Articles Related to Hire act

Over three days last week in Panama City, Lief Simon led discussions with the world's leading offshore tax, banking, asset protection, investment, and business experts to help attendees at our Offshore Summit understand how to navigate and prepare for what lies ahead. What's coming down the tracks.

In fact, though, the truth is, what's coming is already upon us.

Saturday morning, Lief and I traveled with a group of 18 from the conference out to Los Islotes, Lief's development-in-the-making on Panama's Pacific coast. We had a great time showing our new friends around (I'll tell you more about our adventures out on the Azuero Sunset Coast tomorrow). When we returned to Panama City late this afternoon, I downloaded e-mails and found the one I reference above from a friend.

"How do I find out if my bank in Colombia is going to comply with the coming regulations?" asked an attendee at last week's conference.

"What transactions will be subject to the 30% withholding? ATM withdrawals?" wondered another.

The unfortunate reality is that no one knows the answers to these questions. What we do know is that the global banking and financial landscapes are changing. For all of us. I wouldn't say for the better. More restrictions. More hassle. More cost. Fewer options. What can you do?

First, understand what's coming and the potential implications. Joel Nagel, one of the best-schooled attorneys in the world on these issues, tax attorney Chris Bauer, tax advisor Tom Rowley, and Lief Simon spent a lot of time this past week talking through the facts, the consequences, and the strategies for positioning yourself to prevail in the face of them.

Second, diversify. That's the key. It's a necessity of the world we're living in.

But...diversify? What? Where? How?

Those were the big-picture topics of discussion this week in Panama City. As you know, we recorded every one of them—every presentation, every panel discussion, and every question-and-answer session. Our team is editing these recordings now. While that work is in process, you can purchase a pre-release copy of this new Offshore Self-Preservation Kit for more than 50% off the retail price. More details are here.

Kathleen Peddicord

P.S. It's the tail end of the rainy season here in Panama, but we enjoyed a day of glorious sunshine out at Los Islotes yesterday. The hills and mountains all around were a blanket of green, thanks to the rains of the past several months, and the Pacific Ocean offshore from them was blue, glistening, and crashing. Our son Jackson and friend Alexandra played in the surf while we grown-ups walked the beach, planning, imagining... As soon as this rainy season concludes, we're ready to start moving dirt. More tomorrow..

P.S. What else this week?

  • I'm reviewing and clarifying my ideas related to the Five Flags theory of diversification in preparation for my opening remarks tomorrow at this week's Offshore Summit in Panama City. If you're new to the idea, the "Five Flags" are to do with residency, citizenship, banking, assets, and business. Not everyone needs all five flags planted in different jurisdictions, but the goal should be to plant whichever ones you do need in different jurisdictions. Moving to another country and taking all your cash, investments, and business activities with you to that new country doesn't achieve the real goal of going offshore.

Fortunately, different countries shine for different reasons. Some are better for banking, others for investing, some for residency, and yet others as places to incorporate your business. No country gets A ratings on all fronts. Panama is one country that gets close...

  • As promised, at 8 a.m. Wednesday morning, Lief Simon took center stage in the meeting rooms of Panama City's Veneto Hotel to begin leading discussions that will continue over the coming three days. The topic?

Options and opportunities for diversifying your life, your assets, and your future.

"You understand the realities we're facing right now," Lief began, "thanks to the so-called Patriot Act, the HIRE Act, FATCA, and the coming 30% withholding that's going to be imposed on any U.S. person trying to transfer money to what the IRS deems a 'non-compliant bank.'

"There was even, recently, legislation proposed that would have made it possible for the IRS to take away the passport of any U.S. person it accused of owing US$50,000 or more in back taxes. The IRS wouldn't have to prove the accusation...just make it. And the American in question would find himself without a passport..."

  • This week's Offshore Summit has been organized around a series of panel discussions, one for each of the Five Flags being considered.

Yesterday morning, Mark Nestmann, one of the world's leading experts in offshore residency and second citizenship, led a panel discussion related to choosing where you might want to establish foreign residency or obtain a second passport and the particulars for how to go about it. Mark detailed nine criteria to consider when shopping for a place to establish a second, "back-up" residence and discussed the top choices today for second citizenship (by ancestry, residency, or investment).

Then, yesterday afternoon, five gentlemen took the stage--Joel Nagel, Tom Rowley, Chris Braun, Mark Nestmann, and Lief Simon--with, among them, nearly a century-and-a-half of experience helping Americans abroad address, manage, and mitigate their global tax obligations. These five guys are the heaviest hitters you'll find in this arena. Having them on stage, together, to answer attendee questions for an hour, was, alone, worth the price of admission...

