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The SERAPH Global Summit, starting tomorrow (June 1st–3rd, 2016) at L’ Auberge Hotel, Del Mar, California, has sold out but there will be recordings of the event available for purchase. Pre-order Now!

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SERAPH is an exclusive and private global network of just 50 individual investors and family offices dedicated to growing their wealth exponentially by investing in game-changing asymmetric opportunities.

Founded in 2012 by partners from opposite ends of the globe, SERAPH empowers its Members to co-invest with the principals, self-directing their portfolio as they see fit, whilst utilizing SERAPH’S formidable global network and resources.

Thanks to SERAPH’S unique structure and bespoke nature it has proven to be an unparalleled vehicle for advanced global networking and relationship building.

Who is SERAPH?

Members of SERAPH come from diverse backgrounds:
tech entrepreneurs; educators from Harvard and Stanford; doctors; hedge fund managers; venture capitalists; real estate moguls and wine makers.

All are leaders and pioneers in their fields.

Although Members come from over a dozen different countries, the threads that bind them together are freedom of thought and a deep desire to connect with other like-minded individuals who share our values.

How do I join?

Membership is by referral or application.

All prospective Members are meticulously vetted by SERAPH Partners and Advisors.

New Members are ultimately selected based on the unique contributions and experience that they will bring to the group.

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Private Eyes They’re Watching You

If you have been reading my articles on JD Supra for a while, you will know that I love Afro-Cuban and Brazilian music. Nevertheless, the Hall and Oates song Private Eyes, is a more fitting song to describe the state of offshore planning in Tax Havens than “Oye Como Va.” Many things have continued to come to light that would have much rather preferred to remain hidden in the darkness of night. Since the release of 11.5 million documents hacked from the Mossack Fonseca law firm, the rich and famous have been dancing for their lives as fast as they can.

The irony is that the majority of Mossack Fonseca’s clients were engaged in planning that is perfectly legal. Nevertheless, in the eyes of investigative journalists and public opinion, the verdict is guilty until proven innocent. In the current scenario, if you have to explain yourself and your actions, then you have already lost the public relations battle. As a result, clients engaged in offshore planning in tax havens have been forced to re-evaluate their current planning in traditional tax havens. The consequences of this result as the article will demonstrate, is the surprising result that clients no longer need to hide their money in a chain of offshore corporations designed to hide the shareholders’ identities. The best option may be to hide the money in plain sight in the least likely of tax havens – the United States.

This article will briefly outline how and why the United States may be the best option for structuring wealth not only for Americans for wealthy foreign families. The U.S. may be the new Switzerland for wealth structuring since most of what it is required to provide to foreign governments is virtually useless to foreign governments.

FATCA refers to the U.S. Foreign Account Tax Compliance Act. Adopted in 2010, the original construction of FACTA was designed as a one way street benefitting the U.S. Government in regard to financial and tax reporting. Under FATCA non-U.S. financial institutions are required to provide the U.S. government with data about U.S. persons with the U.S. not required to give anything in return to foreign governments. The original construction was met with strong reaction from foreign financial institutions who ultimately faced similar issues with respect to tax evasion.

The United States has entered into numerous reciprocal inter-governmental agreements with the intent of providing foreign governments with reciprocal information except that the information that the U.S. needs to provide is far less than what foreign governments and financial institutions need to provide. Approximately 101 jurisdictions have entered into tax information exchange agreements with the U.S. Government.

The IRS will not provide its reciprocal FATCA partners with any information regarding depository (cash) accounts held by entities, even entities resident in the FATCA partner country. Additionally, the IRS will not provide a FATCA partner country with information whether the account is held by an individual or entity including entities resident in the FATCA partner country unless the accounts earn U.S. source income. The IRS will not provide information about the controlling persons of entities even if those entities are owned and controlled by residents of the reciprocal country.

In order to avoid disclosure under a reciprocal inter-governmental agreement with the U.S., all that that is required holding cash accounts through an entity and non-cash accounts in U.S. securities through an entity. For assets that generate U.S. source income, the income should be blocked.

GATCA refers to the Global Foreign Account Compliance Act. GATCA's foundational document is the Convention on Mutual Administrative Assistance in Tax Matters developed in 1988 by the Organization for Economic Cooperation and Development and the Council of Europe. The Convention is the most comprehensive multilateral instrument available for all forms of tax cooperation on tax evasion and avoidance. It provides for exchange of information on request, automatic exchange of information, spontaneous exchange of information, and simultaneous tax examinations. All G20 countries, nearly all OECD countries, major financial centers, and a growing number of developing countries have signed the Convention and its amending Protocol of 2010. Nevertheless, The U.S. is currently a non-participant in GATCA.

