Peter Macfarlane comments on Offshore Companies, Banking and Investing for Q Wealth Report

Even though not much has appeared in the press since the election of the new British government, it’s clear from the word on the street that offshore service providers in the BVI and TCI are feeling the heat…

Some years ago, especially under Margaret Thatcher,  policy in London was to encourage the development of offshore financial centres in British territories around the world. It suited Whitehall perfectly: a diverse group of islands with not much going for them, except small tourist industries and dying sugar and banana businesses, could – with the advent of fibre optics and the like – suddenly become tropical trading desks and would no longer need to be propped up with subsidies.

Some islands, like Anguilla, have become minor offshore players that never really took off. Others, most notably the BVI (British Virgin Islands), the Cayman Islands and the TCI (Turks and Caicos Islands) have done really well for themselves, carving out respective niches in the offshore investing business. Cayman is famous for offshore banking and captive insurance, while BVI is possibly the world’s most important offshore corporate registry with a reputation for quality. Over 600,000 IBCs or International Business Corporations are incorporated in the British Virgin Islands, with most of the demand for such services these days coming from Asia.

Unfortunately, all is not rosy and the professional service providers in the BVI and elsewhere are clearly worried. Very worried. Offshore finance has become a thorn in the side of the British government and today, it is something they would love to close down. It can’t be done overnight, as revenues from the offshore finance business provide the largest single contribution to BVI government revenues. But every move London makes in this direction is another nail in the coffin for jurisdictions like the BVI and TCI.

Last year, then UK Prime Minister Gordon Brown explicitly warned several British overseas territories that they would face tough economic sanctions if they did not make further commitments to increase tax transparency and dilute banking secrecy. Faced with little choice, they jumped to attention immediately. The new British government is no less hostile to the British offshore havens, and the writing is on the wall.

I have advised clients for years to avoid doing offshore business in British territories but people are sometimes tempted by the good publicity and marketing, and the assurances from company formation providers there that “everything will be OK.” Recently, however, I’ve had a stream of clients with BVI Business Companies looking to redomicile. Even though not much has appeared in the press since the election of the new British government, it’s clear from the word on the street that offshore service providers are feeling the heat.

Where then, can you go?

You may not have to go far. A lot of people don’t understand the difference between British territories and Members of the British Commonwealth.

British territories are ‘owned’ by the UK. While territories operate with a substantial degree of independence, they are not democratic but are ruled by governors sent from London to represent the Queen.

Members of the Commonwealth, however, are independent sovereign nations who do not have to obey diktats from London. This group include offshore centres like the Bahamas, Antigua, St Vincent, Dominica and my personal favourite for a number of reasons: Nevis. (It’s no coincidence that two of these countries offer economic citizenship programs, that the British territories cannot because people who live on those islands hold British passports)

Looking a little further afield, Panama is another of my favourites. I like to tell people, somewhat tongue-in-cheek, that Panama is a ‘real country’. What I mean by that is you can live there without getting island fever. Panama, with its canal, is a real hub of international trade, of such strategic importance that the US are not about to mess with it. While everyone knows that a BVI company is only at best a brass plate that is not even permitted to do any local business in its place of incorporation, Panama is a real thriving business centre, travel and trade hub where you can easily fly in set up a serious office. Panama also has hundreds of stable banks, whereas little Caribbean islands typically have two or three that are worth speaking of.

So my advice: if you’re looking to incorporate offshore, avoid jurisdictions that are British territories.

If you would like to receive further advice like this on a weekly basis free of charge, be sure to sign up for our free Q Bytes newsletter. We respect your privacy and guarantee not to pass your e-mail to anyone else.

The $64,000 question now, is whether the powers that be can continue to play out the hard ball scenario to protect the dollar that we recently wrote about here: What they Don’t Want You to Know about the Euro Crisis. Whilst a reasonable analyst would conclude that they cannot – meaning that the US dollar is doomed long term – it’s looking like they can support it for a while yet. Germany, France, the UK and Switzerland are playing along.

Expect to see attacks on other currencies, particularly the yen. And, for the many readers whom I know like the Aussie dollar (AUD), I am none too confident in its future. I can tell you I wouldn’t put my money on a currency controlled by a government that just decided to kill the goose that lays the golden egg, by proposing a stiff extra tax on its mining industry.

