Category Archives: Central and South American Tax & Money Havens

Belize – Offshore corporations, offshore banking and residency possibilites with no taxes.

Central and South American Tax & Money Havens, , , , , ,

Belize (formerly British Honduras) is the only English-speaking nation in Central America, its offshore laws ensure maximum financial privacy. These laws allow asset-protection trusts, maritime registration and encourage international business and banking.

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The Great Blue Hole in Belize. Picture courtesy of guyspeed.com. Click on the image for larger picture.

There are no local income taxes, either personal or corporate, and no currency exchange controls. So it’s a place where you can arrange your affairs so you gain residency here but pay no taxes locally. And one of the most attractive benefits is that you can maintain your residency in Belize without actually spending much time there.

In Belize people are friendly, oceanfront real estate is still relatively cheap, and Belize’s parliament, courts and government are low tax and pro-offshore.

Designed to attract foreigners as residents, Belize’s “qualified retired persons” (QRP) program resembles Panama’s popular pensionado program. The QRP (administered by the Belize Tourism Board) offers significant tax incentives to those who become permanent residents of Belize, but not full citizens. The program is mostly aimed at residents of the U.S., Canada and the U.K., but it’s open to all.

When you qualify, you’re exempted from all taxes on income from sources outside Belize. QRPs pay no import duties on personal effects, household goods or on a motor vehicle or other transport, such as an airplane or boat.

There’s no minimum time you have to spend in Belize and you can maintain your status so long as you maintain a permanent local residence, such as a small apartment or condo. You must be 45 years of age or older to qualify and be able to prove personal financial ability to support yourself and any dependents.

Initial fees for the program are $700, plus $100 for an ID card upon application approval. The minimum financial requirements include an annual income of at least $24,000 from a pension, annuity or other sources outside Belize.

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Paraguay – Dollar economy – Still no personal income tax

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Paraguay has a number of advantages going for it like 10% VAT (the lowest in South America), no personal income tax, 10% corporate tax (the lowest in South America), low labor cost, young population, plenty of commodities and enormous fresh water resources. In addition the capital Asunción has the lowest general price level in the world of any capital.

The personal “no income tax” regime should last at least to 2013 and very likely beyond. Bolivia and Guatemala are other countries in the region with “low or almost no” personal income tax. The employer’s contribution to social security is 16.5% of an employee’s (worker) total salary which includes bonuses. The employee’s (worker) portion is 9%

However, dividend distributions are subject to a 5% corporate income tax. Dividends distributed to non residents are subject to a 15% withholding tax.

Paraguay has a high degree of openness in the economy and a high degree of dollarization. There is no foreign exchange control in Paraguay.

Paraguay is a member of Mercosur. Other members of this trade organization are Argentine, Brazil and Uruguay. Venezuela is in the process of being a future member. The purpose of Mercosur is free trade with limited or no custom between its member countries as well as visa free travelling. Mercosur is planning to introduce the same “car plate” among its members.

See more in IMF research document regarding Paraguay here

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What is a trust – Set up a trust in Uruguay

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What is a Trust?

It is a legal transaction that involves the transfer of property or rights of the estate of a person or entity to form an autonomous patrimony entrusted to an administrator to manage it or to exercise the rights in compliance with certain instructions in favor of one or more beneficiaries.In compliance with the prescribed term or condition, such property or rights are restored to whom the property or rights conveyed or transferred to a third party.

How are called the different parties involved in the establishment of a trust?
The person who conveys the property or rights of the business object to the instructions on how to proceed with it, is called the trustor or settlor.The person who receives such property or right (trust assets) in order to comply with the provisions of the deed or deed of trust, this is called TRUST. The trustee or beneficiary is the person who receives the benefits of the property or rights managed by the Trust. The Trustor (the person who conveys the property or rights) may also be the beneficiary.The property business objects out of the assets of the Trustor (who conveys the goods) and constitute the trust property passing to form an independent involvement heritage assets of the Trust and excluded from the guarantee of the creditors of this. Both the Trustor and the Beneficiary may exercise their rights to ensure compliance with the trust according to script it gives rise.

 

Use of an Uruguay based Trust ?
Applications for this new instrument are different: one of the most anticipated in Uruguay is as facilitator of the credit instrument. Those who need to obtain a loan can establish a trust which by its nature separates certain assets of the estate of the person to constitute a separate estate, free of any affectation. The trust is a more efficient means of assurance in the field of business, giving greater legal certainty for investors. Compared to the real rights of mortgage or pledge, (traditional security instruments used in Uruguay) in the Trust property has been transferred to the Trustee who will administer the Trust in accordance with the instructions provided by the Trustor. Upon fulfilling the condition or term of affection that heritage will be returned to Trustor or Beneficiary shall be transmitted in compliance with the agreement without court action.Contact us if you want to set up a trust in Uruguay, or need advise regarding the use of trusts.
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Why you need a private foundation – L’Oreal heiress Liliane Bettencourt’s fortune dispute

Central and South American Tax & Money Havens, European Tax & Money Havens, Far East Tax & Money Havens, , , , , ,

If you establish a private foundation, and are careful with how you use Swiss bank accounts, you would avoid repeating Liliane Bettencourt’s problems.

The story of L’Oreal heiress Liliane Bettencourt fortune have it all to provoke a scandal ; A L’Oreal heiress gives EUR 1.3 billion to a friend, causing an investigation, here hiding of secret funds in Switzerland, and here attempt to move the money to Singapore and Uruguay, as well as a jealous daughter and more…….  Read the story here.

If you understand French you can listen to the secrets tapes here.

The lesson from Liliane Bettencourt’s case is be careful with how you use Swiss banks and get distance to your fortune by using foundations and trust’s in selected jurisdictions.

