Why are US taxpayers subjected to pay tax on their worldwide income? Especially when individuals may wish to live abroad in the future or when owners of a US business derive a significant portion of their income from foreign sales. One method used by taxpayers to avoid U.S. tax has been "expatriation" (the renunciation of one's U.S. citizenship or resident status and establishment of permanent residence outside the U.S.). However, even when taxpayers become "expatriates" they are still subject to taxation under special rules if the primary purpose for their expatriation was tax avoidance. (IRC § 877).
In recent years, the IRS has acknowledged significant increase in offshore activity by U.S. taxpayers. Numerous schemes have been devised in which the true ownership of income streams and assets is hidden or disguised so as to improperly shield substantial amounts of financial activity from the U.S. tax system.
The IRS also acknowledges that......" There are a number of possible reasons for a U.S. taxpayer to utilize offshore entities and accounts. While many are created with tax evasion as the primary motivation, some are legal in every respect."
Offshore activity, through Offshore Financial Centres, (OFC's) are generally located in foreign jurisdictions that offer financial secrecy laws in an effort to attract investment from outside their borders. In addition to the financial secrecy they provide, they levy zero or low taxation of income from companies and trusts domiciled in their jurisdiction. In addition to preferential tax regimes and protection against creditors, most OFC's also offer strict laws against disclosure of banking and business records. Generally, these nations do not have income tax treaties with the United States, and tax evasion is not considered a criminal act subject to Mutual Legal Assistance Treaties. It is generaly difficult for Governments (IRS) to access to records of offshore banks, lawyers, accountants and trustees. However there is a legal distinction between disclosures that legally need to be reported by individuals and those that need to be reported by foreign corporations.
The Keylink Consultancy Group only provide clients with legal solutions. We have never yet been investigated by any tax authority world-wide and we are confident that our tried and tested tax planning solutions comply with international law. Many hard working and law abiding US business persons may not be aware that the majority of the US's top 500 Fortune companies pay very little in Corporation taxes, year on year. They don't need to go offshore because the US Government keeps giving them tax breaks so that they will continue to provide employment for millions of US citizens. In fact, many western Governments and organizations such as the OECD recognise that OFC's have a important role to play in the World's economy. OFC's provide Governments and large international corporations sources of cheap, easily movable finance. OFC's are commonly used as safe staging posts to finance political operations and new business ventures in many of the worlds more politically unstable countries.
Foreign corporations - Foreign corporations may be used for many valid business purposes. In some countries, the creation of a corporation in that country is the only way that a U.S. company can do business there.
Foreign partnerships - Foreign partnerships are a common way of pooling financial resources and knowledge among participants from more than one country. In some nations, the government may actually restrict foreign investment to partnerships or joint ventures with the government or domestic partners.
Foreign trusts - Foreign trusts may be used to place assets in the hands of competent managers when there is doubt about the ability or inclination of the beneficiaries to effectively manage the assets themselves. Trusts offer a means of managing a single asset for the benefit of a virtually limitless number of beneficiaries, while keeping the asset intact. Foreign trusts may offer additional advantages by operating in a different legal and tax environment. A number of countries do not tax trusts on income earned outside their borders.
The Keylink Group can assist you to comply with US anti-tax avoidance legislation and expand/diversify your business overseas. For a FREE no-obligation Tax Planning assessment complete our short Confidential Enquiry Form Now.
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