The 5 Best Places To Go Offshore And Diversify In 2017

The offshore world is fast moving. Ever-changing legislation, regulation, incentives, bureaucracy, and market fundamentals mean that the best places to open an offshore bank account, base a business, or establish backup residency, for example, one month are not necessarily your top choices the next.

As we stand at the start of New Year 2017, where are your smartest options for diversifying offshore?

I’d say you want to focus your flag-planting efforts in these jurisdictions primarily:

• Taxation: A+
• Doing Business: A+
• Asset Protection: B
• Banking: B-
• Investing: A
• Residency: A
• Citizenship: C

Panama was much in the news in 2016 and not in a good way.

The scandal created by files released from a large international law firm called Mossack Fonseca was dubbed The Panama Papers because the outfit is based in Panama.

Bad break for Panama, as the hullabaloo could as easily have been referenced as The BVI Papers or The Cook Islands Papers, as these were among the jurisdictions, along with Panama, where Mossack Fonseca’s clients also formed offshore corporations.

The press had a field day publishing details of these clients and their structures. The premise was that those setting them up did so to avoid taxes. In truth, many were simply exercising their rights to privacy and trying to protect their assets.

Run-of-the-mill business folks and investors forming corporations in an effort to try to keep their businesses and their investments safe don’t make for great headlines, I guess.

Panama’s offshore industry took a hit in the wake of the media storm, and the powers that be in Panama reacted by passing a law requiring all Panama corporations to keep current financial statements on file with their registered agents.

In other words, Panama corporations now come with more paperwork and more expense.

These events, though, do not alter the big picture. Panama remains a top go-offshore choice for 2017.

Panama’s big advantage as an offshore jurisdiction is its approach to taxation. This country taxes only income earned in Panama, meaning it can be possible, if you organize things well, to live and operate a business here tax free.

Note, though, that an American should use a Panama corporation for active business activities only. Using a Panama corporation to hold passive investments creates tax complications for a U.S. taxpayer.

In addition to corporations, Panama also offers foundations, a structure similar to a trust that can be useful for asset protection and estate planning.

Residency in Panama is fairly easy to establish, especially if you’re from one of the 50 countries on what is commonly referred to as the Friendly Nations list. Whether you’re looking for a new place to live full time or a backup residency, Panama offers many options, including its now well-known pensionado program for retirees.

While Panama has more than 75 banks (the exact count changes constantly, with banks closing and new ones opening every month), banking in Panama isn’t easy due to increased scrutiny from U.S. regulatory bodies.

Feeling the target on their backs, Panama banks are hypersensitive to money laundering risk and are more reluctant than ever right now to open a bank account for anyone who doesn’t have a connection to the country in the form of residency, a Panama entity, or an investment (in property, say).

In addition, customer service is (always has been) nonexistent in the banking industry in this country. I’ve done business with at least two dozen Panama banks over the years and right now would not recommend any of them.

Still, you have many options for both a local operating account and private banking in this country should you have the need for either.

Finally, Panama remains the best place in the world to start and operate an internet or laptop business in 2017… for the reasons detailed by my entrepreneur-wife Kathleen Peddicord here.

• Taxation: A
• Doing Business: B-
• Asset Protection: B
• Banking: B+
• Investing: A
• Residency: A
• Citizenship: A

I began my discussion of the best places to go offshore in 2017 with Panama because it is an established and still top-notch go-offshore haven.

Close on Panama’s heels, though, is the Dominican Republic, a country dead center of my radar this New Year. A number of my 2017 goals feature the DR, where I intend this year to acquire a passport and also to make a significant real estate investment.

Why?

The reasons to target the Dominican Republic for residency (either as a backup or because you’d like to live in the country) and alternative citizenship are compelling. This country offers some of the easiest and cheapest residency options available anywhere.

Qualify for the Fast Track program, and you can apply for citizenship just six months after obtaining residency. That’s the quickest citizenship-through-residency program you’ll find.

The Dominican Republic has fewer banks and much more limited private and investment banking options than Panama. However, DR banks are more open to working with foreign (including American) clients.

In addition, DR banks will lend to foreigners for the purchase of real estate.

And this country’s real estate market is one of the most interesting on the planet right now.

• Taxation: A
• Doing Business: B
• Asset Protection: B
• Banking: B
• Investing: B
• Residency: B
• Citizenship: B

Like Panama, Uruguay takes a jurisdictional approach to taxation, meaning it taxes only income earned in Uruguay. This makes it (like Panama) a good jurisdiction for setting up a company to house non-Uruguayan activities.

Uruguay is better known as a competitive residency and second citizenship option. While it’s not as quick or as easy a residency-for-citizenship option as the Dominican Republic, Uruguay does offer the possibility of being naturalized after as little as two years of residency if you’re married.

I like banking in Uruguay because banks in this country offer currency options not available in most jurisdictions.

Another thing I like about Uruguay is that it remains off most everyone’s radar.

• Taxation: A
• Doing Business: A (Based on the benefits of forming a structure in this jurisdiction… not on the idea of starting or operating a business here.)
• Asset Protection: A
• Banking: B-
• Investing: C
• Residency: B
• Citizenship: A (For economic citizenship.)

St. Kitts & Nevis is a federation of two Caribbean islands that has made a name for itself for two offshore products specifically.

St. Kitts offers an economic citizenship program that makes a second passport possible in less than a year. If everything goes smoothly, you could have your second passport in less than six months.

This comes at a minimum cost of US$250,000, plus legal and government fees… which is why the DR’s Fast Track residency-for-citizenship program, which can mean a second passport in 18 months at a cost of only US$6,000 all in, is as appealing an option as it is.

On the other hand, a St. Kitts & Nevis passport is one of the best travel documents you can have. If you can afford it, the cost can be justified.

Nevis is known for offshore entities—corporations, LLCs, and trusts. Any of these structures can be used for asset protection, and a Nevis entity provides a strong layer of asset protection that can be difficult to penetrate. A Nevis trust brings powerful protection as well as estate planning benefits.

St. Kitts & Nevis takes a jurisdictional approach to taxation, making it, like Panama and Uruguay, a tax-efficient place to hold investments. You’d owe no tax on the investment income in the country.

• Taxation: A
• Doing Business: A
• Asset Protection: A
• Banking: A
• Investing: B
• Residency: B-
• Citizenship: C

The Cayman Islands are a granddaddy among offshore jurisdictions.

This archipelago is home to well-established financial and offshore entity industries and more than 200 banks, including branches of major international banks, meaning many private and investment banking options.

This is one of your best and most diversified choices for investing in offshore financial investments (international stocks, bonds, and mutual funds).

The trouble is that, thanks to SEC regulations and restrictions, most Cayman banks and brokerage houses won’t deal directly with American clients. An American wanting to take advantage of the investment opportunities on offer in this jurisdiction must set up an entity to hold them. You could go with a Cayman structure, making banking easier, or one from Nevis.

Lief Simon