Trading Offshore for Tax Purposes?

[karim0028 10]

Has anyone in the US/Europe thought about setting up a foreign entity and trading through that or trading fully offshore (ie. outside your own domicile) through that for tax reasons?

 

I'm curious if the folks trading larger accounts have ever contemplated it and if you did, did you go ahead and do it? If not, why did you decide against it?

[DugDug 10]

In the UK as in other places the focus is more along the lines of where the business decisions are actually made and who controls the entity.

If you live in the UK and make all the decisions here, and trade via an offshore vehicle then the tax authorities can deem that the profits should be brought on shore and hence taxed.

Ways around this are to use collective schemes, trusts etc; however the premise remains the same.... and the tax authorities are likely to deem the money is to be taxed here, so by not declaring you are evading tax.... not a good result. All of this will cost money as well.

It all depends on your assessment of risk, future tax penalties and fines.... appropriate for a trading forum.

This will depend entirely on the individual and basically tax is something only qualified accountants and lawyers should (but not necessarily helpfully ) be advising you on.

Personally I just pay my taxes and focus on making the money - I am happy to sign a big cheque to the tax authorities every year.... it means I have made money.

[karim0028 10]

Well, so allow me to clarify...... Its not really just about taxes... I'm looking at some big pic fundamentals... Looking at the US, i am convinced that taxes wil go up (govt is broke), over the long term dollar will go down and i would like to be able to trade in a more viable currency like CHF or something similar that is not being inflated away (at least as fast as the dollar, make no mistake, all govt favors inflation)... With the debts being accumulated at the govt level, there is no more palatable solution that i can ascertain than inflating the debt away....

 

But, there is is no way that i can see to protect my business (ie. trading capital), aside from going overseas (as any diligent business owner would do to protect their business and lively hood)... I am already noticing that inflation is picking up, it may not be apparent in things getting more "expensive" but i do see packages getting smaller while prices remain the same (defacto expensive)..... Another form of invisible inflation.....

 

Has anyone thought about it that way?

[DugDug 10]

so if you are looking to hedge your cash against inflation then by going overseas is a different trade. You will then have currency risk, and you then assume the other country has no inflation either and the value of its currency will rise relative to the US.

Lets say inflation runs to 10%, you will still only make money if the USD falls against the currency you are in. As when you bring the money back if the currency has not moved the monetary amount is the same. I think plenty of countries will have problems.

In order to protect he purchasing power of your cash - while there are often many products offering to do this. The best way I have seen is to buy real assets in your local currency (not futures contracts as the premium can kill you) and ideally borrow today at low rates and let inflation eat away your debt - just like the government:)

Things like gold, land (not necessarily houses), diamonds, art, stocks with businesses that can easily raise prices and maintain its profits. TIPs (google them)

Now then you have the risk of the asset falling in real terms, transaction costs etc;

To protect against inflation is a long term proposition generally.

As per any trade their is a risk/cost of protection.

[cw30000 10]

Well, so allow me to clarify...... Its not really just about taxes... I'm looking at some big pic fundamentals... Looking at the US, i am convinced that taxes wil go up (govt is broke), over the long term dollar will go down and i would like to be able to trade in a more viable currency like CHF or something similar that is not being inflated away (at least as fast as the dollar, make no mistake, all govt favors inflation)... With the debts being accumulated at the govt level, there is no more palatable solution that i can ascertain than inflating the debt away....

 

But, there is is no way that i can see to protect my business (ie. trading capital), aside from going overseas (as any diligent business owner would do to protect their business and lively hood)... I am already noticing that inflation is picking up, it may not be apparent in things getting more "expensive" but i do see packages getting smaller while prices remain the same (defacto expensive)..... Another form of invisible inflation.....

 

Has anyone thought about it that way?

 

Regardless where you go, the end result is the same. The world is running on fiat currency and guarantee there will be inflation. The problems with US is we have too much debt, bad policy, rewarding bad behaviors, etc etc. If you are profitable, I would advise you to leave this country and denounce your citizenship. Go to country like Singapore where there is no tax for trading. You don't even need to learn another language, they speak English there.

[hunter1 10]

Short answer is yes. Many advantages if you know where and how to set up offshore. You must be willing to spend from $5000 to $10000 to set things up properly in the correct jurisdictions. Taxes are least of the advantages. Complete protection from lawsuits and government confiscations for example. Possibility of a non U.S. passport

[sevensa 10]

Short answer is yes. Many advantages if you know where and how to set up offshore. You must be willing to spend from $5000 to $10000 to set things up properly in the correct jurisdictions. Taxes are least of the advantages. Complete protection from lawsuits and government confiscations for example. Possibility of a non U.S. passport

 

Unless you are planning to do something illegal, why is this an advantage?

