No country on earth will admit to selling passports. It just wouldn’t be politically correct! But there are two sovereign countries that have ‘economic citizenship’ programs, meaning that you can obtain citizenship fast by contributing to their economies.

Those two countries are The Commonwealth of Dominica, and the Federation of St Kitts and Nevis, both English speaking nations in the Caribbean who have found a niche and filled it. They offer internationally mobile, high net worth individuals who pass stringent background checks the chance to obtain citizenship within a few months. The St Kitts and Nevis program has the better reputation, having been run continuously since 1984 and currently attracting wealthy Chinese… and increasingly Americans seeking the only legal escape route from worldwide taxation. St Kitts and Nevis citizens also have the benefit of visa-free travel to all of Western Europe and Canada.

These two countries may soon be joined by a third: Grenada.

Grenada is not a new player in this market. Up until 2001 this Caribbean nation ran an economic citizenship program, but shortly after the events of 9/11, the then Finance Minister, Anthony Boatswain announced the suspension of this program, claiming that it became “too risky”. Belize suspended its citizenship program at the same time, although rumor has it that it is still quite easy to obtain a Belizean passport.

However, in Grenada things have changed. Perhaps they are looking jealously at the success of the St Kitts and Nevis program and believe they are now in a better position to tackle the due diligence and political challenges that a citizenship-by-investment program carries with it. A recent report by news service Caribbean 360 states that, “the harsh economic realities now facing Grenada has led government to consider offering overseas investors citizenship in exchange for large financial injections into the island.” So perhaps, as the report would seem to say, they are just desperate!

Anyhow, the outline plan was officially announced by Tourism Minister Peter David last month. “We have listened with interest to the proposal for an Investment Incentive Package for qualified applicants,’’ says the Minister.

The Grenadian government have yet to announce details of the plan, but you’ll be pleased to know that your Q Wealth team are hard at work on a new ‘economic citizenship’ report exclusively for our paid up members that will look in depth at the advantages and disadvantages of the Caribbean citizenship programs. Stay tuned.

We will also be giving a presentation on second citizenships at the BFI Inner Circle Briefing in the Bahamas in just over a week. There is still time to register for the Briefing, and we still have a few slots free for in-depth (paid) consultations on citizenship and offshore issues with Peter Macfarlane and Richard Cawte. Contact the Q Wealth Offices if you are interested. If you can’t make it to the Bahamas, consultations by telephone can also be arranged. And finally, remember that all paid-up members of Q Wealth are entitled to a free consultation by e-mail with one of our recommended experts.

Guest post by Terry Coxon, Casey Research

By keeping all your assets in the country where you live, you commit, ahead of time, to ratify whatever policy your home government might adopt, no matter how objectionable, unreasonable or pernicious that policy happens to be. If the next new mandate is “Register today to get a nail pounded into your head,” you’re already signed up.

Americans, by and large, run all their affairs within the confines of the US. The US economy is so large and so varied that it’s easy to assume that everything you want to do with your wealth can be done without crossing any borders. And people in the US, like people anywhere, live with the habits and attitudes developed over generations. They’re only human. In the case of Americans, those habits grew out of long experience with a government that was small and that generally practiced the rare virtue of following its own laws. In a happy exception to mankind’s experience with rulers, there was little to fear from it.

Stay at home is still the norm for Americans, but it’s a norm that is slowly fading. Every billion-dollar tick of the government debt clock, every expansion of the government’s regulatory apparatus, every overreaching judicial decision made in the name of a compelling public need, every inversion of protection for citizens into license for the state and every intellectually tortured discovery of a new meaning in the Constitution’s 4,400 old words leaves a few thousand more people wondering how prudent it is to consign all their eggs to a single national basket. Encounters with high-handed IRS agents and eager TSA gropers do nothing to ease that concern. And for those who listen thoughtfully, the messages from our designated leaders and their would-be replacements only hurry the dawning sense of unease.

Specific worries include exposure to predatory lawsuits, especially claims that could draw extra go-power by association with politically favored causes or legally favored groups; fear of where income tax rates might climb; the prospect of losing a family business in a regulatory battle or simply through estate tax; the fragility of financial institutions that have operated for forty years with the assurance that the Federal Reserve would rescue them from any folly; the possibility that a government desperate to protect the dollar from collapse might impose foreign exchange controls or capital controls; the memory and precedent of the forced gold sales of 1933; and the thought that a government floundering in deficits might start pilfering from IRAs and other pension plans.

But beyond those particular worries and perhaps more important than any of them is the sense that from here on, anything goes. The politicians will do whatever they find convenient, because there is no longer anything to stop them – not an electorate that is jealous of its freedoms and certainly not the Constitution, which is now just a playhouse for judicial imagineering. No one can know what’s coming next from the government and the financial system it has fostered, but for many of us there is an awful suspicion that we are not going to like it.

Most Americans still have yet to stick a single financial toe across the border, but more and more are considering it. Many, perhaps millions of toes are now twitching at the thought. Their owners want to end their absolute dependence on what happens in the US. They want to prepare for whatever is coming down the road, even though they don’t know what it will be. They want to be as ready as possible, even though their worries can only guess at what’s ahead.

Because internationalizing your financial life means dealing with the unfamiliar, the project can seem more complex than it really is, so it’s best to start with the simplest measures, even if by themselves they don’t give you all the safety you’re looking for. Even from a simple beginning, what you learn with each step will make the next step easier to plan. Start with the first rung on the ladder of internationalization. Then climb, at your own speed, to reach the right level of protection.
Rung 1: Coins in Your Pocket

Gold coins that you’ve stored personally give you something whose value doesn’t depend on the health of the US economy, doesn’t depend on any financial institution in the US and doesn’t depend on any US government policy. Gold coins are portable and hold their value no matter where in the world you might take them. They’re internationalization in a wafer. Safety cookies.

It’s best to buy the coins for cash, for maximum privacy. And there is a good reason to favor one-tenth-ounce gold Eagles. Gold coins mean readiness for troubled times; if you ever need to dispose of the gold in an informal market, it will be easier to do so with small-denomination coins that are widely recognizable and whose value matches the scale on which large numbers of people normally trade.