The U.S. is unlikely to enter into GATCA in the future due to the fact that the information requested in the exchange agreement is not currently reported to the IRS by U.S. financial institutions. The U.S. Government cannot agree to the GATCA-style reporting requirements without Congressional approval. The political view is that Congress does not want to harm the banking industry by driving money offshore and destroying the competitive advantage of U.S. banks.

The only thing necessary to avoid reporting under GATCA is the transfer of client assets to a financial institution resident in the U.S. for GATCA purposes. A trust with a U.S. resident trustee, but structured as a non-U.S. trust for U.S. tax purposes is the key to solving the problem.

A U.S. resident account holder with a U.S. account will not be reportable under GATCA or FATCA. However, an entity that is resident in the U.S. will be subject to worldwide taxation and reporting obligations. As a result, the objective is to use an entity that is resident in the U.S. for GATCA purposes so that it does not have any reporting obligations for GATCA, but is not resident for U.S. tax and reporting purposes. The U.S. will not report non-U.S. persons under FATCA and will not be subject to U.S. tax or reporting obligations. Such an entity would not be subject to U.S. taxation on anything other than U.S.-source income.

The only thing necessary to avoid reporting under GATCA is the transfer of client assets to a financial institution resident in the U.S. for GATCA purposes. The solution is the creation of a trust that has a U.S. resident trustee, but structured as a non-U.S. trust for U.S. tax purposes. A trust with a U.S. trustee is outside of the scope of GATCA and FATCA. The trust should be formed under non-U.S. law and should not have any beneficiaries living in the U.S..

In order to be a U.S. person  for tax purposes, a trust must meet the “court” and “control” tests of IRC Sec 7701(a)(30)(E). The easiest method to avoid these requirements is to fail the “control” test, by giving a non-U.S. person control over one substantial decision within the trust. In the event the Trust fails the “control” test, the trust will be a non-U.S. trust for tax purposes under Treas. Reg. 301.7701-7.  If a U.S. trust with a non-U.S. resident person as a trust protector, has the ability to make one or more of the following decisions, it will avoid treatment as a U.S. person for tax purposes:

1. Whether a receipt is allocable to income or principal.

2. Whether to terminate the trust.

3. Whether to compromise, arbitrate, or abandon claims of the trust.

4. Whether to sue on behalf of the trust or to defend suits against the trust.

5. Whether to remove, add, or replace a trustee.

All of the trust assets should be booked in the U.S. otherwise the non-U.S. bank or financial institution will have its own GATCA reporting obligations. The Trust should not have any reporting obligations under FBAR. Even if the trust has a non-U.S. account, it should not have any FBAR reporting obligations due to the fact the Trust would not be considered a U.S. person for FBAR reporting purposes.

Department of Commerce Form BE-10 is a form designed to obtain economic data on the operations of U.S. parent companies and their foreign affiliates. Trusts are persons for Form BE-10 reporting purposes However, a trust that has non-U.S. individuals as beneficiaries will have no BE-10 reporting obligations.

Form 8938, Statement of Specified Foreign Financial Assets, is a tax form for U.S. individuals to report offshore assets. A trust that is not a trust for U.S. tax purposes will not be required to file Form 8938.

As the dust continues to settle in Panama over the next few rainy seasons, wealthy international families have no time to delay in weighing their planning alternatives. It seems to be an odd result that the U.S. emerges as the new “go to” jurisdiction in order to dance around the reporting obligations of FATCA and GACTA as well as other U.S. reporting obligations. The trick is a careful balance of avoiding treatment as a U.S. person while being considered a U.S. trust for all other purposes. Additionally, a number of U.S. states do not require an LLC manager or member to be listed on a public database.

Future articles will delve into the structure and planning of these trusts.

Panama Papers incident has demonized offshore investments

Offshore investing has recently been demonized in the media, thanks to the release of the so-called Panama Papers. This case paints a picture of investors stashing their money with some illegal company located in an obscure location where the tax rate is next to nothing. While it’s true that there are some instances of shady offshore deals, the vast majority of offshore investing is perfectly legal and carried by law-abiding citizens. In fact, depending on your situation, offshore investing may offer you many advantages, and given that the majority of residents are expatriates, an offshore investment can be useful for many bona fide reasons.

