Are you ready to move your assets offshore? If yes, you’d better hurry—otherwise someone else might beat you to it.
Recently, British serial entrepreneur Richard Branson admitted that he has been living as a de-facto tax exile in the British Virgin Islands for the last seven years. Although he denies tax considerations as a motivation for the move to his private island, Necker (he says it’s for his health), he recently sold his British residence to his kids and declared himself a non-resident.
Across the Irish Sea, U2 frontman Bono, whose net worth is estimated at $600 million, recently slammed big oil companies for allegedly failing to pay taxes in poor countries where they operate. His pious statements were met with a round of applause—though just days earlier he had defended U2’s own use of offshore companies to reduce taxes in response to the Irish government’s decision to cap artists’ tax-free income at €250,000.
There’s a lesson here—and savvy investors would do well to focus on this sound asset-protection strategy…
In 2011, with an income of $195 million, the four members of U2 were ranked by Forbes as the highest-paid musicians in the world. Unsurprisingly, the lads from Dublin decided to take advantage of the same method used by ExxonMobil and other major firms: the Dutch “secrecy regime.” The Netherlands doesn’t include details of trusts on public record, require company accounts or beneficial ownership to be publicly available, nor maintain company ownership details in official records.
U2 accordingly moved its lucrative publishing operation to the Netherlands. Thanks to the Dutch, Bono and his mates will escape paying Irish tax on about 95% of their income.
You should be so lucky.
Fortunately, you are—that is, if you’re paying attention. As I’ve been advising for years, it’s perfectly sensible and legal for Americans to reduce their tax obligations by moving assets to friendlier jurisdictions.
Regrettably, thanks to the financial peonage imposed by the Foreign Account Tax Compliance Act (FATCA), offshoring for tax avoidance purposes isn’t as easy as it used to be.
(Take note: I didn’t say evading taxes. FATCA is intended mainly as a deterrent to perfectly legal tax avoidance. It accomplishes this by imposing such onerous conditions on foreign financial institutions that they simply don’t want to do business with Americans, thereby making legal asset-protection methods harder to achieve.)
Of course, offshoring is still eminently feasible, if you follow my advice.
But here’s the kicker: It’s becoming clearer and clearer that legislation like FATCA, as well as other steps taken by the IRS in recent years, aren’t directed at the Bransons and Bonos of America. Cynically, the IRS and Congress have other more vulnerable targets in mind.
The U.S. government’s egregious violations of our financial liberty increasingly appear deliberately directed at the self-made businessperson and professional who has made an honest living and simply wants to diversify some of their wealth out of Uncle Sam’s greedy hands.
By contrast, big corporations, banks and non-profit “lobbyists” who can afford high-priced legal representation tend to get hands-off treatment by the IRS. It’s not just the IRS, either: It’s no secret that the SEC and other bureaucracies responsible for regulating Wall Street bend over backward to avoid penalizing the supposed objects of their efforts. Like Branson and Bono, the bigger the fish, the less chance they will ever be hooked.
The rest of us require careful planning, intelligent timing and, above all, sage advice to protect our wealth. That’s why I wrote Where to Stash Your Cash Legally. (You can get your copy of that book, here.)
We all can’t buy our own private island like Richard Branson. But if we’re smart, we can achieve the same end—full enjoyment of the fruits of our labors.