5 trillion held "offshore" in tax havens

5 trillion in assets worldwide is held "offshore" in tax havens the IRS writes on their website: “It is difficult to quantify the amount of assets being held offshore or the rate at which the industry is growing. But it has been estimated that some $5 trillion in assets worldwide is held "offshore" in tax havens. Presumably transfers from the U.S. Represent a large share of this wealth. One authority has estimated the annual revenue loss to the U.S. At a minimum of $70 billion.”

The 100 year old investment-banking firm of Warburg Dillon Read (on Park Ave. N.Y.) (now UBS Warburg) has offices in 39 foreign countries - including the Bahamas the tiny Cayman Islands Hong Kong and the Channel Islands. Makes you wonder why doesn't it?

Non-resident foreign companies trusts banks and individuals can trade stocks bonds commodity contracts and options 100% free from U.S. Capital gains taxes.

Under the U.S. Tax code only when a foreign company foreign trust or nonresident alien individual takes up permanent residence within the United States will he be subject to U.S. Capital gains taxes in the same way as domestic taxpayers. For a corporation permanent residence would be a U.S. Office or warehouse. Capital gains realized by foreign corporations and other nonresidents "not engaged in a trade or business within the United States" are exempted from tax under IRC Section 871 and IRC Section 881 & IRC Section 897(c)(3).

Moreover, U.S. Treasury Regulations Section 864-2(C)(1) & (2) provides an exception for what embodies being "engaged in a trade or business within the United States". Under U.S. Regulations a nonresident's Stock Market transactions carried-out through a U.S. Stock broker independent agent or an employee are not considered to cause the nonresident to be "engaging in a trade or business within the United States".

Publicly traded stock market gains (from NYSE NASDAQ or AMEX listed stocks and bonds) accruing to an offshore company are free of US capital gains taxes by the Internal Revenue Tax Code's statutes but "US Shareholders" can have a tax liability (indirectly) if the offshore company is a "Controlled Foreign Corporation (CFC) (I.e."more than 50% of voting and non-voting stock is owned by US SHAREHOLDERS). See sections 951 thru 958 of the IRC. See especially Code-Section 951(b) for the definition of US SHAREHOLDERS.

American taxpayers that use tax havens are taking more risks (generally) than a foreign non-resident alien (not a US citizen). Whether an American citizen taxpayer will have a tax liability on the offshore company profits depends on a lot of things - including what kind of income is produced by the company (I.e.Subpart F or non-Subpart F) and how many shares in the company you own and whether the offshore company is a CFC - as defined in the Internal Revenue Code in Sections 957 and section 958.


IRS CIRCULAR 230 DISCLOSURE

To the extent this document constitutes tax advice subject to Circular 230this tax advice was not intended or written to be used and it cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice).

About the Author: The author has been domiciled in a tax haven (Nassau Bahamas) since 1990. He is the author of a 375 page book - Tax Havens of the World (available at Amazon.com/8th edition)and the Tax Haven Reporter (a monthly newsletter published since 1985).

The offshore financial services firm he works for has formed over 1300 Bahamian and Anguilla companies and Anguillian and Bahamian (foreign) trusts since 1990.

Tom is currently an overseas agent for the Anguilla registrar (since 2001) - a UK overseas territory in the eastern Caribbean like the Cayman Islands Bermuda and the B.V.I. The offshore bank we recommend was once called Bank of America Bank and Trust (Anguilla)Ltd.(back in 1984 ) and is a publicly traded bank whose stock is traded on the Eastern Caribbean Stock Exchange. The Government of Anguilla uses this bank for their own registrar services. PriceWaterhouse was the underwriter that brought this bank public back in 2001.

New Providence Estate PlannersLtd.
Overseas Agent - Anguilla Registrar
(Consultants)
54 Sandyport Drive
P.O. Box CB 11552
Nassau Bahamas
Fax/phone: (242) 327-7359
E-mail: taxman@batelnet.bs