  • Perhaps the most important thing to understand about the offshore world, as the speakers at this week's Offshore Summit in Panama City are reminding those assembled again and again, is that it's forever changing.

Tax laws and treaties, residency visa requirements, opportunities for obtaining second citizenship, documentation required to open a bank account, currency controls and exchange well as the political and the economic landscapes jurisdiction to jurisdiction...all these things change all the time.

Unibank, a Panama City bank that we've been recommending as a good choice for foreigners looking to open accounts in Panama, decided two months ago that it would no longer accept foreign clients who haven't been resident in Panama for at least two years...

I just got back from the beach, and I wish I could turn my car around and go back to where I just came from. Coronado, only about an hour outside Panama City, is what I'd consider the most turn-key, most expat-ready ocean-front lifestyle available in Panama. Foreign retirees living in Coronado have already paved the way, leaving you little to do for yourself to create a familiar, comfortable, English-speaking atmosphere.

It's fear of the unknown that keeps many people from making the move overseas. In Coronado you can rest assured you'll find like-minded folks, all living out their dream retirements on the beach, ready to mingle and welcome new neighbors.

I arrived in Coronado on a quiet Friday afternoon. Residents of the area were out at lunch, busy shopping in the new El Machetazo (the closest thing to a Walmart here in Panama), or lounging by the beach. The sun was shining, not yet allowing the dark, rainy season clouds to push their way into town. Four vendors had set up shop at the entrance to the community, selling everything from bunches of assorted flowers to plantains, tomatoes, pineapples, and garlic. Trucks were loaded with fruits and vegetables.

I'd hoped for a weekend like this, calm and quiet. Holiday weekends can see loads of families from Panama City flocking to their vacation homes on the beach, crowding the grocery store parking lots and filling up the restaurants. For many years, that was Coronado's main purpose, to serve as the vacation getaway and weekend home for those who could afford a retreat outside the capital. Over the past few years, though, as Panama City has grown busier, dirtier, noisier, and generally harder for many retirees to take day-to-day, Coronado has transformed into a full-time retirement community...


Among the multitude of reader e-mails waiting for me in my back-logged in-box this week was the following:

"Kathleen, I am interested in knowing where to find more information related to the legislation and policies that you cited in your article, July 4, 2012, 'Fiscal Cliffs and Taxageddon.' In the article you discuss a 30% withholding on monies transferred out of the United States, for example, and I'd like to know where this is in proposed law or policies. The article raises so many questions about who this would affect and how it would work. On one hand, it seems completely implausible, but I understand that no folly is out of the question given what's going on in the world today..."

We agree. It seems implausible. Hard to process. But it's the reality. And, as this reader reminds us, it's a reality that, though it's been in the making for years, is only just beginning to sink in. In recent weeks, The Wall Street Journal, The New York Times, and others have reported on FATCA, the HIRE Act, and the planned 30% withholding. We've been beating this drum for more than two years, trying to alert Americans to the implications and consequences of what amounts to one of the most extra-territorial pieces of legislation in history. Alas, our voices, raised as high as we've been able to manage, crying out to exclaim the approaching emergency we've perceived, haven't been loud enough.

The situation is more an emergency today than it was when we first reported on it in early 2010. Thus the need for next week's Emergency Offshore Summit. If you're making your way to Panama City over the next few days to be in the room with us Monday morning when this important event kicks off, safe travels. We look forward to seeing you soon.

What else is going on? Our team here at LIOS headquarters, who have kept things moving ahead in our absence these past two weeks, reports the following:

  • We're nearly ready to launch our first-ever Live and Invest in Ecuador Conference. Latin America Correspondent Lee Harrison, with 10 years' experience on the ground in this country, is taking the lead in putting this event together. Details are being finalized and will be ready for release within the next couple of weeks. You can register your interest in receiving a First Alert here...
  • I'll be traveling out to Panama's western Azuero coast on Friday with architect Ricardo Arosemena to begin drawing up plans for the construction of the first house at Los Islotes. If you've not heard of Los Islotes, this is the master-planned beachfront community that Lief and I conceived some four years ago...and that is finally coming to fruition. Watch for the first installment in my Los Islotes "Construction Diary" following Friday's site visit. Meantime, go here to take a look at the just-released video we're produced to give folks an idea what's in store here...
  • Following next week's Emergency Offshore Summit, Lief and I will be traveling again, this time to Paris. My agenda for this trip, unlike that for Medellin, is not rest and relaxation...but focus. I'm going to use these two weeks as an opportunity to make some progress on the new book I'm writing for John Wiley & Sons called "How To Buy Real Estate Overseas." I intend this to be a primer...the complement to the "How To Retire Overseas" primer I wrote for Penguin Books a couple of years ago. I'm counting on Lief's help (as, in truth, he's the real global property investing expert in the family)...and I'll share bits and pieces with you in these dispatches as the manuscript takes shape...