The premium on one-tenth-ounce coins (the price compared with the value of the gold content) is higher than on the larger coins – usually about 15% for the small coins vs. 5% for one-ounce Eagles. But the premium isn’t a dead cost, like a commission or bid-ask spread. The premium is a second investment; it’s what you pay for the packaging, and you can expect to recover it when you sell or trade. And in the circumstances when you would have the strongest reasons for thanking yourself for having bought some gold, the premium you paid will look like a bargain.
Rung 2: A Foreign Bank Account

On its own initiative, the IRS can freeze any bank account in the US without warning. The action might arise from mistaken identity, from an erroneous filing by some other taxpayer, from your failure to respond to an IRS notice in time or even from a postal error. And that’s what can happen without malice. Other government agencies have similar powers to act on their own, without giving you an opportunity to object in court. And any one of them might act against you for any of their specialized reasons – perhaps because someone resents your inattention to the needs of the migratory birds that visit your property or perhaps because someone thinks it would be fun to point to you as a terrorist, drug smuggler, arms dealer or child-porn merchant.

In principle, there are legal avenues for undoing a freeze or a seizure. But you’d need a lawyer, and being suddenly penniless could get in the way of hiring one.

A foreign bank account protects you from being trapped in such a nightmare. The US government can get to your foreign bank account eventually, because it can get to you. But a lightning seizure is very unlikely, because it would require a foreign government to override its own legal processes, which it generally wouldn’t be willing to do except in a grave emergency. So if your liquid assets at home were frozen, you would have cash outside the US to fund the legal cost of untangling the problem.

A foreign bank account is also a way to step back from the uncertainties of the US dollar, since the account could be denominated in another currency.

The US government has seen to it that Americans are no longer welcome customers at foreign banks. So forget about opening a Swiss bank account in your own name. However, if you apply in person (not by mail), you still can open a bank account in Canada. Be prepared to show your passport and to give the bank an original utility bill that confirms your place of residence.
Rung 3: Gold Abroad

The forced gold sales of 1933 were the work of an executive order signed by President Roosevelt. The purported legal basis for the order was the Trading With The Enemy Act, a legislative artifact of World War I. I have yet to find an explanation of how the authority for an order requiring Americans to sell their gold to the government at the government’s official price of $20 per ounce could be found in the Trading With The Enemy Act, but the fact that the enemy in question had gone out of business 15 years earlier didn’t seem to interfere with the legal logic.

The forced sale was a prelude to an increase in the official gold price to $35. The government’s reason for wanting that price rise was to gain leeway for a substantial, though limited, inflation of the dollar while keeping the dollar on the international gold standard. The forced sale was a way for the government, which operated in a political environment that still disfavored deficit spending, to capture the profit from the price rise. That profit would be a kitty for more spending without more borrowing.

Today there is no gold standard for the government to stay on. And deficit spending isn’t something politicians especially want to avoid; they’ve promoted it as a civic duty, to stimulate the economy. So the depression-era motives for a gold grab don’t seem to apply. Yet you can’t listen to a conversation between two gold investors without hearing the seizure topic coming up.

Are they just scaring each other? I don’t believe so. There are two potential motives for the government to again treat gold differently from everything else.

If the dollar’s slide in foreign exchange markets threatens to turn into a panic, the government might want to use gold sales to foreigners to mop up foreign-held dollars – in which case it might see a need to mop up the gold owned by its own citizens. That’s bad enough, but a second motive is a good bit nastier. At a visceral level, people who have centered their lives on government just don’t like gold. It’s an affront to the government’s authority to command and control and an insult to government’s supposed aptitude for solving economic problems. So disrespectful. From their point of view, every ounce purchased by an American is another tomato hurled at the political class. And the purchasers still constitute a tiny minority of the voting population. What could be more satisfying and convenient for the politicians than to kick sand in the face of gold investors for being such lousy citizens?

A new attack on gold ownership probably wouldn’t be a point-for-point reenactment of 1933. There are many weapons for mugging gold investors. It could be a prohibition on gold ownership coupled with a prohibition on sales of gold to foreigners. The only one left to buy would be the government, and being the only bidder, it would be a very low bidder. It could be a commandeering of privately owned gold, with token compensation like the $15 per day paid for jury duty. It could be a super tax, say 90%, on gold profits, which would get the job done slowly… or quickly if it were accompanied by a mark-to-market rule. Or it could be something none of us has thought of yet.

Not only can’t we know the shape of a future gold grab, we can’t know whether or how the rules would touch foreign-held gold. Owners of gold stored outside the US would be a minority of a minority. Their gold wouldn’t be the low-hanging fruit – it would be higher up in the tree and more trouble to get to. That’s why, in a casino sense, gold overseas is a different bet and a better bet than gold at home.

Maybe it will turn out that storing gold overseas won’t matter at all, in which case a little effort will have been wasted. And maybe it will turn out to matter a great deal.
Rung 4: A Swiss Annuity

A conventional annuity contract is a device for accumulating investment returns and eventually converting the value into a lifetime income. The investment return on an annuity from a US insurance company is tax deferred until it is paid out to you. If you buy an annuity from a foreign company, tax deferral is available only if the annuity’s value is tied to the performance of a pool of investments (a variable annuity).

Swiss annuities have long held a special place in personal financial planning. Such an annuity is denominated in Swiss francs, i.e., it’s francs, not dollars, that are owed to you. The Swiss insurance industry has a perfect record; policyholders have never been hurt by a default. And a Swiss annuity comes with an element of protection from would-be lawsuit creditors.

The Swiss franc is, like every other modern-day currency, just a piece of paper. It’s not redeemable for anything, not even a piece of chocolate. But the Swiss National Bank has a remarkable record of restraint in issuing new francs, which means that the franc’s prospects for holding its value have long been rated better than for any other currency.

I believe that is still the case, despite the Swiss National Bank’s current policy of suppressing any further increase in the price of the franc. In September, in order to save export industries from being crushed by the franc’s rapid appreciation against other currencies, the Swiss National Bank announced that it would purchase euros without limit to enforce a minimum exchange rate of 1.2 francs per euro – which implies printing enough francs to pay for those euros. By itself, it is an inflationary move, but it’s not a suicide pact with the European Central Bank (the issuing authority for euros). If the ECB turns to a policy of rapid inflation, I would expect the Swiss National Bank at some point to decouple the franc from the euro and let the franc’s price rise. So owning some Swiss francs, whether directly or through an annuity, is still a good step toward internationalizing your financial life.

