Protect Your Wealth in Paradise by Going Offshore

Part 3 of the article Increase Your Flexibility, Decrease Your Taxes: The Benefits of an Offshore Trust reprinted from International Living

The Turks and Caicos Islands offer a great deal more than sunshine, an easygoing lifestyle, first-class diving, and friendly residents. In recent years, these Caribbean islands have firmly established their reputation in the world of tax-free nations. They rank among the best, alongside the Caymans and Bahamas, in offshore benefits.

As a resident of the Turks and Caicos Islands, you will not be taxed directly on your income, capital, inheritance, or wealth as an individual or as a company. You can obtain legal residence by applying for an annual permit, which costs $600 each year, if you can prove you have sufficient funds on which to live. Permanent residence can be attained with a qualifying investment in the Turks and Caicos, which, according to Nagel, can eventually lead to citizenship. The only taxes to which you'll be subjected are indirect taxes, customs duty, stamp duty on certain transactions, and departure tax.

Going Offshore

Offshore companies, easily formed and maintained, also enjoy the advantages of the islands' tax benefits. They not only provide limited liability to the principles but also ease of ownership transfer and confidentiality.

When forming an offshore company, you must distinguish between ordinary and exempted companies. Ordinary companies are useful for people conducting business within the Turks and Caicos Islands; they can hold title to real estate or a business license.

More popular are exempted companies, useful when the primary business is conducted outside the Turks and Caicos. They can be capitalized in U.S. dollars (the islands' official currency), deutschmarks, yen, or any other main world currency. There are no reporting requirements and no required annual shareholder meetings. Share ownership may also be in bearer form.

In the case of holding companies (which exempted companies find especially useful), you can invest funds by transferring them into a company formed in the Turks and Caicos. The resulting income from investments made by the newly formed company is subject to little or no tax in the Turks and Caicos.

Turks and Caicos may be interposed between a parent company in a taxpaying country and its subsidiaries in the islands, so that dividends from the subsidiaries are only subject to the rates of tax applying in the Turks and Caicos.

Offshore trading companies, used mostly to purchase products from a company in one country and sell them to purchasers in another, are also useful tax structures for individuals and corporations. The profit is free from taxation.

In Good Company

Two other popular types of companies are the portfolio holding company and the limited life company. The portfolio holding company was formed so that the income and capital gains made on the sale of securities are not taxed.

The limited life company is designed so you enjoy (1)the benefits of a partnership under which profits and losses are attributable to the members of the company rather than to the company itself and (2) the advantages of a corporate entity. The 1993 passage of an amendment to the Companies Ordinance of 1981 permits LLCs to be incorporated without one or more of the corporate characteristics of perpetual life and with free transferability of ownership interest and centralized management The memorandum of association must limit the life of the company to 50 years, though it can be extended to 150 years by special resolution.

Another specialized entity includes insurance companies, which were introduced through legislation in 1989 and currently number more than 1,000.

Many U.S. companies look to the Turks and Caicos as a jurisdiction in which to establish captive insurance and reinsurance companies, thereby insuring themselves against loss in a tax-deferred manner.

Over the years, an increasing number of companies have been established on the Turks and Caicos to assist investors in forming an offshore corporation. Property perks - No restrictions are placed on the purchase of property in the Turks and Caicos, and there are no real estate taxes. Taxes are levied on the conveyance or transfer upon sale; tax is 0% on properties worth $25,000 or less, 6.5% on properties worth from $25,000 to $75,000, and 9.75% for properties worth more than $75,000.
Copyright 2002 Nagel & Associates, LLC