The U.S. hasn’t signed the AEoI Agreement: Reciprocity demanded
Many have said that this is THE year where the offshore world will be disrupted to the core.
There will be more leaks; there will be more offshore financial institutions go insolvent; there will be a shift in the market — just like what’s happening in Singapore and many other popular offshore jurisdictions in the world. Governments, regulators and taxmen will continue to “hunt down” taxpayers who are still (and will continue to) finding ways to protect their wealth — and treat those who use offshore jurisdictions legally like criminals.
Perhaps 2017 is the time for offshore jurisdictions to be more on the offense? We’ll see, but one thing for sure, some offshore jurisdictions are starting to raise questions to questionable actions and policies made by those who “condemn” secrecy in offshore asset protection.
The demand for reciprocity
Switzerland, probably the most popular offshore jurisdiction of all, sparked a fire entering 2017 by demanding the U.S. to walk the talk.
Fabrice Filliez, Swiss’ finance department official, told FT that Switzerland is in the middle of a negotiation with the U.S. over a reciprocity issue: He’s demanding the U.S. to do a mutual exchange of taxpayers’ information.
But why the demand?
In essence, the U.S. — through the introduction of FATCA — requires offshore banks to send Americans’ tax data to the U.S. officials. The problem with FATCA is that it’s a one-way data sharing request; there is no agreement that requires the U.S. to share tax data to offshore jurisdictions.
The Automatic Exchange of Information (AEoI,) which is positioned to end secrecy in the offshore banking world, has 100+ countries agreed to do the exchange, and will begin to roll in 2018. It still doesn’t have the U.S. on the list.
In other words, there’s no reciprocity, and Switzerland demands it. It’s expected that Switzerland and the U.S. will reach an agreement by the end of 2017, but the road to reciprocity is a long, rocky one.
The U.S. offshore banking secrecy
If you think that due to FATCA and non-compliance to AEoI, the U.S. has a certain level of secrecy in its banking world, you’re correct. The U.S. are, indeed, becoming the world’s best tax haven.
The U.S. is said to be a popular destination for Chinese investors and allegedly has some of the most lenient regulations for setting up a shell company. Nevada, Delaware, Montana, South Dakota, Wyoming and New York are some of the U.S. states that are more permissive to offshore activities than Cayman Islands, Jersey, and the Bahamas (source.)
Also from the same source, it’s also stated that some clients even move their assets from Switzerland to The U.S.’ tax havens.
When asset holders move their assets out of Switzerland, you know that the destination must be more politically stable, economically sound and private. Those are exactly what offered by some states in the United States.
How easy is it to setup an offshore presence in the U.S., exactly?
Let’s use Delaware as an example.
Did you know that more than 50 percent of U.S. publicly trade companies are incorporated in Delaware? With more than 285,000 registered companies using only one address in Wilmington (1209 North Orange Street,) you just can’t go wrong.
With zero percent income tax, flexible company structure, minimal capital requirement and no financial audit requirement, Delaware is a true tax haven.
Setting up a company in Delaware is fast and easy: Just provide your passport, proof of address and other typical supporting documents, you can get your company registered in about three working days.
Takeaway: Opportunities for asset holders?
For some reasons, the U.S. stays under the radar as one of the most popular tax havens. With the Panama Papers leak, Swiss banks’ fines, and so on — the media keep asset holders’ eyes to those offshore jurisdictions.
Just one year before the AEoI rolls out, asset holders need to start looking for alternative jurisdictions for protecting their assets. There are some reputable jurisdictions that are still outside the AEoI — e.g. Cyprus — but U.S. states of Delaware and some others shouldn’t be dismissed.
As each asset holder’s case is different, it’s advisable to consult with your lawyer, as well as to contact your trusted International corporate service provider for the best options for your needs.