Kathleen Peddicord

P.S. Before leaving Medellin for the return to Panama City, we took another day trip with the kids, this one to Santa Fe de Antioquia. Alas, finally, after nearly three years of looking, I found something in Colombia that disappointed. Not seriously so, but, as Jackson put it that day in Santa Fe, "Well, this is nice, but I don't think we need to come back..."

Santa Fe de Antioquia was settled in 1541, about 75 years before Medellin. While Medellin has developed to become Colombia's second-biggest city, home to more than 3.5 million people, Santa Fe's population today numbers fewer than 25,000. Colombians aren't fools. Medellin is a way nicer place to be.

Santa Fe is historic and charming...but hot. Driving from Medellin to arrive in Santa Fe, the contrast was striking. While temperatures in the City of Flowers qualify as pleasant most every day of the year, those in Santa Fe put us in mind of Panama City... Continue Reading:


"We're coming to a fiscal cliff," one said.

"It's Taxageddon," added another.

Our resident U.S. tax expert Joel Nagel, as I mentioned, has been speaking and reporting on the coming changes for more than a year-and-a-half. As Joel puts it, "If you can see the freight train coming from a few miles down the track, you should be able to save yourself from being run over."

The serious reality is that this freight train is nearly upon us. The unprecedented legislation that will take effect starting Jan. 1, 2013, will affect and seriously restrict the ability of Americans to move their money around as they want. Some say it's the first step toward exchange controls.

We all should be concerned by what this new legislation is going to mean, in practical terms.

Starting Jan. 1, 2013, for example, every time U.S. dollars are wired offshore, the U.S. bank involved in the wire transfer will have to make a decision. Is tax owed on this money? If yes, the bank will be required by law to withhold that tax (at a rate of 30%) before making the transfer of funds.

If the bank fails to take any withholding, and it turns out the owner of the funds in question did, in fact, owe tax on the money transferred, the bank will be liable for the entire amount of the tax. If, on the other hand, the money is not taxable, but the bank mistakenly withholds the 30%, no harm, no foul, as far as the U.S. Treasury is concerned. In other words, no penalty for the bank.

Potentially big liabilities if they make a mistake in one direction. Not so much as an admonishment if they make a mistake in the other.

In which direction, therefore, would you imagine banks are likely to err? Every banker I've spoken with around the world agrees: Banks will have no way of knowing when tax is owed and when it's not. It's impossible for a bank to make that kind of determination. They'll have no choice, really, practically speaking, but to withhold the 30% from every transaction.

Meaning that, starting Jan. 1, 2013, any time you arrange to wire money to another country, you'll have to count on 30% being taken off the top, in the form of tax withholding.

This isn't a new tax. Theoretically, you should be able to have any amount withheld in error refunded to you after you've filed your taxes for that year. The underlying issue here, though, has to do with something even more troubling than the mistaken withholding of some of your hard-earned money.

It has to do with a shift in how taxation works in the United States. Until now, Americans have paid their taxes according to a kind of honor system. We Americans know that we must pay our taxes, but we also understand that we have the right to figure the amount owed ourselves. We declare our income and our assets, and then we calculate what's due Uncle Sam as a result.

With this new legislation, banks will become responsible for figuring when tax is owed. And for withholding it.

These are the kinds of worrisome realities we're going to address in August when we convene our next Offshore Summit.

We're going to do something else, perhaps even more important, during the three days of this event. We're going to present your options.

We're not CNN. Reporting on the world's woes isn't our beat. Our beat is opportunity. Choices.

And here's the good news: You have good ones. Fully compliant ones. And, right now, you also still have time to take advantage of them.

After Jan. 1, 2013, some of these options are going to disappear. Indeed, some have already. I had news this morning that another of our preferred offshore banks, this one in Panama, has decided, as of today, that it will no longer open an account for any American who has not been legally resident in Panama for at least two years. One less offshore banking option available to Americans.

Indeed, you have fewer choices today, if you're an American interested in protecting and preserving your wealth and diversifying your assets and your investments, than you did a year ago. And, in another six months, you will have seriously fewer choices still.

It's not too late. But, no kidding, it will be soon.