What Is offshore investing?

Offshore investing refers to a wide range of investment strategies that capitalise on advantages offered outside of an investor’s home country. I will briefly touch on the advantages and disadvantages of investing internationally. There are no shortage of investments offered by reputable companies that are fiscally sound, tested and, most importantly, legal.

Advantages

Tax Reduction - Many countries offer tax incentives to foreign investors. The favorable tax rates in an offshore country are designed to promote a healthy investment environment that attracts outside wealth.

In recent years, however, many governments have become increasingly aware of the tax revenue lost to offshore investing, and has created more defined and restrictive laws that close tax loopholes. Investment revenue earned through offshore investment is now a focus of regulators and the tax man alike.

Asset protection

Offshore centres are popular locations for restructuring ownership of assets. Through trusts or an existing corporation, individual wealth ownership can be transferred from people to other legal entities. Many individuals who are concerned about lawsuits, or lenders foreclosing on outstanding debts elect to transfer a portion of their assets from their personal estates to an entity that holds it outside of their home country. By making these on-paper ownership transfers, individuals are no longer susceptible to seizure or other domestic troubles.

Confidentiality

Many offshore jurisdictions offer the benefit of secrecy legislation. These countries have enacted laws establishing strict corporate and banking confidentiality.

However, this secrecy doesn’t mean that offshore investors are criminals with something to hide. It’s also important to note that offshore laws will allow identity disclosure in clear instances of drug trafficking, money laundering or other illegal activities.

Diversification of Investment

In some countries, regulations restrict the international investment opportunities of citizens. Many investors feel that such restriction hinders the establishment of a truly diversified investment portfolio. Offshore accounts are much more flexible, giving investors’ unlimited access to international markets and to all major exchanges. On top of that, there are many opportunities in developing nations, especially in those that are beginning to privatize sectors that were formerly under government control.

Disadvantages

Tax Laws are Tightening — Due to political pressure, tax agencies are tightening up on many of the traditional tax efficiency-enhancing measures.

Cost

Offshore Accounts are not cheap to set up. Depending on the individual’s investment goals and the jurisdiction he or she chooses, an offshore corporation may need to be started. However, most offshore funds have similar charging structures to their onshore equivalent.

How safe is offshore investing?

Popular offshore countries are known to offer secure investment opportunities. More than half of the world’s assets and investments are held in offshore jurisdictions and many well-recognised companies have investment funds located in offshore locations. Like every investment you make, use common sense and choose a reputable investment firm. It is also a good idea to consult with an experienced and reputable advisor to get the best possible advice, especially if you are looking to protect your assets, or are concerned with estate planning or business succession.

402b Implementation provides:

• a foreign investment account Ordinary or Roth IRA
• access to all investment sources globally for income from capital which is the whole point and purpose of all retirement plans in perpetuity

The result of holding this specific foreign investment account is:

• no Unrelated Business Income Tax or Income (UBIT or UBTI)
• recognized exempt from tax in Common, Civil and Sharia law

The intended use of this recommendation is:

• to provide multi-jurisdictional investment choice without U.S. Person investment restrictions, restraints or blockages.
• to comply with disclosure reporting, tax compliance.
• to provide statutory asset protection acknowledged by the IRS.

When your investments are overseas via a U.S. Qualified Retirement Plan they are excluded from Passive Foreign Investment Company (PFIC) and Unrelated Business Income Tax (UBIT) rules.

A relevant foreign investment account must provide at minimum:

• Choice and control over investment class, type, currency and securities market
• No U.S. person restrictions, restraints or limitations
• Full disclosure reporting.
• Recognized asset protected by foreign domestic law, Double Tax Agreement (DTA) and Tax Information Exchange Agreement (TIEA)
• Pension law that preempts securities regulatory law
• Safety & Security in a multi-jurisdictional “Triangle of Security”
• An investment account pre-qualified as a professional investor
• Operational use to investment dealings both from inside or from outside the USA
• U.S. Person access to investing in the same manner as a tax-free foreign resident
• This puts your qualified plan assets under your control without a change in your tax consequence. and you will be able to purchase from offshore any registered, regulated and recognized security globally as a foreign investor.

Tax and regulatory protection is an ORS402(b) occupational pension which is Hong Kong Government regulated, registered and recognized by the People’s Republic of China (PRC). Contact us now about "How to move your 401k assets into an IRA offshore.

Contact us today for a free copy of the book.

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