Under Swiss law, an annuity is protected from the owner’s creditors if the beneficiaries consist of family members or if the owner has made a beneficiary designation that is irrevocable. For an owner in the US, that protection is not an impenetrable barrier to the winner of a lawsuit, but it is a barrier, and it makes the annuity a less-than-ideal prize for an attacker.

Earnings that are accumulating in a Swiss annuity are not eligible for tax deferral for a US taxpayer. The advantages are currency protection, the reliability of Swiss insurance companies and a measure of asset protection.
Rung 5: Foreign Real Estate

Owning real estate in another country gives you a suite of protections that distinguishes it from other steps toward internationalization.

First, the property’s value will depend on economic conditions in the country you’ve chosen, not on what happens in the US. If the economy of the foreign country grows and prospers, there is likely to be a spillover effect on the market value of your house, apartment, farm or patch of land – regardless of what is going on in the US.

Second, a foreign real estate investment would be hard to digest for any future capital controls imposed by the US. New rules could compel you to repatriate the cash you have in a foreign bank; rules forcing you to liquidate your foreign real estate and bring the money home would be another matter. Selling real estate isn’t quick or easy. How does the government compel an unwilling citizen to do what an eager seller often finds difficult to accomplish?

Third, as a potential prize for a lawsuit attacker, foreign real estate is a stinker. Even if he wins a judgment against you, foreclosing on your foreign property would be difficult to impossible, since it would require the cooperation of the courts in the foreign country, about whose rules and procedures the attacker’s attorney probably knows nothing. But he does know that even if he persuades a court in the US to order you to sell the property, the inherent illiquidity of real estate would give you plenty of opportunities for foot-dragging.

Where to buy? The whole world is open to you… which can be a problem. So many possibilities and no obvious place to start. One approach is to think about where you’ve been that you’d like to visit again or about some place you’ve long wanted to see. Plan to spend a few weeks there. Minimize your hotel hours, to maximize your exposure to the rest of the locale. Try to meet Americans, perhaps expatriates, who know their way around the place and who can point you toward a real estate broker who won’t try to treat you as an out-of-town sucker.

Buying foreign real estate isn’t for everyone. It requires a big investment in time and effort, but it could repay you with an asset that is low on the list of things anyone might try to take from you.
Rung 6: A Foreign LLC for Investments

A limited liability company organized under the laws of a foreign country is easy to set up and not too expensive. To bring the company into existence, you (or a service you hire) would file a simple form with a government office in the country you’ve chosen and pay a small fee. Then you as the LLC’s Manager and you as the LLC’s owner would enter into an agreement (the “operating agreement”) that would be the company’s governing instrument.

As the LLC’s Manager, you would open a non-US bank account or brokerage account in the name of the LLC and transfer your personal cash and investments to that account. Again as Manager, you would make all the investment decisions.

For a US person, a foreign LLC can be a powerful door-opener. It is welcome at many banks and brokerage firms where you personally would be turned away. This enables you to keep a wider range of assets outside the US, which puts more wealth beyond the reach of any arbitrary bureaucratic action. It also gives you investment choices that aren’t available at home.

Access to foreign investments and overseas financial services is reason enough to consider using a foreign limited liability company. But it can do much more for you, although at the cost of some complexity.

Notice the fundamental difference between a foreign LLC and what is going on at the first four rungs of the ladder of internationalization. With the LLC, you no longer personally own the assets you are trying to protect; the company owns them. This makes the LLC a powerful device for reducing your family’s expose to gift and estate taxes. And with the right provisions in the operating agreement, it can provide strong protection against loss to any malicious lawsuit.

If you are the sole owner of a foreign LLC intended for holding investments, you can and almost certainly should file an election for the LLC to be treated as a disregarded entity (indistinguishable from you for income tax purposes). If your spouse or anyone else is going to share in ownership of the LLC, the company can and should elect to be treated as a partnership for income tax purposes.
Rung 7: A Foreign LLC for Business

A business that operates outside the US does even more than a portfolio of foreign investments to give you the benefits of internationalization.

By its nature, a foreign business lives in a different environment than a business in the US. Economic troubles at home might not touch it. If it’s a business that depends on your personal efforts, it’s even less attractive as a lawsuit prize than foreign real estate. Being foreign, it would be outside the range of capital controls in the US. And many of the financial institutions that might turn away an investment-owning LLC because it is owned by an American will welcome an LLC that makes or sells goods or services.

If you already have a business in the US that has foreign customers or foreign suppliers, you may be able to relocate the business’s non-US activities to a foreign LLC. Internet-based businesses are especially amenable to internationalization.

Locating your business in a low-tax or no-tax jurisdiction, if it is practical to do so, can reduce your overall tax burden. In many cases, a foreign LLC that operates a business should elect to be treated as a foreign corporation for US income tax purposes. That can allow the business to reinvest its earnings while it pays little in current taxes and you personally pay nothing.
Rung 8: An International Trust That You Establish

Establishing a trust outside the US is the strongest internationalization step you can take for yourself and your family. Doing so costs more than any other measure, but the costs needn’t be prohibitive if your goal is to move $500,000 or more into the safest structure possible. What you achieve is a very high level of protection from aggressive lawsuits, from potential capital controls and from the possibility of a gold seizure. The trust also puts your wealth in a far better environment for income tax planning and for estate planning.

To serve the purposes of protection and tax savings, an international trust is irrevocable (you can’t simply call the institution you’ve chosen as trustee and say you’ve changed your mind) and discretionary (meaning that the trustee has a responsibility to decide when to send a check to you or to any of the other beneficiaries you’ve included). Putting assets under the control of a trust company under such an arrangement is a big step. You’re not going to do it unless you’ve done the homework needed to understand how and why you can count on the trustee to handle the assets in the way you intend.

Getting the protection and tax savings of an international trust doesn’t require you to give up management control of the assets. The trust can be limited to owning just one thing – an LLC that you manage. The LLC owns all the investments, under your supervision as LLC Manager.