If you have money, assets, business interests, investments, and a future to protect...I urge you to join us here in Panama in August for our final Emergency Offshore Summit to find out how.

I say "final" Emergency Offshore Summit, because, by year-end, the emergency situation will have passed. The aftermath will be upon us.

Kathleen PeddicordContinuing Reading:


July 4, 2012

"Kathleen, I am a disabled American veteran and longtime reader of your newsletters who enjoys them very much. I find that every one of your newsletters is so full of valuable information. Thank you very much for your dedication in keeping us well informed so that we will be able to make a wise decision when the time comes to move.

"I wonder if you have any information on a good place to go in Central or South America for quality dental work at low cost. I live on a fixed income and am in need of some tooth implants. While I am there, I hope to check out some the places you have mentioned in your newsletters so that I may have an idea of where to settle when I make the move.

"I know that I will have to enroll myself sooner or later in your 52 Days course to really put myself in position for any future move I make.

"I appreciate any help you can give me on this matter and thank you for all your efforts on my behalf."

--Robert K., United States

Panama, Colombia, and Costa Rica are good "dental tourism" choices in the Americas. Malaysia and Thailand are good options in Asia. I'd decide where to have your dental work done based on where you're thinking you might like to base yourself in retirement. Panama, Colombia, Ecuador, Malaysia, and Thailand are very different lifestyle choices, each with pluses and minuses. All, though, are good budget options. You could retire to areas within each of these countries on a budget of US$1,200 a month or less.


"Kathleen, I thoroughly enjoy all the tips and advice and stories you provide, but there is one topic that I haven't seen addressed--services in different retirement locations for elderly who need special assistance (such as with bathing, dressing, etc.) as well as accessibility issues (ramps instead of stairs, elevators, etc.).I currently have my 90-year-old father living with me. I'd love to live in one of the places described in your publications, but it'd have to be able to provide services that he needs. Any suggestions?"

--Mike P., United States

The unfortunate truth is that most of the world outside North America, especially the developing world, is not very handicapped accessible. In much of the world, certainly outside the bigger cities, someone in a wheel chair or even getting around with a cane is going to struggle. Medellin, Colombia, is one exception I can think of. I'm sure there are others, but, generally, you should assume that your options in this regard are limited.

Likewise when it comes to special assistance of the kind you describe. These services don't exist in much of the world, though I believe this is going to change in the coming several years as the demand is growing. A new nursing care facility has opened recently in Cuenca, Ecuador, for example, and a friend in Panama City told me yesterday of a retired doctor here who is starting a new home-care service to help older and disabled folks needing routine assistance. I'm following up to find out more about this new service, as I think it will be of great interest to our readership. I'm hoping to have some details in time for next week's Live and Invest in Panama Conference.


"Kathleen, I found today's e-mail very apropos to my situation. Choices, choices, choices. I think visiting a variety of places will be my next move.

"In the interest of full disclosure, do you or your business partners own property for rent or sale in the locations that you are promoting?"

--Jim B., United States

Lief and I, with some partners, are developing land on the Pacific coast of Panama. The community is called Los Islotes. You can read about it here, and we reference it regularly.

In addition, we own rental apartments here and there around the world. Each is managed by a local rental management agency.

If ever and whenever we're invested personally in anything we write about, we disclose that fact in the writing.

Hope this helps to clarify.Continuing Reading:


"Section 1474 refers to 'withholdable payments' to Foreign Financial Institutions that don't meet U.S. standards for information sharing. The law requires that any financial institution (U.S. or foreign) remitting any foreign payment to a bank in such a country withhold 30% of the amount of such payment and remit that percentage to the Internal Revenue Service (IRS) as a tax.

"A withholdable payment is defined as any payment of interest, dividends, rents, salaries, wages, premiums, annuities, compensation, enumerations, emoluments, and other fixed or determinable annual or periodical gains, profits and income, if such payment is from sources within the United States.

"On its surface, the withholdable payment is designed to ensure that pre-tax monies are not sent abroad without applicable U.S. federal taxes being paid. Looking a little deeper, however, the law does two things that go beyond the responsibility of each taxpayer to pay what he owes to the IRS.

"First, under Section 1474 of the bill, the law makes banks, as a third party, responsible for the enforcement of government tax policy. The banks are liable for the customer's tax obligation on transferred funds if they don't withhold the required 30% to cover any possible tax liability. The banks essentially become the tax police, working for the government as hammers to bring about individual compliance.

"Second, the same provision holds the banks harmless and indemnifies them if they improperly withhold the 30% tax when it is not due.

