Offshore Banking and Tax Shelters

tax shelters

Peter Zipper

Investors often turn to offshore banking because it has a number of appealing qualities. One of these aspects is that it provides people with different ways to minimize their tax burdens. In most cases, they allow almost any investor to have anonymous banking transactions. These are known as foreign tax shelters, and they come from countries that have lower taxes than the United States on average. Belize, for example, is an ideal country for these shelters because of the nation’s tax laws.

The three most common types of foreign tax shelters are foreign trusts, foreign business investments, and credit card programs. Foreign trusts are financial arrangements based in a foreign location that allow a third party to hold assets on behalf of the beneficiaries. An investor can place any asset into a fund, which goes to the third party. Since the asset itself is located outside of the U.S., the laws of the foreign country determine the amount of taxes owed (if any), as well as who has to pay them.

Another common type of foreign tax shelter is the act of setting up a foreign business. They essentially work in same way as foreign trusts. Since the business is set up outside the U.S., it is subject to the tax laws of the foreign country. As long as these businesses are physically located outside their home country, they will allow the investors to protect their assets with privacy. This process is very popular among investors with high income they want to maintain.

Credit card programs are a useful shelter because they allow smaller investors to use a flow-through entity to meet the transaction policy. Since these programs are legally structured and based within the foreign country, they can allow individual U.S. tax payers achieve the same tax treatment as investors who utilize foreign trusts. Many credit card and banking programs that provide U.S. citizens with this benefit are most commonly found in Central American countries.

Smart U.S. investors often look for secure investments that offer the most advantages. The three you just read about are the most common forms of foreign tax shelters, but there are also many other offshore opportunities investors can utilize to minimize taxes and enjoy privacy. However, the political and economic environment is not always consistent. In fact, it changes from year to year, which is why you need to seek professional help you want to move your assets overseas. Caye International Bank will be part of a number of upcoming asset protection and investment conferences, which we highly encourage you to consider attending. We can walk you through everything you need to do to find the right investment that gives you a great return without having to worry about U.S. taxes.