If you establish an international trust, it will be tied to you for income tax purposes. But at the end of your lifetime, it will completely disconnect from the US tax system. At that point, for the benefit of your survivors, it becomes…
Rung 9: An International Trust Someone Else Established

Being a beneficiary of an international trust established by someone other than a living US person is as good as it gets. It’s not linked to you by any transfers you’ve made to it, and you don’t have a determinable percentage interest in it (since it’s a discretionary trust). So until you actually receive a distribution, there is nothing for you to report, nothing for you to pay tax on and nothing a potential lawsuit creditor can hope to take from you. And, having no living connection to the US, the trust is as far beyond the orbit of any conceivable US gold seizure or currency controls as the former planet Pluto.
One Toe over the Line

It’s a long way from walking into the local coin shop and buying a few one-tenth-ounce gold Eagles to setting up a trust in a foreign country. But the distance isn’t nearly as great as you might imagine, and it will get shorter both in fact and in apprehension with each step you take.

As you move up the ladder, you’ll learn about the reporting requirements for US taxpayers. Rung 1 (gold coins in your pocket) entails no reporting, nor does Rung 8 until you actually receive a distribution. Rung 5 (foreign real estate) also is free of reporting requirements, at least for now. But under rules in effect now or soon to come, everything else covered in this article entails filing a form with the US government. The most reliable way to make sure that you stay within the rules, so that internationalization adds to your safety and not to your problems, is to let your accountant know what you are doing. Keep him informed, so that he can see to it that all the reporting requirements are satisfied.

[Every day you delay beginning your internationalization strategy is another day your bank accounts are hemorrhaging. Learn how to protect yourself.]

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by Peter Macfarlane

I want to apologize for posting bad news at this time of year, when I truly hope that all our readers will get to spend some peaceful, stress-free, quality time with their families. In fact this bad news does not come as a great surprise to us, but we have just been made aware of it and I feel it is my duty to pass this on as soon as possible.

The ‘clear and present danger’ from this bad news is to Americans, but this matter is very much of global significance for two reasons: first, where America treads, other countries like the UK, Australia etc tend to follow. And second, this is all related to America’s most daring extra-territorial legislation ever, FATCA (the Foreign Account Tax Compliance Act) that aims, seriously, to draft all banks and other financial institutions in the rest of the world as unpaid spies and tax collectors.

There can be no doubt at this point that the US government is serious in its wish to know everything about everything you own, anywhere in the world. The only reasons they could legitimately need this information would be for capital or exchange controls, and the imposition of a wealth tax.

A wealth tax, for those who are not familiar with the term, is a kind of tax imposed in certain European countries – France being the most prominent example – where the tax is on the savings and capital of citizens, irrespective of income. It is not like income tax that you only pay on profits.  Wealth tax is a form of tax that has never been known in the US.

So what is this immediate cause for concern? The new reporting guidelines that we have just been made aware of.

REPORTING REQUIREMENTS BECOME MUCH MORE INTRUSIVE: INTRODUCING FORM 8938

The American IRS and Treasury Department have just published guidance notes regarding a new form, that will replace the old FBAR (Foreign Bank account Reporting) form TDF 90-22.1 that all Americans with foreign bank accounts are (one hopes) familiar with.

This is not an IRS form. Collecting the expanse of information requested in this form would clearly be outside the limits of the IRS’s constitutional remit, which is to ensure collection of taxes.

Neither is it a Treasury Department form like the old FBAR form. The Treasury Department’s remit is amongst other things to prevent money laundering, and it was under that guise that the FBAR form was required.

Form 8938 is a joint IRS and the Treasury Department that demands complete information on all of your foreign assets – no longer just offshore bank accounts.

The exact terminology used on the FBAR form and its accompanying notes often left open to debate what constituted a “financial account.” For example, it was never really clear whether gold bullion stored offshore in a vault constituted a “financial account.”

The notes accompanying form 8938, however, make it clear to us that the US government is no longer satisfied with taxpayers merely filing their taxes accurately and paying on time. They now want to know everything about everything you own, even if it is not taxable. The sheer scope of this invasion of privacy is just breathtaking. For readers with offshore assets, the old questions of definition have been rendered moot with form 8938.

There are some exceptions – for example for Americans living overseas, or for those with very small amounts overseas. If you want to read more on the exact details, we suggest you start with this article in Mountain Vision.

WHERE TO FROM HERE?

Are the concepts of offshore asset protection, offshore investing and offshore banking for Americans dead? Should Americans at this stage throw in the towel, give up the fight to protect what is rightfully theirs, keep all their assets at home in dollars and rely on the US government to ‘protect’ them?

I think you know my answer to that already. And if you have found this article and read this far, the chances are you agree with me.

As much as we like American values and what America originally stood for, it’s clear that the US government doesn’t have much faith and credit left anymore. The US is already bankrupt. Anyone who thinks politicians on either side have the capacity to ‘solve’ this is living in a fantasy.

Keeping your assets entirely in the US or in US dollars at this point would be equivalent to financial suicide. Diversification into hard assets, outside the grasp of a hungry US government, is the only way to protect your savings and business. There’s a lot of information on the best and safest ways to do this scattered around the Q Wealth site, with more specifics in the Members’ Area and in our quarterly Q Wealth Report.

At Q Wealth our focus is always on positive solutions. This one, we admit, is difficult to solve. We have said for a long time that we believe a point will be reached, at some point in the not too distant future, where compliance will be impossible. But, let’s stay positive… here are our thoughts.

THE WATER IS GETTING HOTTER

You’ve certainly heard the boiling frog analogy. If a frog is thrown straight into hot water, it will jump out to save itself. But if you put it in cold water and slowly turn up the heat, it will eventually boil to death.

You can see how this analogy fits with what is going on now. The heat has just been turned up a notch on all Americans who have assets worth protecting, or even the American dream of building up such assets one day.

At the same time, another notch I won’t get into much depth on here is SOPA, the Stop Online Piracy Act. This is effectively a mechanism for taking away freedom of expression on the internet, dressed up as a way to protect American consumers from all those horrible foreigners who would try to rip them off online. It is actually a law that would allow the US government to censor the internet, similar to China’s internet censorship mechanisms… it’s just a bit more subtle and it transfers the cost and compliance burden away from the government onto the shoulders of already-struggling private American businesses.

Yes, dear readers, the water is getting really, really hot! Some of America’s smartest frogs have already jumped out, obtained foreign citizenship and expatriated. That’s the only way of making a clean break and legally escaping all the hassles. But for most people, this option is still not practical.