[karim0028 10]

Unless you are planning to do something illegal, why is this an advantage?

 

Sevensa, you assume that everyone who wants protection is doing something illegal.... Lawsuits can happen at any time and for any stupid reason, if your assets are out of reach lawsuits can be settled quickly and for little cost.... If they are domestic, contingency fee lawyers see $$$$'s and wont settle...

 

Hunter1, do you have any tips on jurisdictions, entities, offshore brokers, etc...?

[sicktrader 10]

Until yesterday I would do anything to screw the IRS, today I respect its power. Wife went to the grocery yesterday evening to buy some things before this big storm, and her debit was declined. She came home all pissed, logged in the bank account to find a wopping balance of $0 ( far from where it should have been). Called the bank last night and was told it was an IRS levy. Man was she pissed at me since it stemmed from my business. Since I was ordered to the couch, I proceeded to get drunk, pass out on the couch, and subsequently missed a number of trades through the night. Spent an hour and a half this morning talking to the IRS, had to get to the third agent before I found one that wasn't a fcking idiot. Turns out, they have the power to take anything they want, when they want, without a notification. Yes, I was supposed to call them two weeks ago and didn't, so this was their action. They said they go to one or more of your bank accounts, and take whatever is in there. Which is what they did. Told me I have 30 days to get '08 taxes in or they will freeze everything for the entire amount. All this after my worst week of trading. Boys, I have a new respect for the IRS. Be smart.

[karim0028 10]

Until yesterday I would do anything to screw the IRS, today I respect its power. Wife went to the grocery yesterday evening to buy some things before this big storm, and her debit was declined. She came home all pissed, logged in the bank account to find a wopping balance of $0 ( far from where it should have been). Called the bank last night and was told it was an IRS levy. Man was she pissed at me since it stemmed from my business. Since I was ordered to the couch, I proceeded to get drunk, pass out on the couch, and subsequently missed a number of trades through the night. Spent an hour and a half this morning talking to the IRS, had to get to the third agent before I found one that wasn't a fcking idiot. Turns out, they have the power to take anything they want, when they want, without a notification. Yes, I was supposed to call them two weeks ago and didn't, so this was their action. They said they go to one or more of your bank accounts, and take whatever is in there. Which is what they did. Told me I have 30 days to get '08 taxes in or they will freeze everything for the entire amount. All this after my worst week of trading. Boys, I have a new respect for the IRS. Be smart.

 

 

Funny, that same thing happened to me IRS levies any and all accounts linked to you... They levied one account with a large sum of money in it for a $300 dollar amount they stated i owed them for a property tax refund that my accountant claimed incorrectly...

 

Talk about power Now that is power... Luckily i had other accounts that i could access, but if you keep all your money/assets in a single place you cannot fight, bc what lawyer is going to work for free once they have you in that kind of bind? You are essentially screwed..

[natedredd10 10]

Good stuff...

Only a fool would try to go offshore without a great tax lawyer on retainer..personally I think its just lame..Taxes are the cover charge to this party...if everyone gets on the VIP list and doesn't pay, then the party can't continue.

If you want to be a 2 bit pirate instead a business man, then move physically to a place with a history of piracy like the carribean.

[MidKnight 12]

Reminds me of the Mafia, they also take whatever they want when they want it. And if you don't pay, they will threaten and extort you - sounds familiar?

[SNYP40A1 10]

Reminds me of the Mafia, they also take whatever they want when they want it. And if you don't pay, they will threaten and extort you - sounds familiar?

 

I started the same thread on another trading forum before this one was started and I got flamed pretty bad for suggesting that people should move to another country to avoid paying higher taxes. People over there really don't like the idea of other people not paying taxes. The best argument against not leaving the country is that it's still a pretty good place to live. We have the best higher education system in the world, that's undisputed. You don't have to work very hard to get by and have a nice life. You can even argue as some on here have that if you are paying taxes, that means you are making money -- be happy with what you have. That's all true, but at the end of the day it's still a business. And like all businesses, if they can get the same product from a different supplier for cheaper, then they should in the spirit of an open and competitive market. The problem with government, as I see it is that there's no competition. Combined with the fact that large organizations tend to sponsor corruption and the matter starts to become an issue of ethics for me, but that's a whole other debate.

 

In any case, if you earn money as a US citizenship, you have to pay uncle Sam. I think the US and Philippines are the only countries that do this. Even if you leave the country and earn the money someplace else...you still have to pay taxes to the US (I think there might be a way you can exempt the first $90k though). What about moving to Panama or the Bahamas?