• So you might want to keep short term funds in US dollars, always being aware that there will be ever more restrictions on what you can do with them. (In the wake of the HIRE Act, several countries, most notably Mexico, have introduced further restrictions on the use of US dollars in their banking systems)

• You definitely need a multi currency bank account, in a neutral private bank in a neutral country which is not likely to introduce exchange controls. A multi-currency account gives you flexibility to switch currencies quickly when the need arises, as it definitely will. You’ll find plenty more of information on some of the best offshore private banks within our Members Area. US citizens in particular should be aware that there are numerous signs of further restrictions on export of capital from the USA. So act now rather than later.

• You should keep substantial wealth in gold… physical gold bullion that is. Again, if you need independent advice on how to invest from people who know what they are talking about, Q Wealth is your source of information. Gold bullion is a non-reportable asset.

• And if your right to privacy is a concern to you – as it should be – hold all your assets through corporate entities like LLCs, corporations (IBCs), offshore trusts or foundations. There are good, inexpensive options out there that can keep your assets one step removed from you and anyone who wants to take them away from you, whilst allowing you to retain control, completely legally of course. Reporting requirements depend on your country of residence and citizenship.

• Finally, we live in turbulent times, and if you like what you read in Q Wealth, there is no substitute for coming to one of our live events. This will give you a chance to meet experts like Peter Macfarlane, Frank Suess, Richard Cawte and Thomas Bolther. For further details on upcoming events, visit our Offshore Events page.

Our next event will be in Ireland in late September. There is just time to get in on the early bird bonuses, enabling you to attend for well under $1000. For this event we are offering several different modules, depending on your level of existing knowledge, and the amount of wealth you manage. VIP Mastermind members receive a 50% discount on the event fees, so there’s another thing to consider.

What if you are not yet a member of Q Wealth? At just $87 for a year’s membership that gives you all these benefits, we think it is well worth your while join today. We will help you sort the wheat from the chaff by introducing you to the best offshore banks and international private bankers who can help you achieve your asset protection goals.

However, if you don’t have $87 to invest in a membership, there’s also a free option: try our five part Secrets of the Super Rich course absolutely free and without obligation.

Whatever you do, as the title of this article suggests, RIGHT NOW is the time to start protecting your assets internationally if you haven’t already done so. Don’t put it off!

Many of our readers are interested in offshore investing and offshore investment funds, and they frequently contact us for advice. The question we are most frequently asked is: Do high yield investment programs really exist?

In this article we look first at offshore investing scams and how to avoid them, then we will move on to the topic of genuine alternative offshore investment opportunities that can legitimately generate high returns for investors.

Of course,  programs referred to as HYIPs (High Yield Investment Programs) do exist, but most of them are scams – or more specifically ponzi schemes. There are internet HYIPs where you can invest $10 and get $20 back the next day. And there are more sophisticated scams, involving complicated terminology like ‘bank debentures’ or ‘standby letters of credit’. There are whole websites dedicated to scam concepts like ‘offshore fund leasing.’ People frequently lose hundreds of thousands of dollars to these more sophisticated rip-offs. Such funds, once lost, are almost impossible to recover.

One of the ironies about such deals is that the scammers often claim that they are making money with exotic named things inter-bank trading, seasoned notes, and other mysterious offshore financial instruments… some so secretive that ordinary bankers don’t know they exist!

Years ago we used to ridicule such ideas. We used to say that the bankers didn’t know about them simply because such things don’t exist. But the last few years have proven us wrong – there are indeed weird things going on behind the scenes that most bankers don’t understand or even know about! For starters, most bankers don’t seem to realize the facts about the giant Federal Reserve scam, a privately-owned company, printing money backed by nothing, that is responsible for the devaluation of the dollar. And very few bankers understand or have even heard of the mysterious forex operation CLS Bank that settles around $5 trillion worth of transactions every day. The lesson here is that all good scams have an element of truth.

But, here at Q Wealth we like to accentuate the positive. So let’s rephrase the question a bit. Are there any legitimate offshore investment funds where you can make say 10% or 15% return with little risk? The answer is yes, such opportunities do exist. But it does take some work to find them. And once you find them, you should be prepared to dedicate some time to monitoring them.

The general rule is that the higher the rate of return, the higher the risk. Some people are happier than others to accept risk. For example you might dedicate a small part of your investment portfolio to high risk ‘play money’. Younger people can generally afford to accept a higher degree of risk than persons approaching retirement. Absolutely the worst thing you can do, of course, is to put everything into one offshore investment because the worst can always happen.