Kevin Brekke writing in Mountain Vision says:

Whatever the IRS has in store for US taxpayers, the only way to fight back is to keep what you have. And to do that means complying with reporting requirements no matter how offensive, intrusive, maddening, or unjust they are. Penalties are now defined by the IRS as a revenue raising measure. The new mindset is clear: If we can´t tax them, we will penalize them.

Unfortunately, a new era for individual privacy is upon us. We must sacrifice our financial privacy for our financial security. We will accomplish this by staying compliant with reporting requirements and safeguarding our wealth from confiscation via seizure and penalties.

We will prevail by keeping our wealth outside the US and invested in assets that will protect and grow our wealth. That is the mission of today´s international investor.

We at Q Wealth would agree with this. As long as you can stay compliant you should, as penalties for non-compliance are substantial.

Fortunately, a lot of this is for show, designed to discourage people from protecting their assets overseas. There are still things you can do to protect yourself. And as a responsible individual, you not only can do these things, you should!

We regularly write about these solutions, and if you haven’t already done so, you should definitely sign up for our free weekly newsletter, Q Bytes, and read our free reports. If you like what you see, then just $87, the price of a good lunch, will get you a year’s membership to our Members’ Area, where you will find lots of exclusive, up to date offshore banking, asset protection and overseas investing information.

We also suggest that if you are really serious about protecting yourself, your family and your assets, you should definitely come to visit us at BFI’s Inner Circle Briefing at Atlantis, Paradise Island in the Bahamas at the end of January 2012. At the time of writing, there are still places available. For your invitation, contact the Q Wealth offices or contact BFI directly. Please mention Q Wealth in order to qualify for a discount on the normal registration fees.

Our article ‘How to Open an Offshore Bank Account in Singapore’ continues to be one of the most popular articles on the Q Wealth blog – even though, as regular readers will know, some things have changed since it was written. So, here’s an interesting case study…

We now have an excellent banking contact in Singapore who is able to assist readers with opening bank accounts in Singapore for offshore companies (Nevis LLCs are particularly popular and efficient in this regard) Paid-up members are welcome to contact our office any time for a referral to our Singapore banking facilitator. It is possible, in some cases, to open your Singapore commercial bank account without even having to travel there, though visiting the bank in person is recommended.

However, you can also do it yourself, if you wish. For example, I received the following feedback the other day from a reader who had followed our advice and done just that. I thought it was particularly interesting given that he is a former US citizen who had renounced his nationality. I’ve redacted the name of the bank as most banks don’t like to have their name in print, but again, paid Q Wealth members can get a referral through o this bank.

“Thought you might be interested to hear that my mother and I (the Q-Wealth subscription is in my mother’s name)  traveled to Singapore earlier this month to open individual savings accounts at [name of Singapore bank].  What was interesting was that we were never asked for bank references or bank statements or utility bills. [Name of Singapore bank] did indeed claim we would need those when I inquired via email prior to the trip, but when we walked into a random office in Singapore without an appointment all we were asked for were our passports and drivers licenses.  I had only my Dominican Republic passport since I renounced US citizenship a year ago, but I still was able to use my US drivers license as proof of address (the young lady never asked for my Dominican cedula nor any other Dominican ID).

Incidentally, although I renounced eleven months ago and my name was promptly published in the Federal Register (my legal name is now the Spanish version of my birth name), I am still  waiting for my CLN.  But the same embassy that had processed my renunciation has granted me a 10-year H1B visa despite the CLN not yet existing. Go figure.”

So as you see, this reader followed the best course to free himself of his home country tax obligations and diversify internationally. He acquired a second citizenship, changed his name, renounced his US citizenship, obtained a US tourist visa, and opened a bank account in Singapore…. all on his own and without encountering resistance. He did this totally legally and transparently, following the relevant regulations, and remains on excellent terms with the government of his home country, so he can visit as and when he pleases. Life is really not that difficult! It’s a good thing Q Wealth is here to help you by giving you practical advice and information on such matters.

If you are not yet read our numerous free reports explaining how you can break free from taxes and government regulations, I recommend you surf around our site and read these reports to get an idea of the Q Wealth philosophy.

by Peter Macfarlane

Following on from my detailed article in Q Wealth Report issue 58 covering the best ways to open an offshore bank account in Hong Kong, I’ve received some questions and clarifications from readers that I decided to answer here on the blog. I hope this information will be useful to you.

What banks do you recommend in Hong Kong?

HSBC Group is clearly dominant in Hong Kong. HSBC (HongKong and Shanghai Banking Corp) is the biggest player in the market, and Hang Seng Bank, majority owned by HSBC, is the second largest. For commercial banking for your small offshore company, or a simple personal savings type account, you will likely end up at one of these two banks. If you prefer to be with a smaller, private bank with less international exposure, read on below.

There are other large commercial banks in Hong Kong, such as Bank of China, DBS and Standard Chartered. In our experience, they are a lot less willing than HSBC to open accounts for non-residents of HK.

Why? You would think these banks would be hungry for business, right? There’s a simple reason, an unwritten rule that explains this. You have to look at it from the banks’ point of view. There is just so much money flowing out of China into these banks right now that they literally have more money than they know what to do with. With their traditionally conservative lending policies they cannot lend all these deposits out in the relatively small local market. Interest rates on the international markets are miserly, not to mention the counterparty risk of dealing with big western banks, something Asian bankers are acutely aware of.

If you already had too much money to manage, and lots of pressure to generate high returns without risking it, would you want to the additional hassle of managing lots of small deposit accounts from westerners that you can’t really make money on anyhow?

HSBC does not have this problem as they can shift excess liquidity within the group. Local HK banks cannot.

How does offshore banking in Hong Kong differ from the rest of the world?

If you’re accustomed to private banking in Europe (Switzerland for example), you’ll know that most banks don’t like to see too much activity on the account. Transactions in and out are generally discouraged, through the use of high fees and explicit warnings from private bankers! They want money to come in and stay in, and be managed by the bank, preferably on a discretionary basis with high fees.

In Asia it’s the opposite. Hong Kong banks, perhaps because of the city-state’s long history as a trading outpost, is different. HSBC in Hong Kong, for example, is not really interested in opening personal savings accounts for non-residents. When opening corporate accounts they want to see a connection with Asia and they want to see evidence of a real, active business. The benefit is that their transaction fees on wire transfers are much lower than in Switzerland, so for active business this is ideal.

What if I don’t want to use HSBC?

