Are you considering placing an investment in an offshore tax haven? While you can protect your wealth, there is a lot of bad press around the practice—what do you need to know?
Offshore banking is a legal and respectable practice if set up appropriately. The term “offshore tax haven” refers to a location, jurisdiction, territory, or country where minimal taxes are charged on the investment. In the past, tax havens usually did not share a lot of information with governmental agencies with the aim of reducing tax liabilities in the home country of the investor.
As offshore banking has matured, some tax jurisdictions dropped their tax rates ever lower, kept few records, and did no reporting. These secrecy jurisdictions have been outed as prime locations for tax evasion. As more wealth flows around the globe and drains into secrecy jurisdictions, tax fraud has become rampant, leaving countries with minimal tax coffers struggling to stabilize and serve their populations.
Another method used by Big Business has been relocating headquarters and opening foreign bank accounts in offshore tax havens to reduce or eliminate their tax burden. Good examples include Amazon’s European headquarters in Luxembourg and Apple’s headquarters in Ireland. Amazon did huge business in the EU in 2020 and paid zero corporate taxes.
With the Paradise Paper and other scandals, regulators around the world are going after citizens who evade taxes. In the USA, FATCA legislation requires foreign institutions that hold assets for U.S. citizens to annually report those accounts. On the flip side, U.S. taxpayers are required to file FBAR disclosures each year to identify their offshore wealth to the IRS.
Interest in offshore tax havens remains high for good reasons. Tax shelters work well in strategic plans aiming to place wealth in a protective entity in a location with a low tax rate. You may be able to avoid capital gains tax by placing wealth in a tax haven.
Your offshore options depend upon your investment aims. Offshore tax havens are not a one-size-fits-all solution—but require consideration attuned to your financial profile and current tax laws. Running afoul of FBAR regulations can cost a lot of money if your investment is not properly reported.
Offshore tax shelters are legal when used transparently. When you are considering foreign investment, speak with an experienced tax attorney for guidance that suits your financial goals.
Seasoned tax lawyers help you with offshore tax investments
From offices in Chicago and Cleveland, Robert J. Fedor, Esq., LLC offers strategic legal guidance to clients throughout the US and abroad on matters of business or offshore tax, bankruptcy, and IRS civil or criminal audits. When you have questions about individual or business tax compliance, call us at 800-579-0997 or contact us.
