As we often point out here at Q Wealth, there is really no need to engage in tax evasion – the illegal way to pay no taxes. Governments are getting desperate. The penalties for getting caught are just not worth it.

I was sitting in a cafe the other day, in a little tax haven country (Malta to be precise… check our article on residence in Malta: Malta, Little Known Tax Haven Within the EU), having just this conversation with another expat. Why on earth, we agreed, would anyone choose to remain in a high tax country and pay taxes against their will, when they could so easily move offshore or live internationally? The quality of life is better offshore, provided of course you do your research. There are countries that are great for business, countries that are great for kids, etc etc.

And you can still legally earn money in your home country, from your existing business, without paying any tax. How? By working from overseas. I found this example on Vernon Jacobs’ excellent Jacobs Report tax site.

QUESTION: Assume that a US citizen renounces citizenship and is now a sole citizen of the Federation of St. Kitts & Nevis. That person has an IBC in Belize through which he advises companies in the USA for a fee. However, that person does not physically need to be in the USA to perform the services and has no bank account in the USA. The Belize IBC doesn’t pay Belize taxes on the advisory income. If the Belize IBC pays a salary to the citizen of St. Kitts, the St. Kitts citizen doesn’t pay taxes in St. Kitts on the salary. Does the US government have any claim on this revenue stream?

ANSWER: No. An expatriate (one who has renounced US citizenship)  is not subject to U.S. tax unless the income is deemed to be U.S. source income. Income from services is subject to tax in the country where the services are performed.

Therefore, provided the services are performed from offshore, the income is completely tax free.

The same principle applies in the UK, only UK citizens don’t need to renounce citizenship – they simply need to leave the UK and establish residence elsewhere. A UK Limited Company may have a full time employee, director etc working outside the UK. Provided that one is careful not to perform the job in the UK, then no tax is payable on the salary – which, of course, remains tax deductible in the UK company’s books.

With the ease of remote working by phone, over the internet, videoconferencing, Skype etc today – it is so easy to avoid taxes. Tax avoidance is completely legal and is good business practice.

Using Q Wealth’s information, you too can learn the details of using offshore companies to protect your assets and grow offshore wealth. If you are not yet a subscriber to Q Bytes, our free weekly newsletter, please sign up now by clicking here.

A guest post by Jeff Clark, Senior Editor, BIG GOLD. I suggest you read this. Yes, it was written to sell you something. It’s something we here at Q Wealth endorse and believe in because we think there’s a lot of good points in the following article. It’s written about events in the 1970s, about bank nationalizations, about paper money that becomes worthless, checks drawn on banking systems that no longer function… could it happen in your country today? You decide. Enjoy.

In 1975, as Saigon was falling, South Vietnamese refugees were air-evacuated into Guam and the U.S. The company Deak-Perera was hired by the State Department to serve as the official “money changer” for the refugee camps, and it quickly became apparent to the employees that even the most prominent of Vietnamese citizens arrived with nothing but the clothes on their backs and whatever belongings they could carry. It was a somber scene.

The problem facing the refugees was that the banks in their home country had been nationalized (along with most everything else in the economy), meaning they couldn’t write a check that was cashable. This presented obvious financial roadblocks for many of them, who were already dejected about their circumstances and insecure about the future.

Perhaps the most dramatic example was a successful Vietnamese businessman and his family who had been uprooted by the war. Though his suit was haggard, it was readily apparent the man had been wealthy back in his home country. He approached the exchange desk with two large suitcases full of piasters, the paper money issued by the Republic of Vietnam. The Deak-Perera worker, Michael Checkan, gulped and, with as much empathy as he could muster, explained to the refugee that piasters no longer existed. They were worthless, and the employee could not give him any money.

The reality of the situation visibly struck the man, and his face suddenly looked like he’d been told he had 30 days to live. He protested, but there was nothing the company or Michael could do. The currency simply wasn’t worth anything. The man was broke, in spite of suitcases full of his country’s money. As he trembled, his wife began crying and the children became frightened. They shuffled away, hopeless.

Later that day, Michael had another well-dressed refugee approach the exchange table with his family. He carried a ragged satchel, and explained that he had been a banker in Vietnam. As the man began pouring the contents of the bag onto the table, Michael braced himself, knowing he would have to explain that piasters could not be exchanged for anything of value.

His mouth dropped open, however, when he looked down and saw, gleaming in the sunlight, stacks of 24-karat gold TAELs, a form of gold bullion indigenous to South East Asia. They looked like wafers, thin sheets of gold delicately wrapped in paper. Each TAEL was .9999 pure gold and weighed 1.2 ounces. The man had dozens and dozens of them.

Michael peered back up at the man; he was brimming with hope. The employee calculated the bullion’s value and moments later bought the gold TAELs, issuing the refugee a traveler’s check for a large amount. The family hugged as they walked away.

