What is the Privacy Passport®?
When prospective US clients (whether they are citizens or residents of the USA) ask me about how to “go offshore”, I begin by asking a very basic question to see if the idea is appropriate for them:
Do you have any income that can be moved “offshore”?
Just setting up a foreign company will not help if all the business is generated from US business activities. If you are a plumber in Los Angeles, setting up a foreign company will not help you much since I would presume all your income is derived from providing services in and around Los Angeles from resources located in and around Los Angeles. However, if you are a software developer in Los Angeles, and you outsource a great deal of your work to foreign software designers, then going offshore might be a very good idea for you. For such a person, I would suggest setting up a PRIVACY PASSPORT®.
The PRIVACY PASSPORT® is a simple system that allows the user to take advantage of “offshore” tax and asset protection benefits, while getting access to all the benefits of US banking. All without violating various laws concerning foreign trusts, companies, bank accounts, etc.
The PRIVACY PASSPORT® is made up of three parts, an International Privacy Trust, usually established in Belize (Trust), an International Company (usually a Belize International Business Company), and a US Limited Liability Company (US LLC). The Trust owns the Belize IBC, and the IBC owns the US LLC. All contracts and business is done through the IBC which maintains a foreign office, but the banking is done through the US LLC. In this way, the non-US Source Income earned by the IBC is tax free, while the requirements of FATCA and FBAR are avoided because the bank accounts are all located in the USA. (FATCA and FBAR are some very confusing and unpopular regulations that require foreign banks to maintain information on US clients and report to the US government, and US citizens and residents to declare their interests in some foreign companies, bank accounts, and other financial institutions.)
How can this work? It works because the US LLC is treated as a “disregarded entity” by the IRS. In this case, the US LLC is the wholly owned subsidiary of the International Company. Everything done by the US LLC will be treated as an extension of the International Company. Simply having a bank account in the US, in the absence of additional US contacts or US Source Income, does not make a foreign company owe US taxes. This remains the case if the US LLC maintains a US bank account on behalf of the International Company. If the US LLC does nothing more than receive income generated by foreign business activities in the name of the International Company, neither the Trust, the International Company, or the US LLC will owe any taxes in the USA, nor will they even have to file any tax returns. This will be the case even if the majority of the sales are to US clients.
The PRIVACY PASSPORT® is an ideal way to protect your assets, lower your taxes, and obtain greater financial privacy by taking advantage of both “offshore” and “onshore” legal options.
Contact me at ‘ahay@alexander-hay.com’ if you would like further information.
or download the report and order form:PRIVACY_PASSPORT