USE AN OFFSHORE CORPORATION OR TRUST TO HOLD SWISS INVESTMENTS
It is important to remember that Switzerland is a
money management center, not a tax haven. Swiss
residents, including corporations, do pay fairly
substantial income taxes. For this reason, many
investors seeking to have an investment portfolio
actively managed from Switzerland prefer to have that
portfolio owned by a trust or corporation based in a
tax haven.
The most popular investments for U.S. investors in
recent years have been mutual funds and insurance
products. For the internationally minded investor,
there are offshore versions of these products
available. In many cases, they offer even more
benefits to U.S. investors than do their domestic
counterparts. The IRS and other elements of the U.S.
government apparently do not believe in offering
international opportunities to U.S. citizens, however,
so in some cases these investments are less attractive
to U.S. investors than to residents of other countries.
The main obstacle standing in the way of many
foreign opportunities is the U.S. securities laws. Any
"investment contract" sold in the United States must be
registered with the Securities and Exchange Commission
and with its counterpart in each of the states. This
is a very expensive process. U.S. securities laws
require far more disclosure than do those of most
foreign countries and also require different accounting
practices. Therefore, many offshore mutual fund
companies decide that whatever income they might
eventually earn would be inadequate compensation for
the time and expense involved in attempting to comply
with U.S. securities laws. In fact, several of the
mutual funds and hedge funds with the top performance
records are run from the United States by U.S.
residents but do not accept investments from U.S.
residents. To reduce registration costs and avoid
other restrictions, the funds are made available only
to foreigners.
That doesn't mean that there is something dirty or
illegal about it -- it merely means that the fund is
not registered for sale in the U.S.
Successful foreign funds don't need the American
market and see little reason to pay the outrageous fees
of our litigious society. (Some of the best foreign
cars cannot be purchased in the U.S. for a similar
reason -- the makers of $100,000 custom cars are not
about to give the federal government ten free cars per
year for destruction testing.) Some of the funds
cannot meet U.S. legal requirements because they charge
investors a performance fee rather than a management
fee based on a percentage of assets. But many
investors would actually prefer a fund manager whose
only compensation is a share of the profits instead of
a fee based on the total investments in the fund. The
manager's goals are different.
Fortunately, U.S. citizens can get around the
obstacles through bank accounts or trusts. Basically,
you can travel overseas to buy the shares in person,
you open a foreign bank account and invest through the
account, or you can establish a foreign trust. Only
then will these opportunities be open to you.
It is not illegal for Americans to buy offshore
mutual funds (called unit trusts in some countries) or
any other security that is not registered for sale in
the United States.
Creating a foreign irrevocable trust which in turn
owns a foreign corporation has proven a viable solution
in some circumstances. Recently revised Securities &
Exchange Commission regulations also make it legal for
such a corporation to purchase foreign shares and funds
which could not be purchased by an American directly.
Regulation S now defines circumstances in which such
purchases may be made by a corporation indirectly
controlled by an American shareholder (such as control
through an asset protection trust). In many cases such
a trust and corporation structure can be created in a
way that provides both asset protection and fully-legal
income-tax exemption for the trust or corporation.
One of the best sources of help in setting up
offshore trusts and corporations is an American
certified accountant who has a large practice in
Panama. Marc Harris holds a master's degree in
business administration from Columbia University in New
York, and completed the certified public accountancy
examination at the age of 18. He is believed to be the
youngest person in the U.S. to pass the examination.
He opened his Panamanian firm in 1985, after being
a consultant with the accounting firm of Ernst &
Whinney. His services are highly recommended because
he is able to create and administer offshore
corporations and trusts with complete compliance with
U.S. laws. Often an American client uses a tax-haven
based advisor who knows the local laws but is not
familiar with American tax law requirements and
technicalities, and the client eventually gets into
trouble, so Marc Harris has a unique ability to bridge
the two worlds for his clients. Although based in
Panama, he can create and administer corporations and
trusts that are registered in all of the popular tax
havens.
