How to be a good investor in tax haven?

  • Posted By : Admin
  • Tax havens
  • 24-03-2018
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Fundamental factors for investing in a tax haven

1.Almost all countries, except where one usually resides, can be considered tax havens. In other words, a tax haven can be any place except the jurisdiction where you live, work and get regular income: a tax haven for a nonresident can be a place of high taxation for a person who lives and works there. 

Curiously, our country of residence can be a tax haven for others, tourists or retired workers who live in Spain, for example, almost permanently without being controlled by tax agents. In recent years, and with the aim of attracting high-level professionals, Spain has softened the taxation regime of nonresidents as will be seen below.

Tax havens offer many different compromises and peculiarities: some of them are good for company formation, others for using their banking services, others for investing from them, and others for living. One of the first steps to learn about foreign investment is to get familiar with their characteristics in order to assess which, within this group, suits better your needs.

Tax haven concept moves further and further away from the image of remote island, small principalities and banana countries. United Kingdom, Holland, Belgium and Spain may be appropriate tax havens in certain circumstances for any international investor. We reiterate that most of the countries considered hostile from a tax standpoint have developed or are developing more and more tax shelters for companies that want to establish themselves in them under very favorable conditions. There is, on the other hand, no tax haven that can test any contingency because great nations can influence a particular offshore territory. However, there are different ways to mitigate these influences.

2. From a certain amount of money available, any person, in anticipation of what may happen, must consider having an account, in the form of investment, with funds in a tax haven, the territory outside the jurisdiction where he resides and performs his professional duties.

Everyone in the civilized world is surrounded by economic threats (fiscal problems, bankruptcies, economic downturn), political threats (terrorism, confiscation), and legal threats (professional liability claims, divorce). Some of these threats appear unexpectedly. It has been estimated that tree times in a person`s life such events occur. We live in a world of uncertainty, where the only certainty is change. The approach and use of an offshore structure takes time and proper tax planning, and it should be done before it is needed urgently.  

3. The easiest advice to give and follow: to live a discreet life where one lives and works.

As a general rule, you should not communicate anything to anyone about you investments in tax havens. Similarly, you should not give the impression that you have a lot of money. At the least sign of danger, for example a legal claim, the importance of not having informed anyone about the existence of funds abroad is crucial. The knowledge about that funds are available abroad, or the mere suspicion of it, is precisely a criteria used by judges to order the unconditional prison and without bail in serious demands, apart from confiscating the passport. We reiterate that the best protection of your offshore investments is to live a discreet life. This is an unnatural advice that challenges both our most basic impulses and the general principles of the current economic and social behavior. However, the boast of wealth should be avoided. The discretion, and the protection derived from it, is a higher value to a complex pattern of concealment of property. 

4. When searching for privacy, you should know that there is no such thing as an absolute banking secrecy. 

What there are in fact are different procedures that guarantee a high degree of secrecy of banking operations making it difficult to detect the true owner. The best guarantee of confidentiality can be obtained by separating the local accounts and banking operations from the external accounts, carried out in offshore jurisdiction. This is a complete separation, without leaving an electronic information trail, and with no connection between them. Such confidentiality can be reinforced if you do not use intermediaries and do not talk about it with anyone. Although a minimum of advice can save you from making important mistakes, it is convenient if it is possible to do all the banking operations by yourself. Putting yourself in the hands of local bankers or lawyers and international experts increases public exposure (as there are more people you share the information with) and, especially, expenses.

5. Financial activities and success of investing in tax havens rely on the trust relationship between the professional and the client.

The banks and bankers with whom you work with should inspire confidence, as your money is at stake. Personal relationships are important not only for confidence, but for reciprocal knowledge. The professionals you work with must know very well your needs, goals and concerns. Reciprocally, the client should be familiar with those responsible and the course of action of the professionals and the investment companies whose services are used for offshore investments.  

Every effort should be made to choose good professionals and banks and, whenever possible, to diversify risks. Many times, the monitoring of the investments abroad is a very active process. It requires a more or less continuous control of the operations and financial situation. At other times, as in the case of the “lazy” investor, who is limited to invest client´s money in a fund and forget about it, the required activity is periodic, and carries a price that do not have to be very high. Internet helps to carry out many operations from home with minimum cost but, of course, without forgetting that the network is not secure.  

6.The social, political and economic conditions change: in our own country, tax havens and worldwide.

For example, Spain was an almost complete tax haven until the end of the seventies when the tax regularization and modernization began. As we mentioned before, even then Spain can be a good tax haven for many foreign residents and their investments. In general, these types of territories are places of very stable government or, even though they are unstable, they try not to change the fiscal regime or financial situation for the non-resident investor. However, even if the country is very stable, banking conditions and investment legislation can vary almost overnight. For example, in Switzerland, a tax haven with known political and social stability, there have been important changes in recent years that have altered in part its attractiveness for investors and depositaries of funds.

Tax havens are subject to changes in the legislation, most of which respond to the extension of the services that these offer, the accelerated introduction of stricter control procedures of financial activities or anti money laundering laws, and increases of the governmental fees. We must be awake to react in time to an eventuality. It is advisable to check the international press, the economic news, and to know the political changes at the global level to preserve the assets and see them grow. It also helps to know firsthand these territories and visit them whenever possible. Given that many of them are touristic areas, you will be able to combine leisure and tax planning while on vacation.   

In any case, this is a world of changes and as popular wisdom says: “To sit still you have to run”. The continuous change also tells us that it is good to seek advice from professionals.