The world is smaller than ever. After just a seven-hour flight from the US East Coast, you could be in Austria, checking your gold into one of the safest, most private vaults in Europe. After a three-hour flight from Miami, you could arrive in Panama, where US dollar CDs at local banks pay as much as 4.5% interest. Without even leaving home, you can create an LLC in Nevis, where the asset protection laws are among the strongest on the planet. And with a surprisingly small investment, you can acquire the ultimate tool to reduce your dependence on any one government: a second citizenship and passport.
In recent years, of course, there’s been a firestorm of media and government criticism of any offshore dealings. For instance, in 2016, more than 11.5 million documents were stolen from Panamanian law firm Mossack Fonseca and turned over to the International Consortium of Investigative Journalists (ICIJ). The mainstream media chose headlines like these when they announced the theft of what came to be known as the “Panama Papers”:
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“Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption“
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“Massive Leak Reveals the Global Elite’s Secret Cash Havens“
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“Inside the Firm that Helps the Super-Rich Hide Their Money“
And there were comments like this one, from economist Gabriel Zucman: “These findings show how deeply ingrained harmful practices and criminality are in the offshore world.”
I’m sure you get the idea.
Except the stolen documents reveal very little actual criminality. If you read past the headlines, you’ll see statements like these:
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“Most of the services the offshore industry provides are legal if used by the law abiding.”
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“As with many of Mossack Fonseca’s clients, there is no evidence that [name] used his companies for improper purposes.”
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“Holding money in an offshore company is generally not illegal.”
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“Having an offshore company isn’t illegal. For some international business transactions, it’s a logical choice.”
Indeed, according to the International Consortium of Investigative Journalists (ICIJ), the non-profit organization to which the stolen documents were conveyed, only a handful of the 214,000 offshore entities exposed in the leak were tied to any wrongdoing.
A better headline would have been, “Panama Papers Proves Most Offshore Investments Are Legal.” But of course, headlines like that don’t “sell” as effectively as more sensationalistic ones.
The fact is that investing, doing business, and setting up relationships outside your own country – for most readers, the US – has unique benefits you can’t achieve any other way. Here are a few of them:
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Access to investment and business opportunities not available in the US. The average interest rate paid by American banks on one-year CDs is just 0.49%. Yet by taking that three-hour flight to Panama, you can buy a one-year CD that pays six times that much. Choose a five-year CD, and you get an interest rate of 4.5%. And this in a bank with rock-solid capitalization – much safer than the average US financial institution.
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Reduced portfolio risk. It’s been proven time and again over the last few decades that globally diversified investment portfolios carry significantly less long-term risk than those concentrated in only one market. When you invest in different international markets, you diversify across different markets, currencies, and legal systems.
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Asset protection. There’s no sugar-coating it: the US is by far the world’s lawsuit leader. About 90% of the world’s lawsuits are filed in the good old Red, White, and Blue. And here’s another fact: domestic strategies and structures to protect yourself against frivolous lawsuits aren't always effective. Internationalizing yourself with the right offshore “structure” is a great way to gain protection from the US lawsuit industry. It can also protect you from the rising threat of civil forfeiture.
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Increased privacy. In the US, almost every piece of personal information that you might want to keep private is for sale. At the click of a mouse, investigators, identity thieves, stalkers, and just about anyone else can locate your assets. Outside the US, the picture is very different. Most countries – even those without so-called “bank secrecy laws” – prohibit banks or securities brokers from releasing customer data except under strict rules. The wholesale data sharing between banks, information brokers, and the government that's routine in the US simply isn’t allowed in other countries.
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Investment continuity. The attacks of Sept. 11, 2001 demonstrated the vulnerability of the American financial infrastructure. US securities markets closed for four days after the attack. But US investors with foreign accounts could trade foreign securities on foreign exchanges. There's no assurance that a future attack on the US financial infrastructure wouldn't lead to a longer suspension of trading. It’s only prudent to maintain nest egg positions in politically neutral international havens.
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Protection from foreign exchange controls. Another compelling reason to consider international investments is that they can help protect you from restrictions the US could impose on capital movements abroad. They’re already in effect in dozens of countries, including the world’s two most populous countries: China and India. While Uncle Sam has never imposed direct exchange controls, the president can put them into effect with a stroke of a pen. And with the federal government promising endless trillion-dollar deficits and unfunded mandates that now exceed $200 trillion, no one should rule them out.
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Tax savings opportunities. Mention “tax savings” and “offshore” in the same breath, and the average Joe thinks you’re talking about tax fraud or money laundering. But thanks to the 2017 tax reform bill, there are more opportunities to save tax internationally than ever before. For instance, if an American structures an international business properly, they’ll pay tax on the profits at half the normal corporate rate – 10.5% instead of 21%. You can also invest your IRA offshore and get the same tax benefits as you would domestically. If you live outside the US full-time, you can exclude up to $105,900 of your earned income from any US tax liability. You can double that exemption if you’re married and your spouse accompanies you offshore.
What are you waiting for? The global investment marketplace is at your doorstep. If you need help getting started – just contact us at . We have many resources available to assist you.
