Puerto Rico a New Tax Haven

September 16, 2014 Comments off

A new law exempt immigrants from capital gains taxes in a bid to attract new wealthy residents. The island nation has join other offshore locations, like UK territories Jersey and the Cayman

Puerto Rico

Islands, in helping wealthy individuals pay less tax. Puerto Rico is a US territory, which means it is technically part of the United States but largely administered by an insular local government. It is a four-hour flight from New York City, offers a nice climate, and doesn’t have another obvious strategy for economic growth. But most important is the law passed a year ago, which exempts new residents from the island’s already small 10% capital gains tax.

 

 

Picture of the  in Puerto Rico, Courtesy of Wiki Commons

The local government is luring investment managers, who can often treat their salaries as capital gains, along with other wealthy Americans whose income is largely investment returns, on moving to the island, with the hope that their arrival will coincide with investments in real estate, more service consumption, and perhaps new businesses forming here.

The law does offer a significant financial advantage, but before it was enacted, capital gains were taxed at only 10%—still more than fifteen percentage points lower than the American rate, which could have still attracted wealthy residents. People taking advantage of the law must live on the island for 183 days a year, among other residency requirements, and depending on how strictly they are enforced, Puerto Rico may be more of a retirement destination for the super-wealthy than the kind of place where they operate a business.

The issue, though, are Puerto Rico’s economic woes: 14% unemployment, little in the way natural resources, growing pension obligations, and a robust grey market have the country on the budgetary ropes, with raters looking to downgrade its already junk-level bonds. Those high yields are attracting investors, but they are essentially betting on the expectation that the US won’t let its territory go under. They might not be wrong: The UK, after all, rescued the Caymans when that country foundered financially, but it attached a number of strings, including efforts to limit tax avoidance. While the government guarantees the capital gains tax break through 2035, a country looking to raise revenue will find a way to tap the pockets of its wealthiest residents.

Indeed, tax incentives have proven to be both a boon and a bane to Puerto Rico: The country’s recent economic troubles can be traced in part to the end of costly manufacturing tax breaks the US government gave to companies who made goods on the island. But when those breaks ended, in 2006, many companies kept their facilities on the island while transferring ownership to Cayman Islands subsidiaries, avoiding taxes in both Puerto Rico and the United States.

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Countries with No US Extradition Treaty

August 15, 2014 Comments off

Flag map of Cuba

The best countries for Snowden, the following countries have extradition treaties but do not always comply with US requests: Bolivia, Ecuador, Iceland, Nicaragua, Switzerland, Venezuela, and Zimbabwe.

 

Afghanistan Ethiopia Nepal
Algeria Gabon Niger
Andorra Guinea North Korea
Angola Guinea-Bissau Oman
Armenia Indonesia Qatar
Bahrain Iran Russia
Bangladesh Kazakhstan Rwanda
Belarus Kosovo Samoa
Bhutan Kuwait São Tomé & Príncipe
Bosnia and Herzegovina Laos Saudi Arabia
Brunei Lebanon Senegal
Burkina Faso Libya Serbia
Burundi Macedonia Somalia
Cambodia Madagascar Sudan
Cameroon the Maldives Syria
Cape Verde Mali Taiwan
the Central African Republic the Marshall Islands Togo
Chad Mauritania Tunisia
China Micronesia Uganda
Comoros Moldova Ukraine
Dem. Republic of the Congo Mongolia United Arab Emirates
Cote d’ Ivoire Montenegro Uzbekistan
Cuba Morocco Vanuatu
Djibouti Mozambique the Vatican
Equatorial Guinea Myanmar Vietnam
Eritrea Namibia Yemen

 

Snowden could have taken the steps we recommend on our site and publications on the best countries to obtain a second passport, open an offshore account, and more. Internationalizing is a strategy for anyone who does not want to be under the total control of the whims of one particular government – especially one that is desperate and bankrupt.