Many of our clients are looking for diversification and they want to avoid the kind of international money-market exposure that big international banks have. The solution would logically be to look for smaller private banks. However, there are no home-grown Hong Kong private banking institutions. You are then left dealing with the branches of European or Asian banks. This is is a far from ideal situation in my view, because:

• You are getting the international exposure you are trying to avoid anyway – you are probably looking at HK banks as a way of avoiding European exposure

• The minimum opening deposits at these banks are hefty, in the range of $1 million to $5 million USD

• Private banks don’t typically accept US citizens as clients, even though the HK commercial banks still do

• If the above three points are not a problem for you, then you still typically need a referral from the head office. These are not banks you can walk into cold off the street.

I would say if you are looking to open an account at a smaller private bank in Asia, Singapore might be a better choice for you. There you will find sophisticated home-grown private banking operations like Bank of Singapore and DBS Private Banking. Needless to say, Q Wealth can recommend paid up members free of charge to experts in both jurisdictions who can help you with your international banking requirements.

Can I open an account without going to Hong Kong?

This is a question we get asked all the time. I already covered it in more depth the original Q Wealth article. Suffice to say the answer is yes, but don’t expect it to be easy going. If you can get to Hong Kong in person, that is recommended. If you have your heart set on a Hong Kong bank account but cannot go there, our local facilitators can assist you. They will do an interview with you by Skype, then on the basis of that they will produce a written business plan, and present your application to the Hong Kong bank along with notarized corporate documents.  The process can take some weeks when you do it this way.

Can I open an account for my Nevis/Marshall Islands/Cook Islands company?

Yes, absolutely, and this is my recommended way to go. Many local providers will try to encourage you to set up a Hong Kong company, but this is not recommended as the annual work and costs involved in compliance are not insignificant. For example, notwithstanding the fact that your income will remain tax free provided you have no HK business, you must still file annual audited accounts and tax returns.

Using an offshore company adds a welcome extra level of privacy and asset protection at a relatively low cost, and Hong Kong banks are completely used to opening accounts for foreign or offshore corporations.

Is there a minimum deposit to open a Corporate Bank Account in Hong Kong?

There is, but it’s very little if you go for one of the commercial banks. A few thousand Hong Kong dollars should get you in.

Are all accounts multi-currency?

Yes, with a few minor exceptions, all Hong Kong bank accounts are multi-currency. This means you have just one account number, but when you log in to your internet banking, you’ll see separate balances for each currency. For example you might have some HK dollars, some Singapore dollars, some US dollars, some Euros etc. You can also hold Chinese Yuan Renminbi in your HK multi-currency bank account, and you can also hold virtual ounces of gold.

Talking of Gold, can I buy Gold in Hong Kong?

Yes, absolutely, Hong Kong is one of the best places in the world to buy and hold gold bullion coins. In fact, if that’s your main objective, you may not even need a bank account as there are also a number of private safe storage facilities in Hong Kong. We are happy to point readers in the right directions.

Conclusion

If you are looking to increase exposure to Asia and decrease your exposure to the western markets, Hong Kong is a first class jurisdiction in which to open an offshore bank account. It isalso be an ideal banking base for a trading company. The stability and rule of law is excellent. The only downside is the lack of choice of banks at the lower levels.

If you are interested in learning more about this topic, please refer to QWR Issue 58 available in the Members Area for the full article. If you are not yet ready to subscribe but would like to keep in touch with our news, why not sign up for our free weekly e-mail newsletter, Q Bytes?

‘FIAT MONEY IS ON THE WAY OUT – NO QUESTION ABOUT IT!’ says Peter Macfarlane. Note: this is a snyopsis of an article sent out this past weekend to Q Bytes readers. If you would like to join the free subscription list for Q Bytes, click here.

I’m just back from Singapore, where I attended a very interesting presentation on FATCA given by a major American law firm, intended for private bankers. More on that in future articles, suffice to say that there are no conclusions we can rely on until the IRS publishes the next set of guidelines, that have been promised for next month. So I’ll probably hold off on commenting until then.

Never mind Asia or America, though – the focus this week is fairly and squarely on Europe. With all the news this past week you might think the Euro is ready collapse. Is it? And can we profit from this collapse?

First of all, things are bad. We are not headed for a crisis, recession or depression. We are already deep in one. And yes, things are going to get a lot worse yet.

However, will the Euro collapse by the end of this year as some are predicting? I don’t think so. I would at the moment rate the chances of Greece leaving the Euro at about 50-50. But if Greece leaves the Eurozone, it does not follow that the Eurozone has to collapse. It would actually be strengthened, which might help to prop up the Euro for a bit longer.

I do predict that both the Euro and the Dollar will continue to fall in tandem, but I believe it will be more of the continued, gradual collapse we are seeing now – what I refer to as ‘stealth devaluation.’ Fiat money is on the way out, no question about it.

What we will definitely see is more collapses of large Euro zone banks. And this is where it gets interesting. Because it creates opportunities for sound investments outside fiat money. And remember, times of crisis are often where great fortunes are created.

Some countries on the periphery of Europe, like Ireland and Denmark, have good fundamentals, and relatively efficient, free market and investor-friendly systems of government – but they have been brought down by the excesses of their banks. These relatively small, nimble economies have the potential to be the first to recover from the crisis. Yet right now, you can buy in cheap.

I’m not saying now is necessarily the right time to jump into Europe, but it’s time to start watching. Opportunities could come along very soon, in both real estate and in shares of fundamentally sound companies that have been brought down by bank collapses. You always hear about the investors in bailed-out banks not losing money. What you don’t hear about is the well-run, cash-generating businesses that might have landed in trouble because their agreed bank financing did not come through at the last minute, or because the administrators of bankrupt banks called in loans early, or simply hiked up interest rates where they were unable to call in loans due to contractual terms. Ireland and Denmark have seen a lot of this.

If you’re looking for a historic precedent, who remembers the Icelandic crisis? Iceland, a small, nimble, economy, was brought to its knees by its banks’ excesses, but recovered quickly and is doing pretty well now, thank you! I think Ireland and Denmark are the next ones to watch.

I’m not the only one with this idea. According to an article in Thursday’s Financial Times, it’s hard to get a 5-star hotel room in Dublin these days as US hedge fund ‘vultures’ have moved in in a big way, looking for rich pickings.