 

Also, for me it's not just about taxes. I see the US becoming very hard-pressed for more money and with a growing population of unproductive people who can VOTE, I'm a bit concerned. Soon, all a president will have to do to get elected is campaign on redistributing the wealth and then...oh...already happened. So I think it might be wise to store money outside the country just to protect it from getting seized in the future. Question is, what other country would be safe (with a stable government) from having the US sieze it. Seems like Switzerland is no longer a safe haven. I'm not even talking about avoiding taxes on interest income here, just talking about storing the money in a place where the US can't seize it. Worst case, convert all your savings to raw gold and then bury them someplace out in the middle of nowhere... Anyone got a better idea?

 

Edit: Oh, and if you do try to revoke your citizenship, there's an exit tax on all assets above $2 million. Before that, I think you still had to file taxes for something like 10 years after renouncing citizenship. That's pretty ridiculous, definitely like the mafia.

Edited February 25, 2010 by SNYP40A1

[karim0028 10]

Question is, what other country would be safe (with a stable government) from having the US sieze it. Seems like Switzerland is no longer a safe haven. I'm not even talking about avoiding taxes on interest income here, just talking about storing the money in a place where the US can't seize it. Worst case, convert all your savings to raw gold and then bury them someplace out in the middle of nowhere... Anyone got a better idea?

 

Edit: Oh, and if you do try to revoke your citizenship, there's an exit tax on all assets above $2 million. Before that, I think you still had to file taxes for something like 10 years after renouncing citizenship. That's pretty ridiculous, definitely like the mafia.

 

You can try bullionvault.com for holding physical gold outside the US.... Pretty solid and audited.

 

I am still looking for the same things you mentioned above.... Essentially the mechanics of going offshore and trading (at least creating an account offshore).

[JBahn 10]

This is probably more of a question for a lawyer/CPA, but I will see if people on here have some insight.

 

I currently trade full time from Costa Rica, under a Sole-Prop account that is US based. I have no other income/business in the US, however I am a US Citizen. I have several Corporations in Costa Rica, some which are inactive and only used as asset holders (Bank Accounts). I talked with Tradestation and they said no problem with opening an account under the CR Corporations (known as "Anonymous Societies"). Costa Rica has secret banking laws as well as secret corporate documents (hence: Anonymous Societies).

 

So TS sent over the application, and in the application it demands my Passport number and SS#. With them having that information, is there still a tax advantage to trading under the corporate name? My wife and I are the only directors of the corporation. I am a US Citizen, she has no US connection.

 

Thoughts?

[Kiwi 16]

Unless you find a broker who is not seeking a US linkage then all you are doing is diluting the secrecy of your AS. Stay away from TS or create another AS that your wife is a director of and you are not associated with - but make sure that your wife's earnings are not the purvey of the IRS. Then she can pay you a couple of dollars to trade for her and you can declare that as income. Keep the income low enough and I don't believe you have to tell the IRS about it.

[hunter1 10]

I am a lawyer. I got into trading because a large area of my practice was setting up asset protection plans for traders from the Merc and CBOT.. Some of them taught me how to trade and now that's what I do and only do offshore work for a few on the side. Mainly old clients and their friends.

 

Rule 1 A U.S. citizen must pay tax on income earned anywhere in the world. Trade station will supply the IRS at the end of the year with your trading information.

 

Rule 1a. You are not required to pay more than your fair share. You are allowed to take any steps you deem necessary as long as they are with in the law to minimize your taxes.

 

Ex US companies keep earnings earned outside the US in countries with no corporate taxes. They only pay tax if they return the earnings to the US. This is legal.

 

Rule 2 Tax court does not work like regular court. You are guilty until you prove you are innocent. This means the IRS seizes first then it is up to you to prove they were wrong to do so.

 

Rule 3 earnings through a US domiciled entity are deemed earned in the US. EX earn through trade station and get taxed by the US. It does not matter where you actually live.

 

Use non US broker for trading. For example Saxo bank has good operations. I prefer Hong Kong brokers myself.

 

Rule 4 For asset protection you must be set up and operating before something happens that makes you want the protection. For example to protect from a lawsuit your assets must have changed title before you received notice of a possible suit. To avoid government seizures the same. Once the IRS or Dept. of Labor knock on your door it is to late to legally transfer assets. The courts will hold you in contempt if they find out about it. Same for lawsuits. You will be held in contempt if you transfer after the cause of action arose.

 

This means that while the government cannot get your money they can hold you until you bring your money back to the US so they can grab it.

 

Rule 5 transfers can be on paper . Physical transfer out of US is not needed. Once title is transferred to a non US entity, a corp for example, the corp can move assets at anytime. ( To do this and avoid contempt you must use an attorney that really knows this stuff. It is highly specialized and most lawyers even at the biggest firms have no clue how to do this.

 

Rule 5a You will be deposed. You do not want to lie. You must be set up in such a way that allows you to tell the truth.

 

Rule 6 A Plan without the use of a trust some where in the mix can lead to problems.