As an American, you may not have to flee your country due to a military conflict. But there is something far more likely; you may have to flee your currency. There are many threats to your hard-earned wealth, and the most insidious is a weakening of the U.S. dollar.

For the United States, the invoices are piling up. Out-of-control government spending, rising healthcare costs, increasing entitlement programs, burgeoning military expenditures, etc., all add up to a number well in excess of revenue. The only politically acceptable solution is to print more money and devalue the dollar. The money you use for everyday life will buy less and less over this decade. Remember, as gold rises, it essentially means the dollar is losing value, eroding the purchasing power of every greenback in your wallet.

If you own any form of gold, you are already well aware of those facts. But have you considered the implications of traveling with that gold?  Sure, coming from Vietnam in 1975, you probably got barely a sideways glance for carrying gold TAELs, or even a suitcase full of cash. But today, in the age of TSA “love tap” pat-downs and full-body x-ray scanners, and when you must declare any amount of cash over $10,000 on your way in or out of America, leaving the country with a stack of gold bullion is probably going to raise a few eyebrows – if not land you in a TSA backroom somewhere.

That’s why it is important not just to own gold, but to consider owning it in various forms that give you both discretion and portability. There is no substitute for gold bullion, but there are far more portable alternatives, and which are far less likely to raise eyebrows (sure, numismatics are collectibles, but good luck explaining to customs the difference between a Gold Eagle and a Saint Gaudens).

Take 24-karat gold jewelry, for instance. To the casual observer, or the TSA agent, it’s not unlike any other necklace or bracelet. To you, it is a portable store of wealth. A “money belt” customs will ignore. And a great insurance policy should you find yourself in need of money on the road.

Not only does 24K gold jewelry make moving with your money simpler, it also makes giving wealth to heirs or as a gift simpler. In fact, there are a number of advantages that are frequently overlooked: it’s significantly cheaper than most numismatics and carries far lower premiums than traditional gold jewelry; it’s subject to less of the complexities of taxes; it’s more accessible than gold stored in a vault or certificates that take time to redeem; and as jewelry, it would avoid gold confiscation if that ever came to pass again.

Unfortunately, you are not likely to find real 24K gold jewelry of any significance in your local mall’s jewelry store. Instead, they are probably selling 14K gold, and at premiums of 100% or more to the value of the precious metal. It’s simply not practical to use designer jewelry as a store of wealth –-  you won’t find a numismatic-like resale market for that Tiffany necklace.

Instead, you need to find a dealer that can provide you with pure, certified 24K gold jewelry that was designed specifically for use in passing down or traveling with your wealth, and at a reasonable markup. It helps if the jewelry uses a common unit of measure as well … each piece being an ounce or in some way easily divisible. That way you can quickly account for how much you have, and if the time ever came where you needed to sell it for emergency cash like our Vietnamese friend above, you could easily do so.

At Q Wealth, we’ have found just such a partner with First Collector’s Guild, which specializes in 24K gold jewelry for people who think like us and value portable wealth.

If you own bullion or any other form of gold, consider how portable it really is. A little forethought and you may just realize it’s not all available the moment you need it. If that’s the case, a little bit of portable wealth protection might be in order. 24K jewelry is not an investment, but in the right circumstances it can be a great form of insurance.

But don’t mistake it for just bullion; this is beautiful jewelry: These pieces are very elegant and sophisticated. It’s something you can enjoy for many years and generations to come. And they’re perfect for gifts. Which, of course, is why we are writing about them at this time of year.

If you want attractive, wearable bullion that allows you to store value safely, then 24K jewelry is it. And it might be just the right way to sneak some gold into a loved one’s stocking this year!  But hurry:– since every one of the beautiful necklaces and bracelets is custom-made, you have to order by December 10 for delivery by December 25. To see all the different choices you have and learn more about Heirloom jewelry, click here.

I continue to get lots of mail about the new USA-Panama Tax Information Exchange Treaty that was actually signed last week and was the subject of my earlier blog posting. This has certainly stirred up a hornets ne’st in terms of Panamanian offshore banks, law firms and corporate service providers.

One thing that is rather irritating as a writer is when people say “such and such a person doesn’t agree with you, here’s the link” … when in fact they don’t even know what I think, and the person writing the other link probably also has some hidden agenda like collecting taxes, or like selling consulting services to move to another jurisdiction.

What I said last week was in essence that while I hadn’t seen the treaty yet, I didn’t think there was cause for immediate alarm for my clients. I also explained that I had written an article explaining my position in the next Q Wealth Report that is due out next week in the Members Area.

Now the treaty is actually signed and published. You can download it here. Perhaps the most surprising thing about it is that it is retroactive to 2007. That is, the US can now demand information dating back to 2007 from Panama relating to tax investigations. Panama, in theory, can demand the same from the US on Panamanian tax evaders.