Here at Q Wealth we have established connections in Ireland and Denmark, and I’m looking at private equity placements in these markets with some of our Platinum members. These investments will be outside the banking system (off exchange) assets, backed by ownership of real hard assets. There will be exit strategies for launching on financial markets in the future if that looks like something we should do a few years down the road.

ABOUT Q WEALTH PLATINUM MEMBERSHIP

We do currently have a few vacancies on our Platinum Membership programme. Platinum is our exclusive membership level aimed at people who are already sophisticated investors and probably have basic structures like offshore accounts in place – but are looking for the places where they can get the best returns on their investments, in a secure offshore environment. It’s a group of like-minded individuals who follow the Q Wealth philosophy and would like to exchange ideas with Richard, myself and the Q Wealth team via a highly personalized service, with regular phone calls and exclusive meetings.

If you are seriously interested in learning more about Platinum Membership, and the unique benefits it offers (compared also to our Mastermind level) please contact Richard Cawte.

As we’re all very busy this week with the Symposium in Hong Kong, we prepared in advance a valuable gem for those who didn’t have the chance to join us. We thought you might like to hear about two essential communication tools for PTs (Perpetual Travellers). These are services we wouldn’t be without, that make your life more private, more free, easier, and/or cheaper.

The first is primarily a privacy service. It secures all your communications on the web, not just e-mails but all your surfing, instant messaging, VOIP calls and the like. The second is a service that can save you a fortune in cellphone and data roaming charges, the only mobile phone service we know of with free incoming calls in over 115 countries of the world. And it’s anonymous to boot.

INTRODUCING CRYPTOHIPPIE

You understand that you are being tracked on the Internet and that all your data is scooped up, sifted, sorted, bought and sold. Now you want to protect your Internet traffic and that of your family and customers.

Cryptohippie gives you military-grade technology in an easy-to-use form. You don’t need to be a tech expert to use their system. It was built by top professionals but designed for average computer users. Installation takes about 15 minutes; after that, it runs completely unobtrusively in the background -  you can use the internet just as you always have, but with far more peace of mind.

Not only does this protection cost less than a dollar a day, but they will also give you a secure email account, encrypted chat and excellent tech support.

We use Cryptohippie ourselves and can’t recommend it highly enough. We have known the people behind it for about fourteen years now and we know they are trustworthy beyond doubt.

But you don’t just have to take our word for it. Simon Black calls it “the Rolls Royce of online privacy.” Mark Nestmann uses it too. Steve Sjuggerud says, “Long-story short, it makes it so nobody – not Google, not even your Internet service provider, not the government, and (theoretically of course) not a hacker – can track your Internet activity back to you. This service is not free, but it’s worth every penny.”

We won’t rave more about Cryptohippie here, suffice to say if you are serious about protecting your privacy from prying eyes, you should have it. Cryptohippie have been kind enough to offer all Q Wealth readers a week’s free trial of their service so you can test it for yourself, and see how simple it is to set up and use. This is totally without obligation, and no credit card is required. To take advantage of this offer, visit Cryptohippie here.

Of course, if you want the more technical details of how the service works, and the lengths they go to to protect your privacy, you’ll find all the details on their website.

A REVIEW OF AIR BALTIC CARD – FREE GLOBAL ROAMING

A strange name for a global telephone service, but we first discovered this one by buying an anonymous SIM card (mobile phone chip) on board an Air Baltic flight. If you’re a frequent traveler anywhere, however, you can benefit from this service, and you don’t need to get on a plane to buy it.

Simply put, it allows you to be reached on one global phone number in more than 115 countries, from Albania to Zimbabwe, without you having to pay a penny for incoming calls. In other countries of the world where it is not free, and for outgoing calls from anywhere, you also benefit from rates that are much lower than most cellphone operators.

It’s a pay-as-you-go service – absolutely no fixed contracts, no monthly fees and no minimum spends.  You don’t even need to show any ID to sign up. It costs just EUR 10 to buy the card and you can get started receiving free calls immediately.

Or, if you buy EUR 50 worth of credit up front they give you the card for free. That is credit that you can use for outgoing calls, data services etc, which never expires. The only condition is that to keep your credit active you have to make or receive a call at least once every two years to keep your account active. I think if you get used to using this service, you’re unlikely to go a day without using it.

More recently, they have also started offering data roaming services. While international data roaming remains expensive, Air Baltic Card have some of the best rates, especially their low fixed rate across the entire European Union.

Another innovation is that you can divert incoming calls free to mobile or fixed lines in many countries. So let’s say you travel to a new country and buy a local prepaid SIM card, then divert your international calls to that number, people can still reach you on the same number as always.

And there’s more. If you buy 2 or more cards, you can talk mobile to mobile in any of those 115 countries for 20 cents per minute. Ideal for keeping in touch with your family and friends while on the go.

All you need is an unlocked mobile phone of the GSM type, the SIM card that you can buy online, and you are ready to go. You can buy the SIM card online here.

How does it work? Calls to the Air Baltic Card number, that has an Estonian country prefix, are relatively expensive – though not unreasonably so, we think. Calls from Skype to this number, for example, cost about $0.30 per minute. So they make money on the incoming calls, that covers the cost of the roaming.

There are SIM cards offering free roaming, but this is by far the best one we have come across. We’ve been using it for about five years and wouldn’t be without it.

We hope you enjoy our PT communication solutions, and we’ll be back with you next week with some exciting investing news from China, where I am headed next. Sign up for Q bytes, free of charge, to be the first to hear the news.

Peter Macfarlane talks about the new tax treaties signed between the UK and Switzerland and Germany and Switzerland, and about how this model is likely to be expanded to other countries. If you hold assets in a Swiss bank account you should be making preparations now.

Following the agreements made by the Swiss banks with the IRS, that effectively end Swiss bank accounts for Americans, a Swiss bankers plan called the “Rubik Project” is about to impact British and German residents who hold accounts at Swiss banks. However, we expect this eventually to be expanded to other countries, especially those within the European Union and likely also Australia, India and a few other jurisdictions that have been particularly vociferous about Swiss banking secrecy recently.

If you are resident in one of these countries, you might need to take action now to avoid a huge tax haircut on your Swiss account next year. This article tells you about steps you can take now to secure and safeguard your assets.