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Cuba a Tax & Money Haven for Foreigners

July 16, 2014 Comments off

Havana, Cuba is well known for it’s great cigars, exotic  night life, beautiful women and old charm, but there are more….. Cuba has a territorial tax system for foreigners that are resident in the country. However, ordinary Cubans are taxed on their world wide income.

Faced with financial ruin, one of the last communist countries in the world is now undergoing a new revolution, Capitalism is coming back to Cuba…

The extremely low salaries and cost level adds to the attraction. The average salary for state employed Cuban’s is about USD 19 per month. An average pension is USD 5 per month.

Old Havana Cuba

The saying goes in Cuba:

“The government pretends to pay us and we pretend to work”.

To  motivate Cuban’s to work can be a challenge according to new business owners.

The salaries is not enough to survive, and food is rationed so the state provide basic food on quotas to favorable prices, and traditional health care is free. However, pharmaceuticals are in short supply, but foreigners are given preference before ordinary Cuban’s here as well because they have money and can pay. Many Cuban’s receive money almost monthly in support from their relatives abroad (mostly in the US) that escaped the revolution.

 

Street view of old Havana, Cuba.  Courtesy of Wiki Commons.

A large privatization program has been underway in Cuba for some time. The state has begin giving back the homes taken during the revolution to the people, and all types of small businesses have been / are being privatized.

However, there are still travelling restrictions for ordinary Cuban’s and the media and internet use are strictly controlled by the state. Dissidents are not tolerated.

As it was in Eastern Europe at the fall of communism most buildings and infrastructure incuding public transportation systems are “run down” and in need of extensive renovation.  The state is broke and the Cuban’s have no savings.

The key to future investments are in the hands of the more than a million displaced Cuban’s abroad, many living in the Miami area of the United States. They have the money and could come back to Cuba in the future.

Havana city faces a serious drinking water shortage due to gross neglect of the infrastructure for decades. In addition the United Nations Environmental Program (UNEP) warns that water pollution in Cuba is a serious concern. The standard practices throughout the revolutionary period of virtually non-existent pollution limits, and detrimental agricultural practices,  seem to have taken a significant toll on the Cuban environment.  Cuban bays are widely recognized as being polluted.

New luxury hotels are planned on Cuba to attract foreigners. This hotels will have their own clean water systems.

You can learn more about Cuba in Havana Times and in Havana-Guide,

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Singapore – A Preferred Trust Jurisdiction

June 18, 2014 Comments off

High net worth individuals (“HNWIs“) around the world have traditionally regarded Switzerland, London and New York as the main global wealth management hubs. However, over the last 5 years, Singapore is increasingly regarded by such HNWIs as a serious alternative to these traditional centres.

Singapore Skyline

In 2011, assets under management by Singapore-based managers have reached 1 trillion US dollars. This article briefly highlights the key factors making Singapore a rising jurisdiction amongst HNWIs for the setting up of trusts for their wealth management purposes.

 

Picture Singapore Skyline, courtesy of Nick Socrates Wiki Commons.

 

Robust Regulatory Regime:  Singapore trust law is based substantially upon English trust principles. The principal statutes governing trusts that are most relevant to the private banking and wealth management industry are the Trust Companies Act1 and the Trustees Act2.

The Monetary Authority of Singapore (“MAS”) is the regulator of trust companies under the TCA, and supervises the complementary activities of trust services, private banking and wealth management in Singapore.  The TCA imposes mandatory licensing for all corporations that carry on or hold themselves out as carrying on any “trust business”3 in Singapore.  The licensed trust company is required to appoint at least two resident managers with certain minimum credentials and who must be approved by the MAS after a “fit and proper” test to ensure their suitability for the role.

Well Defined Legal Framework for Trusts: The Trustees Act was amended to facilitate and promote wealth management in Singapore through the use of trusts and trustee services.  This is part of the Singapore government’s broader aim to enhance Singapore’s position as a leading financial and wealth management centre.  Salient provisions of the Trustees Act include:

(a) Reservation of power permitted: Section 90(5) of the Trustees Act expressly provides that no trust or settlement of property on trust shall be invalid by reason only that the settlor reserves certain powers to himself.  The powers concerned are those of investment or asset management.