"So, if banks are third-party tax enforcers on one hand, and completely indemnified from improper tax withholding on the other, it is clear what banks will do. It would be difficult in any case for banks to determine the difference between a pre-tax remittance versus a post-tax payment. They will be inclined, therefore, to withhold 30% tax on all foreign payments to banks and countries that do not have what are considered 'information-sharing agreements' with the United States.

"The net effect of this provision will be to greatly discourage any financial transactions between U.S. banks and foreign banks not entering into information-sharing agreements with the U.S. government.

"To wire transfer US$100,000 to Panama, for example, to purchase a piece of real estate, one would have to agree to send US$142,000 so that a net US$100,000 would reach its destination. Who would be inclined or willing to pay 30% more in a global transaction to satisfy these requirements? Almost nobody.

"International payments beginning Jan. 1, 2013, will be subject to these new withholding requirements. The delay of more than two years is designed to force foreign governments (especially those in tax havens) to enter into agreements with the United States, as Panama is in the process of doing now.

"In addition, the law will put extreme pressure on individual foreign banks to enter into private-sector agreements with the IRS to disclose all U.S. account holders or risk having all U.S. transactions to or through their individual bank subject to 30% tax withholding.

"In addition to those intended effects, I believe the new law will have two unintended consequences, as well. First, both U.S. and non-U.S. persons fearing how the implementation of the new law will impact them after Jan. 1, 2013, may be inclined to move assets outside the United States before the effective date, meaning we could see significant capital flight from the United States in the next six months.

"Foreign financial institutions may drop U.S. clients as one way to avoid being subject to the 30% withholding requirement, as well as avoiding the U.S. regulatory compliance costs (again, probably an intended consequence of the law). These compliance costs to worldwide bankers have been estimated by the Swiss Banking Association to total nearly US$40 billion annually, while the measure is projected to generate only around US$8 billion to the U.S. Treasury in increased taxes.

"Additionally, foreign financial institutions and foreign private-sector interests may simply stop conducting their business in dollars. A dollar-denominated transaction will ultimately pass through a U.S. Federal Reserve Bank and potentially subject the transaction to the risk of a U.S. bank levying a 30% withholding tax on any payment.

"One method for foreigners to ensure that this would not happen would be to designate the contract in a currency other than U.S. dollars. So if a German businessman, for example, contracts with his Japanese counterpart to do a deal to sell equipment in China, the best way to ensure that the transaction would not be subject to U.S. withholding tax would be to designate the contract in euro, yen, won, or any other currency than dollars. Those currencies would not pass through a U.S. Federal Reserve Bank and therefore would not be subject to the backup tax regime.

"Russia and China have already announced that they will no longer be doing trade transactions in U.S. dollars but rather in their own currencies. The two countries indicated that there was too much risk in using the dollar for their trade.

"As more global transactions (especially oil, gold, and other commodities) are done in non-dollar currencies, the global demand for the U.S. dollar will decrease. If you follow this thinking through, you see how it is very likely that the U.S. dollar eventually, perhaps sooner than later, will no longer be the world's reserve currency. As demand decreases, the value of the dollar will surely fall as well. So while exchange and private capital controls may well have been envisioned in the HIRE Act, additional unintended consequences of immediate capital flight and long-term devaluing of our currency through simple supply-and-demand manipulations were probably less well-considered.

"It is unlikely that even a new President in January 2013 will undo the effects of this damaging legislation. For individuals, there exists just less than six months to plan for the new law and to take steps to avoid the consequences, both intended and unintended."

Kathleen Peddicord

P.S. Joel Nagel will be joining us in Panama City in August for our Emergency Offshore Summit, during which he and the more than two-dozen other offshore experts we've invited to join us for this important and timely event will detail the best options and opportunities for taking your assets, your business, your investments, and yourself offshore.

As Joel explains, you have six months remaining to get your financial house in order for the changes that are coming.

As of this writing, a handful of VIP places remain available for our Offshore Summit. And the Early Bird Discount is still in effect (it expires July 6).

Full details of the program we've planned are here.Continuing Reading:

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Readers Say

"This was a 10! Great event. Awesome job by the Live and Invest Overseas team!"

Edward T., United States


"Thank you for all your hard work. You have made a lot of people dream and a lot of dreams come true. I enjoy all the e-mails from all your staff living all over the world. I am always telling people about you and how you started your publications years ago. In fact, I just today told my banker about how honest and smart you are, letting us know where to go. Wish I had listened to you more years ago..."

— Marlene M., Alaska

Kathleen Peddicord

Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.

Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.

Read more here.


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