The Rubik Project is little known and understood. Even Swiss bankers I talked to told us they had not as yet received any guidance on the subject. Here are some of the highlights:

• The Rubik Project is originally a Swiss initiative. The Swiss have designed it as a way of appeasing other governments while (a) keeping full bank secrecy in place and (b) keeping their own access to important financial markets like London and Frankfurt unhindered.
• The Swiss banks offer to create and administer a flat rate tax on behalf of foreign governments, starting with the British and German governments, though this project is designed to be expanded to other countries. A retroactive tax is explicitly permitted, so that is a particular point to watch out for.
• The Swiss bank will automatically collect tax by deducting from the client’s account. Initially in the case of the UK the amount will be up to 50%, depending how long the account has been opened. In other words, up to half the account balance will be transferred to the foreign tax authority in one fell swoop! The payment will be transferred first to the Swiss federal tax administration, then to the respective foreign government.
• In return for this, the account remains completely anonymous, full bank secrecy is preserved, and the account holder is no longer obliged to declare the account on his or her tax return. In other words, the tax payments are calculated by the banks but the payment is completely anonymous.
• Importantly, this applies not just to natural persons resident in a treaty state, but also to legal entities of the personal/offshore holding company type, where the beneficial owner is a natural person resident in a treaty state. This includes offshore companies, trusts, foundations and the like that do not engage in any commercial or manufacturing business.
• Account holders do have the option to opt out of the anonymous tax collection, by proving that they have fully declared the funds to their home tax authority.

If you are netted by this tax, you are of course free to withdraw your funds before the date your account become liable to the Rubik tax. But the question is where to put them? Here are a few pointers:

1. Since only the USA taxes its citizens, this project only applies to residents of the treaty countries. If for example you are a British citizen resident in Spain, or a German citizen resident in Paraguay, this tax is irrelevant to you. Changing your residency might be easier than you think! The only thing you need to do is make sure your Swiss bank has up to date details on your residency status, and copies of documents to back it up.
2. Setting up a simple company to hold the account, that was always a legal way around the EU Savings Tax Directive, is not going to work any more. There are however two ways to keep companies out of the net:

 - It appears that as long as your company engages in commercial transactions then it is exempt. There is no stated minimum, so this may be just one or two commercial transactions per year, that should be unrelated to the investment activity. However we would recommend if you choose this route you get your bank to agree in writing that the company will be exempt from the haircut. It seems to me that most banks will be keen to do this in order to retain the business.

- You can also change the beneficial ownership of the company, while keeping signatory control. There are a few ways to do this, that we will cover in future. One is by using an insurance company, and another is by using trusts.

Of course, what many British and German clients are doing right now is moving their assets out of Switzerland, often even within the same bank (eg Swiss-owned banks in Singapore)

This project is a uniquely Swiss initiative and we do not see it being widely adopted outside Switzerland.

The tax justice crowd are already claiming that the treaties signed by the UK and Germany are a sell out. It seems to me, however, a very pragmatic and ultimately sensible decision on both parts. The Swiss get to keep their secrecy, including a new treaty provision that limits requests for information to a maximum of 500 individuals per year – a clause specifically inserted to avoid fishing trips. The UK gets good publicity about cracking down on tax cheats, and some people will likely be scared enough to pay the tax. On the other hand, it’s quite an easy tax to legally avoid.

Bottom line? You should be especially aware of the retroactive nature of this treaty model, and the likelihood that it will be expanded to cover other countries. You should be making plans to avoid this, right now. If in doubt, talk to a professional adviser. Paid up Q Wealth members are entitled to free referrals to banks and advisers, including a free initial consultation.

It’s certainly been a turbulent week, even by the standards of this year! Reuters, for example, is hyping about High-flying gold crashing in $100 freefall. I’ve addressed this in detail, what you should be doing (buying farmland, precious metals etc) and what you should not be doing (freaking out about short term fiat currency and metal price movements) in a special last-minute addition to the latest Q Wealth Report.

Edition 58 is available now for download here.

In it you will find for example:

• A detailed article on banking in Hong Kong. This including my suggestion on the best way to open an account… that is not what most of the HK corporate service providers will recommend. And our analysis of the Tax Information Exchange Agreements in place in Hong Kong, as well as the regulation and security of Hong Kong banks. We also cover the possibilities to open accounts without travelling to the territory.

• An article by young entrepreneur Adam Richardson on the use of internet tools in your business.  I have personally learned a lot from Adam, a Q Wealth member whom I met at our event in Cancun a couple of years back. See if you can benefit from his experience and the strategies he proposes.

• A Complete Guide to Uruguay by our recommended contact there. If you’ve ever wanted to know how to open a bank account in Uruguay, how to get residence, how to get there and around, and more… our contact’s details are included and he is happy to help out readers who are interested in knowing more.

This and much more is in the latest Q Wealth Report. If you’re not yet a member, this is what you are missing out on!

Peter Macfarlane answers a reader’s question on second citizenships

There’s a lot of misleading information out there on second passport and economic citizenship programs, and some of that misleading information comes from the very sources that you would normally trust to be accurate – like the governments involved.

One example of this is Montenegro, a small European country with some of Europe’s most beautiful coastline, into which serious money from some very serious investors is discreetly flowing (look for example at the Porto Montenegro development.) I was there last year, shortly after the Montenegrin government announced the first new official economic citizenship program since after 9/11.

Although it was formally announced in 2010, the program appears to have been semi-officially available since 2008.  The legal basis for the economic citizenship program is found in Article 12 of the Citizenship Act of 2008:

“An adult person may be granted Montenegrin citizenship if he or she does not fulfill the requirements referred to in Article 8 of this Law if it would be in the scientific, economic, cultural, sport, national, or other interest of Montenegro”.

During this time, for example, the former Thai prime minister Thaksin Shinawatra received Montenegrin citizenship.

At the end of last year the program was supposedly suspended because of pressure from the European Union. It is, however, our understanding that this program remains open on a semi-official basis. Obtaining a second passport is really just a matter of approaching the government and making a substantial investment in the country. This investment is tax-free and may be in the form of government bonds, bank deposits or real estate. Of course, professional advice is a necessity in transactions of this nature.

A well-designed citizenship program, such as that operated by St Kitts and Nevis, can attract investors and badly needed investment capital to Montenegro, or to any country that decides to implement such a program for that matter.  We hope that in future Montenegro will once again see its way to relaunching this program.