I haven’t had time these past several years to think about investing in wine futures. Plus, after getting burned by the fancy French website, I wasn’t as interested in the idea… until Kathleen and I returned to St. Emilion last week.

You can’t walk around this medieval World Heritage Site village soaked in the history and culture of stomping and pressing grapes into wine without wanting to buy some of it. Down every cobblestoned street and around every white stone corner is another wine vintner or vendor. A handful of small chateaux are located right in or just outside the town. Travel any direction down any road leaving town, and you’ll discover more vines, more centuries-old chateaux, and more opportunities to sample, to purchase, and to invest.

With so many options the question is what to buy.

You don’t have to go far for help answering that question. Everyone you meet in St. Emilion knows wine and can make suggestions, depending on your tastes, your budget, and your objectives… as did the girl who helped me back in 2005.

Buying wine strictly as an investment is a crapshoot. The obvious variables are the vintage and how well it ages. In addition, you have locational pricing differences and transportation and storage costs (if you don’t have a cave in France).

However, as a hobby, buying primeurs and holding them until they are ready to drink is a great idea that comes with the possibility of upside. Of course, in many cases you end up drinking your profits…

In my case, many of my 2005 bottles will be served at my daughter’s wedding, taking place here in France in less than two weeks’ time. I’d say that’s the best investment of all.

If you’re interested in wine as a hobby-investment, here’s a good place to go to get started.

Lief Simon

P.S. These two months in Europe this summer, I’m looking at “investing” in wine but also considering best current options for investing in real estate in key markets as well as banking choices that still make sense in this post-FATCA, anti-money-laundering age. I’m finding lots of opportunities, which I’ll feature as part of my fifth-annual Wealth Summit, taking place Oct. 21–23 in Panama City.

Registration for this once-a-year event opened last week, and places are filling quickly. If you’d like to join me in Panama for these three days in October to discuss your best options and opportunities for diversifying your life, your investments, your banking, etc., offshore, I encourage you to reserve your place in the room now.

Continue Reading: Climate In Mexico: Alamos Versus Mazatlan

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