Contact us if you need assistance to establish a private foundation or advise regarding the use of Swiss bank and other international banking centers.

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Private Foundations

African Tax & Money Havens, Central and South American Tax & Money Havens, European Tax & Money Havens, Indian and Pacific Ocean Tax & Money Havens, , , , ,

We can help you to establish a Private Foundation. Essentially, Private Foundations act as a holding entity for assets transferred to them.  The transfer is usually in the form of a gift, by a person referred to as the donor and in some jurisdictions, the term “settlor” is used.

The Private Foundation have traditionally been used over the centuries for benevolent or charitable purposes, often being associated with pieces of art or other valuable collections. The Private Foundation works well for individuals desiring a straight forward asset holding/protection structure designed to provide beneficiaries with an asset-derived income.

Foundations cannot be used for trading activities or for conducting financial service business activities.  However, the buying and selling of assets (real estate, shares in trading companies, investments etc.) is not considered a trading activity. Foundations can act as a shareholder but not a director or officer, in a trading entity like a corporation.

There is no gift tax to pay at the time a Foundation is established, and earnings generated by the Foundation are tax exempt. However, incomes paid by Foundations to its beneficiaries, once declared by beneficiaries, might be subject to local taxation at their place of domicile.

Because the Foundation’s assets are gifted, the donor receives no payment in return. The Foundation becomes the owner of the assets endowed to it and, as such, the entity has a separate legal personality. It is in this area that Foundations fundamentally differ from trusts, since trusts are not considered to be legal entities.  In the case of a trust, legal title of its assets is held in the name of the trustee.

In order for the Foundation to function, the assets need to have been endowed and placed at the disposal of the Foundation and its officers.  This endowment satisfies the tax inspector’s question “has the property ceased to be the asset of the tax-payer (donor)”. One of the documents required at the time of registration of a Foundation is a Certificate of Initial Assets signed by its officers. This declaration must confirm that assets of not less than US$ 10,000 in value have been endowed to the Foundation. Upon receipt of the Certificate of Initial Assets, the Registry will issue a ‘Certificate of Endorsement of Statement of Value of Initial Assets’.  The specific assets endowed at the time of registration need not be named and additional assets can be gifted at anytime, again without any public record of their value or their source.

Unlike trusts, once assets are placed in a Foundation, they cannot be withdrawn at will by the donor.  A statement relating to the endowed assets also needs to be included in the Memorandum of Endowment signed by the donor and submitted with the application to register. The Memorandum is not filed, but is returned to the Foundation attached to a Certificate of Endorsement of Documents issued. An ‘Extract of Particulars of the Memorandum of Endowment’, signed by the Secretary of the Foundation is filed. The names, addresses and specimen signatures of the appointed officers and the Secretary, and details of the address to be used for the service of documents to the donor are included in this Extract. The name of the donor does not appear in the Extract and, therefore, need not become public information. In addition, more than one donor is permissible, and there are no restrictions on residency or nationality of the donor.  However, a donor cannot act as an officer or be appointed as the Secretary of the Foundation, but can participate in its supervisory board, if one is appointed.  Moreover, the donor can be one of the beneficiaries.

Management responsibility of a Private Foundation sits with its officers who determine the distribution of income and capital in accordance with the donor’s instructions.

A minimum of three officers need to be appointed, and at least two officers must be physical persons. One of the officers can also act as the Secretary, and a corporate Secretary is permitted. Consent to Act declarations for each officer and the Secretary need to be submitted with the application to register the Foundation, and these are filed together with the Extract. As with the donor, there are no restrictions on residency or nationality for the officers and/or the Secretary. Officers can delegate their powers to one another. To assist in the management of a Foundation, the officers may decide to appoint a Supervisory Board comprised of at least three physical persons.  Private Foundation Law permits a donor to participate on the Supervisory Board.

The Supervisory Board must be established as a body that is independent of its officers and beneficiaries. The Board acts like the Protector of a trust. Similarly, auditors may also be appointed. The procedural rules for running a Foundation are set out in the Management Articles, a document that is very similar in scope to the bylaws of a corporation. The Articles are signed by the donor and submitted with the application to register the Foundation. Like the Memorandum, the Management Articles are not filed, but returned to the Foundation attached to a Certificate of Endorsement of Documents.

A typical function of a Private Foundation is to provide beneficiaries with an income derived from an asset(s) endowed to it from a donor(s). As has been outlined above, the donor provides guidelines as to how the Foundation is to be managed and also defines who the beneficiaries will be, what payments should be paid to the beneficiaries, and when payments should occur.

While the officers of the Foundation need to know the names of the beneficiaries, such information is not required to be filed. A donor can also provide further guidance to assist officers to manage the Foundation in the form of a Letter of Wishes and, from time to time, change the beneficiaries. The Letter of Wishes is an internal document and not, therefore, filed.

Once formed, a mandatory annual return for the Foundation, signed by the Secretary must be submitted.  The annual return must confirm that the information filed in the Extract remains correct and that proper accounts have been maintained.  Annual returns are not publicly filed.

The Private Foundation provides a perfect holding structure for emerging financial and asset empires, while distancing the donor from otherwise taxable events.  The Foundation permits income generated from assets held by the Foundation to be available to the donor and subsequently his heirs in accordance with the (changing) wishes of the donor/settlor.   At the same time, the Foundation keeps intact the wealth-generating activities of a family (shipping operation, hotels, property, licenses, royalties, manufacturing or service activities).

The above concept is based on Austrian law and also used in Liberian Private Foundations. Similar foundations are available other places like Panama and Mauritius.

Contact us if you are interested to set up a Private Foundation.

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