This is certainly bad news for those American taxpayers who may have set up non-compliant structures in the past and opened accounts with Panamanian banks. Such individuals need to take expert legal advice urgently. With the approaching holiday season the few US attorneys who actually know anything about this are going to be super busy/unavailable. I hate to say I told you so, but the people in trouble are going to be the ones who tried to save a thousand bucks on set-up fees by going with cheap internet-based ‘lawyers’ who try to sell important financial structures as if they were groceries.

In the case of our consulting firm, we can refer clients to licensed US attorneys if necessary, but we like to do a confidential consultation through our firm first. This generally saves the client a lot in attorney’s fees compared to going direct to an attorney, as we are able to brief the attorney fully on the situation. Sometimes we can even do so anonymously.

Let’s be very clear on one thing. Neither Q Wealth nor my consulting firm has ever recommended tax evasion. We find the principle of stealing people’s privacy in order to collect taxes to fund things like bailouts, unnecessary wars and high level corruption extremely distasteful. That is the direction we are coming from. But if you want to live in or be a citizen of a country, you have to follow its rules. Not to do so would be plain stupid, because they are more powerful than you are.

IT’S SO EASY TO OPT OUT OF TAXES LEGALLY

It’s really so easy to opt out of taxes and government control legally if you don’t like things the way they are. Americans have it slightly harder than our other readers because they have to opt out of citizenship, not just residence. This, of course, is unjust in itself. Anyone else can just make the move.

There’s a world of choice out there. First there are the well-known tax havens like Monaco and Andorra. Several of our clients have gone down to Nevis recently in search of instant second citizenship that come with purchasing real estate there. Then there are countries like Dominican Republic or Paraguay where it’s cheap to get a residence permit, you don’t have to stay there much, and there are no taxes on foreign sourced income. Then, there are mainstream countries like France, Spain or Canada where – with good pre-immigration offshore tax and asset protection planning – a foreigner can live almost tax-free and unmolested.

I would take this opportunity to remind you that if you are looking at citizenship and residence in Paraguay, I’ll be there in January. Why not make it your new year’s resolution to obtain an official foreign residence and start the clock ticking on a second passport, that could solve all your troubles once and for all and help you sleep better at night? Details here.

“THE OECD STUFF IS A FIG LEAF, A DIVERSION”

While we are on the boring but somehow important subject of tax information exchange treaties, here’s something interesting that happened this week, that was not widely reported.

Tax Justice Network is a group who want all the world’s governments to join together in collecting taxes. Apparently they believe that if there were no tax competition, no bank secrecy and a ‘level playing field’ when it comes to taxes, there would be no poor people in the world any more. Such utopian ideas may appear beyond help to pragmatic realists like us… but they do have an interesting blog.

This week, they finally admitted they might be wrong. An anonymous person, not me but someone clearly benefiting from an intimate understanding of private banking and politics, wrote them a tirade which I agree 100% with – and they admitted might actually be right. Here are some selected extracts:

The OECD stuff is a fig leaf, a diversion. The real power mongers want the whole system to keep going, and to put out these diversions. While they are all doing all this stuff for the popular press, for the NGO world and Civil Society who don’t know how it works from the inside – at the same time they are saying to their clients (as on the BFSB website) ‘all is hunky dory in the world of confidentiality.’ They are all saying to their clients: it is business as usual.”

It is a fee-earning opportunity too – I don’t have any statistics on this – but you can say to your clients: ‘just for an extra level of safety, we can restructure your accounts to this or that other centre, or in this other structure’, and then they can charge fees for it.

You can read the whole blog entry here. I suggest you do.

This is Peter again. Panama is a country with an amazing amount of intrigue. I think it has something to do with the heat and humidity. Personally, I love it. What is said on paper is not usually what happens in practice. Once you understand that, and combine it with other countries to create a multi-jurisdictional structure, you can turn it to your advantage. If you don’t understand how Panama works, it is dangerous.

All this hype about tax treaties, that came out of nowhere a week or two ago, is certainly a diversion. If the US had wanted tax information on US citizens from Panama before, they could have got it just as easily as they will now be able to get it. This is all about show. The way is now paved for another round of the IRS voluntary compliance program that has been targeting Switzerland and UBS until recently, and we will certainly see more of this and other jurisdictions targeted during 2011.

In the meantime the USA will continue to haemorrhage funds, because smart businesspeople (and Americans are nothing if not smart business people) see that their money will be better off elsewhere.

TJN ended by quoting the latest Le Carre novel:

“Money’s got no smell as long as there’s enough if it and it’s ours. Above all, think big. Catch the minnows, but leave the sharks in the water. A chap’s laundering a couple of million? He’s a bloody crook. Call in the regulators, put him in irons. But a few billion? Now, you’re talking.”

Bear all this in mind when you look to manage your wealth and offshore investments.

If you haven’t yet read our Free Report on Panama, do so now. It explains some of the hidden truths of doing business in Panama. It was written before the tax information treaty was announced, but it’s still essential reading for anyone looking to invest offshore in Panama.