What ABout “Offshore”?

“What about setting up a corporation ‘offshore’? I’ve heard that offshore corporations don’t have to pay any tax and that I can move my money offshore to shelter it.” Up front, there is little that can be done offshore that cannot be accomplished in and through the shelter of Nevada corporations. But let’s look at just a few things that this questioner should consider before moving in this direction.

There CAN BE tax advantages, particularly in cases where the offshore entity earns its income in a tax-free jurisdiction from activities in locations that do not tax the income. Such opportunities can be hard to find. On the other hand, if the offshore entity (sometimes called an IBC, for International Business Corporation) is OWNED by U.S. stockholders, the stockholders are still subject to tax on capital gains and on any income derived from the IBC.  In most cases offshore shareholding is NOT private, unlike in Nevada. Further, the United States has developed MLATs (Mutual Legal Assistance Treaties) with virtually all offshore locations, allowing for the extension of U.S. law—and the powers of the I.R.S.—into those jurisdictions, at will.

One good solution might be for the offshore entity to be owned by a private Nevada corporation.  Just keep in mind that the Nevada corporation would still be subject to taxation on any income or capital gains derived from the IBC. In many cases, however, it might be better to simply extend the structuring of Nevada corporate shelters than to try to operate offshore. The main reasons for this are more immediate control and, of course, privacy. The Nevada Corporation Manual sums it up like this:

“Nevada is unique in that it not only offers a high degree of privacy but ready access to your capital that is not likely to be denied in even the most extreme turmoil that COULD develop in the world’s financial markets. In these highly uncertain economic times, long-range planning should take into consideration the possibility—even the probability—of extreme turmoil. In that event, there could be some real shock felt by those whose strategies are oriented around offshore structures. It is entirely possible that in a real emergency offshore funds would be totally inaccessible, depriving the owners of those assets the use of their own capital when they need it the most. For any situation where ready access to one’s capital is required, and especially if you wish to work with your capital, Nevada corporations are THE answer.”

In September 2000, the globalist OECD (Organization for Economic Cooperation and Development) proposed the total elimination of any and all offshore tax advantages. The Bush Administration has withdrawn its support—for the time being—from this initiative, probably allowing time for repositioning by at least some of the Big Boys. Ultimately, though, it seems likely that offshore jurisdictions will be precluded from offering tax advantages to foreigners. When that happens, it will leave the shelter of Nevada corporations as one of the very few true “havens”.