(b) Promotion of Singapore trusts to foreigners:  Under the Trustees Act, a person who is a non-Singapore citizen nor non-Singapore domicile is excluded from forced inheritance and succession rules, provided the trust is governed under Singapore law and the trustees must be resident in Singapore. This would allay fears by foreigners about the enforceability of such trusts in Singapore due to forced heirship rules in their home jurisdictions.

(c) Rules against perpetuities addressed:  Under Section 27(2)(b) of the Trustees Act, the validity of a trust extends to 100 years unless a shorter period is specified in the trust, in order to address the rule against perpetuities for trusts.

Confidentiality:  Singapore has enacted comprehensive secrecy and confidentiality provisions to the Banking Act, Chapter 19 of Singapore (“Banking Act”)4 and the Trust Companies Act5 to offer protection to the personal information of banking clients and settlors and beneficiaries of trusts. That said, these secrecy laws are subject to Singapore’s commitment to assist the international community in combating against money laundering, terrorism financing and tax evasion.

Friendly Tax Environment:  Singapore has a territorial tax system (only Singapore-sourced income is subject to Singapore income tax) and only taxes foreign-sourced income upon its remittance (or deemed remittance) into Singapore. Capital gains are not subject to tax in Singapore and estate duty was abolished in 2008. Singapore’s highest personal income tax rate is 20% whereas its corporate tax rate is flat at 17%.  In addition, Singapore has an extensive network of double taxation agreements with over 70 jurisdictions.  Qualifying Foreign Trusts (“QFTs”), which are trusts created in writing where the settlor and beneficiaries are neither citizens nor residents of Singapore or are foreign companies, enjoy attractive tax exemptions.  To enjoy the tax exemption, the QFT must be administered by a Singapore licensed trust company.

Open Economy and Sound Economic Policies: Singapore’s greatest competitive advantage is the openness of its economy. It has been regularly rated as one of the world’s freest economy, and easiest jurisdiction to carry on business by the World Bank.  There is no exchange control, and the exchange rate of the Singapore dollar is managed by MAS, against a basket of currencies of its main trading partners, with the objective of keeping inflation low and maintaining the purchasing power of the Singapore dollar.  Global financial institutions (including private bankers) and fund managers are attracted to Singapore due to its competitive tax incentives for the financial and wealth management industry.

Moving Forward

The wealth management industry in Singapore continues to be in an exciting phase of growth, notwithstanding current global economic uncertainties. Singapore has set its sights on attracting the world’s wealthiest to its shores.  With its open economy, well-defined legal and regulatory framework, and tax neutrality, Singapore is well positioned to be the premier wealth management hub in Asia, acting as the gateway for the world to tap Asian investments and to the world for Asian investors.


1 Chapter 336 of Singapore (“TCA”).

2 Chapter 337 of Singapore (“Trustees Act”).

3 “Trust business” is defined widely to include acting as trustee for an express trust, administering an express trust, creating an express trust, and arranging for any person to act as a trustee for an express trust.

4 Under Section 47 of the Banking Act, a blanket prohibition exists against disclosure of “customer information” by a bank (or any of its officers) to any other person except as expressly provided in the Banking Act.

5 Similar provision prohibits disclosure of information regarding a “protected party” (which is defined as, in relation to a trust company, a trust for which the trust company provides trust business services and includes the settlor and beneficiary under the trust) by a licensed trust company (or any of its officers) to any other person, except as expressly provided in the TCA.

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Can You Use Bitcoin for a Tax Haven?

May 12, 2014 Comments off

University of Florida Assistant Law Professor Omri Marian discusses potential tax abuses using Bitcoin.

Omri Marian speaks on Bloomberg Television’s “In The Loop.”  Source: Bloomberg News.

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