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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER
Your Link to Freedom, Privacy & Prosperity in the Offshore World
Tuesday, August 8, 2003 - Vol. 5 No. 94
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In This Issue:
* COMMENT: Privacy in Offshore Accounts
* OFFSHORE: Bankers Say Swiss Are Tough. Cyprus Ends Tax Haven Status.
Isle Of Man Investors Warned. Pacific Presidents. I.R.S. Wants Tax Informers.
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COMMENT: Privacy in Offshore Accounts
Dear A-Letter Reader:
The concept of "bank secrecy" has changed greatly in recent years. In the right jurisdiction, bank secrecy provides an almost impenetrable bulwark against greedy lawyers, vindictive ex-spouses and industrial spies. But it is no longer absolute.
Thirty years ago, it was possible to hire an attorney in several offshore jurisdictions—including Switzerland, Liechtenstein or The Bahamas—and have the attorney open an offshore bank account, in their name, and operate it for you without the bank knowing your real identity.
In those days, secrecy was virtually complete. No one—including agents of the U.S. government —could penetrate it, except in very unusual circumstances.
All this began to change in the 1970s, when the USA signed its first "Mutual Legal Assistance Treaty" (MLAT) with Switzerland. This agreement obligated Switzerland to waive bank secrecy when the USA presented evidence that money tied to a serious crime in the USA was held in Switzerland. Tax offenses, with the exception of tax fraud, were not covered.
Since then, the USA has ratified nearly 50 additional MLATs. And various international organizations, including the Organization for Economic Cooperation and Development (OECD)and its stepchild, the Financial Action Task Force (FATF), have prepared "blacklists" of countries in which "excessive financial secrecy" prevails, and tried to impose sanctions against those countries not agreeing to restrict it. The OECD has also tried to eliminate bank secrecy with reference to tax investigations.
But despite these developments, you can still take your domestic wealth off the radar screen to achieve practical, if not necessarily impenetrable, privacy.
Why bank offshore? One important reason is to protect yourself from the global litigation epidemic. Since lawyers size up targets for lawsuits by looking for their money, if that money is out of sight, offshore, someone considering suing you may decide to find a target with more visible wealth.
The privacy advantages of dealing offshore remain in place, but only if you follow a few simple rules.
- Choose the right jurisdiction. Dozens of formerly excellent offshore jurisdictions have virtually eliminated banking secrecy; some have even agreed to exchange information with foreign tax authorities. However, a few jurisdictions have not given in. The Sovereign Society rates the following jurisdictions as the best: Switzerland, Panama, Liechtenstein and Hong Kong.
- Understand foreign "due diligence" requirements. The vast majority of offshore banks now require prospective customers to identity themselves with a passport or other official document along with the source of the money they are depositing. However, the application for your account along with all documentation you provide is subject to bank secrecy laws.
- Don't try to cheat on taxes. Most high-tax countries impose taxes on the world wide income of their residents. While domestic tax authorities don't generally have the authority to go on offshore "fishing expeditions" to uncover unreported offshore income, our recommendation is to report the existence of the account and pay whatever taxes are due. There have been many more prosecutions for failing to report offshore transactions than for engaging in allegedly illegal reported transactions.
- Don't open an account at the foreign branch of a domestic bank, or a foreign bank that has domestic branches. Either of these options places the bank under the jurisdiction of your country's domestic courts, thus providing litigants with additional opportunities to penetrate offshore banking secrecy.
- U.S. citizens shouldn't use offshore accounts to hold U.S. securities.
U.S. depositors in foreign banks who purchase U.S. securities and refuse to identify themselves to the IRSa re subject to a 31% withholding tax—not just on income from the account, but on their entire investment.
That's the way it looks from here.
Mark Nestmann, Vienna, Austria
assetpro@nestmann.com
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COMMENT LINKS:
* Frivolous lawsuits, including "Mass murderer sues to have bomb-making
materials returned." LINK: http://overlawyered.com.
* MLATs reduce offshore bank secrecy. LINK: http://travel.state.gov/mlat.html
Mark Nestmann's special report on MLATs.
LINK: http://www.agora-inc.com/reports/190SMNML/W190CB47/
* FATF demands end to offshore bank secrecy. LINK: http://www.oecd.org/fatf
* Sovereign Society annual review of top offshore banking jurisdictions. LINK:
http://www.sovereignsociety.com/vmembers.php?nid=604 (members only)
* Sovereign Society "Offshore Convenient Account" member benefit.
LINK: http://www.sovereignsociety.com/vmembers.php?sec=acctprog (members only)
* Join The Sovereign Society.
LINK: http://www.agora-inc.com/reports/SVS/WSVSCB14/
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* OFFSHORE *
BANKERS SAY SWISS ARE TOUGH
ZURICH: Swiss anti-money laundering laws do the job.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=12933
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CYPRUS ENDS TAX HAVEN STATUS
NICOSIA: Formal law changes conform to EU demands.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=12931
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ISLE OF MAN INVESTORS WARNED
DOUDLAS: Bogus stock schemes are investment threat on the Isle of Man.
LINK: http://www.tax-news.com/asp/story/story.asp?storyname=12942
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PACIFIC PRESIDENTS
NAURU elects fourth president this year.
LINK: http://www.abc.net.au/news/newsitems/s922056.htm
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I.R.S. WANTS TAX INFORMERS
IRS pays informers who turn in tax cheats; offshore a target.
LINK: http://moneycentral.msn.com/content/Taxes/P43944.asp
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THE SOVEREIGN SOCIETY OFFSHORE A-LETTER. *
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