So where do you find such opportunities? In Q Wealth Report of course! We are constantly on the lookout for genuine investment opportunities and funds that have the offshore advantage. What is the offshore advantage? Since there is no tax deducted at source and no automatic reporting, you can often roll over profits and reinvest them, rather than paying tax on the income. Over a period of five or ten years, the compounding effect can be huge.

The rule of thumb is that with onshore investment funds you might take three steps forward, then two steps back as the tax is deducted. With offshore investing funds, you take three steps forward, then the next year you take three steps forward again… and so on, and so on.

In our flagship Q Wealth newsletter, we frequently spotlight offshore investment funds and opportunities that we have done full due diligence on. There is always a risk, but we can help you minimize it. Since the investments we feature are generally managed offshore, you can participate as a sophisticated investor or via your offshore corporation, foundation or IBC.

Frequently Q Wealth Events also turn into incubators for great offshore investment ideas, that have a potential for high return. Getting together for a few days with like minded, free thinking individuals and simply brainstorming is a fantastic way to get these offshore income generating opportunities off the ground. Our next event will be in Ireland in September, and we will be focusing it even more than ever on offshore investments. Even if you only have a small amount to invest, consider coming along. Contact us to be put on the list and we will let you know as soon as the dates are fixed.

Finally, if you are interested in our offshore investment advice and are new to this site, don’t miss the opportunity to sign up for our free five part course Secrets of the Super Rich, delivered free and without obligation to your e-mail inbox. You will also receive a free subscription to Q Bytes newsletter, which from time to time features serious high value opportunities too.

One offshore low tax zone we don’t hear much about is the Netherlands Antilles, a group of islands in the Caribbean that were colonised by the Dutch. However, they have long served as an attractive offshore base for European and other multi-nationals, as well as quite a number of offshore banks including First Caribbean International Bank and Maduro & Curiels. Interestingly, some major reforms are underway there that may be of interest to our readers.

Bucking the worldwide trend, and thankfully disproving the naysayers who would like to suggest that offshore havens have no future, the Netherlands could have a zero corporate tax zone and an attractive, better regulated offshore banking and asset protection system, as of October this year.

In that month, the current political entity known as the Netherlands Antilles will be broken up. The various Caribbean islands that currently make up the Antilles will get a new political status. Curaçao and St Maarten will become ‘autonomous territories’ within the Kingdom of the Netherlands, the same status that Aruba has right now.

The other three islands of the Netherlands Antilles – Bonaire, St Eustatius and Saba, together called the BES islands – will become special municipalities of the Netherlands. More details about the Netherlands Antilles and the political changes taking place can be found on Wikipedia.

The BES islands will get their own tax code, and the current proposal does not include a corporate income tax. (Distribution of dividends to shareholders will be subject to a ‘revenue tax’ of 5%)  With this special tax code, and highly privileged access to the European Union via their status as municipalities within the Netherlands, these islands will become very attractive offshore financial havens.

The Ministry in the Dutch capital writes: “The proposed system for corporate and dividend taxation for the BES islands strengthens the relative competitive position of the BES islands in the Caribbean region.”  The reference group studied for this purpose includes Bermuda and the British Virgin Islands, whose governments are reportedly none too happy about the proposal.

To qualify for the no-tax zone, companies do have to meet certain economic substance conditions. In other words, mere shell companies or IBCs will not be permitted. The companies must utilise at least half of their assets for business activities on the islands, and will be required to employ at least three locals. Still, considering that these islands are attractive places to live, comparing very favorably with the best of the Caribbean jurisdictions, I don’t think most people would consider these requirements unduly burdensome.

In practice, say local experts, the new tax code might not make big difference. Right now the BES islands have so-called e-zones ór free trade zones where the corporate tax rate is just 2% .  The greatest beneficiary of the current system is probably Valero Energy Corporation, a US oil trading giant, which maintains an oil terminal on St Eustatius.

So what will become of Curaçao and St Maarten? These two islands will maintain their fiscal autonomy, but they are bound by the EU code of conduct on business taxation.

Want to learn more? We will be monitoring this subject in Q Bytes, our free newsletter, over the coming months. By signing up you will receive lots of free useful and valuable information on offshore banking, asset protection, second passports and much more. All with our no spam guarantee. Sign up for your free Q Bytes today!