 

Hope this helps.

[karim0028 10]

This is probably more of a question for a lawyer/CPA, but I will see if people on here have some insight.

 

I currently trade full time from Costa Rica, under a Sole-Prop account that is US based. I have no other income/business in the US, however I am a US Citizen. I have several Corporations in Costa Rica, some which are inactive and only used as asset holders (Bank Accounts). I talked with Tradestation and they said no problem with opening an account under the CR Corporations (known as "Anonymous Societies"). Costa Rica has secret banking laws as well as secret corporate documents (hence: Anonymous Societies).

 

So TS sent over the application, and in the application it demands my Passport number and SS#. With them having that information, is there still a tax advantage to trading under the corporate name? My wife and I are the only directors of the corporation. I am a US Citizen, she has no US connection.

 

Thoughts?

 

I am neither a lawyer nor an accountant; so take it for what its worth... I would say no real advantage... In the US if you are a US citizen there is not such thing as anonymous when it comes to banking or brokerage; essentially anything tied to liquid "digital" assets...

 

But, if you have a Costa Rican Passport (ie. dual citizen), then you would have an advantage in that no one in the US would have any idea about your financial accounts; as you would be listed under a corporation with a foreign director... You can report tax any which way you please; but as a US citizen you are obligated to report income especially since you are in the US.. If you are outside the US, i think there is a tax exemption for the first 70-80K of income...

 

But, theoretically you would get "anonymity" from any US legal claims; since as a US person you would have no assets in the US... In other words you would be "off the grid"; and if you appear to have no assets less likely hood of getting sued bc some one thinks you are mister money bags...

 

I always think that if you live in one place it is always prudent to have assets outside the jurisdiction for whatever reason that may come up... Think of it as a business owner would; you are "limiting liability"...

 

Again, not a lawyer nor an accountant...

[SNYP40A1 10]

I always think that if you live in one place it is always prudent to have assets outside the jurisdiction for whatever reason that may come up... Think of it as a business owner would; you are "limiting liability"...

 

Exactly. And I see holding assets in the US becoming a greater liability. It's probably ideal to store assets in multiple countries -- diversify. Just curious, if you buy a real estate in other countries, fully pay for the property and pay local property taxes on it, can the US government step in and seize? I suspect that in some countries they can and in others they cannot.

[karim0028 10]

Exactly. And I see holding assets in the US becoming a greater liability. It's probably ideal to store assets in multiple countries -- diversify. Just curious, if you buy a real estate in other countries, fully pay for the property and pay local property taxes on it, can the US government step in and seize? I suspect that in some countries they can and in others they cannot.

 

Unless you are bernie madoff, and screwed half a country; i highly doubt it.... Too long and complicated process...

[hunter1 10]

Your assets can be seized in any country that recognizes US judgments. Question is can they find your assets and do they want to go through the expense of grabbing it.

[SunTrader 10]

Be smart.

 

Like not talking about such matters on the wide (open) world web. :doh:

[karim0028 10]

No one knows who we are

[randy1953 10]

Well this is what I have done and it works fine.

Move to Panama we use the dollar here, many Americans here. They have very good residency program. Actually if you can show $1200 a month coming in from retirement or another source but need to be ongoing then you get what' called a Pensionado via which allow you to live here forever and also get all the discount a retire person would get even if your not retired. Down here they treat people different than the US with thi visa you get 50% off on hotel and resort, half off on movie and entertainment and o forth.

 

Now it i true that you need or uppoe to pay taxes no matter where you live aa a US citizen however in Panama you can go and have a private interest trust made up. It' all legal and give you ton's of tax benefits where you can reduce any tax and reduce it a lot.

Hope that help

Randy

[Ranger 10]

Here's a story - there was a group of companies under ownership of a holding company situated in Gibraltar. The companies were US & Caribbean companies all legal formed; legally operated etc ...

 

One time the Holding Company was transfering approximately 100K to a US sister company and the funds vanished. The bank in Gilbraltar provided proof of transfer; the US bank provided proof of no receipt. The funds were finally traced to OFAC, a division of Homeland Security. The companies had to provide corporate documentation to demonstrate they were operating legally before the funds were released.

 

Moral to the story:

 

a) Believe that US can track and investigate banking transactions.

 

b) The US operates and maintains foreign offices for the purpose of monitoring and investigating US personnel living abroad and US companies formed in foreign countries.

 

c) Taxes must be paid on earned income less approved deductions in the year earned.

 

Having your accounts frozen is the small price to pay, right? Spending 5 years in prison with bubba; loss of income is the real price.

 

Best method: Hire a good tax lawyer(not a shady crook with bullet proof plan) and map out a strategy that will stand legal scrutinity because, if there's a problem that's exactly what will happen.

 

RANGER