Offshore Tax Evasion Strategies

Offshore Tax Evasion Strategies

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Wyoming LLC & Trust Attorney / Domestic Asset Protection Trust / vs Offshore Trust / Tax Evasion

Abusive Offshore Tax Avoidance Schemes


What follows are summaries of some identified and emerging schemes. All of which we strongly discourage in favor of forming a domestic trust and taking advantage of Wyoming's favorable laws.

FATCA Compliance

Recent efforts by the (OECD) seeks to eliminate damaging tax competition between member-states. Nations labeled "tax-havens" have been accused by OECD members of engaging in the very practices the members desire to cease. A common scenario put forth is the simplicity nonresident aliens have engaging in business funnelled through a U.S.A. domiciled limited liability companiy (LLC) , with a comparatively high degree of anonymity, that has no U.S. tax consequences. A report by the GAO states corporations act as conduits for illicit funds. This abuse of the anonymity provided by corporations in the U.S. by foreigners diretly mirrors the very abuse allowed by tax haven entities by U.S. persons that are so firmly scolded.

Deferred Compensation Arrangements

Highly paid professionals, and business owners, are frequently solicited to engage in "offshore deferred compensation plans". The individual is encouraged to terminate an existing employment relationship and replace it with arrangement wherein the nominal employer is an overseas "employee leasing" business. The desired result of this abusive structure is that taxes for most of the salary are deferred, meanwhile the individuals has immediate access to "other" funds through establishing loans and/or offshore based credit cards. The corporate tax return will also have an nn improper deduction for employee leasing expenses.

Fictitious or Overstated Invoicing

U.S. taxpayers have for some time been concocting schemes whereby the taxpayer's U.S. business is invoiced by an ostenibly unrelated offshore entity for services and goods (e.g., "marketing services") which are nonexistent or overpriced.

Factoring of Accounts Receivable

A taxpayer's company may discount receivables to a supposedly unrelated foreign company. This factoring fee significantly reduces tax liability, and is relocated to an offshore entity allowing it to be either invested free of U.S. tax or repatriated for the taxpayer's free use.

Abusive Insurance Arrangements

Some promoters have devised arrangements that are characterized as insurance arrangements, giving rise to a deduction for the U.S. taxpayer for "premiums" paid to a purportedly unrelated offshore insurance company. Often these arrangements are merely self-insurance, lacking in real transfer of risk.

Shifting of Income Using Offshore Private Annuities

Tax avoidance promoters have created an arrangement whereby taxpayers can substantially defer tax on income and capital gains through exchanging property for unsecured private annuities.

Offshore Variable Life Insurance and Annuity Products

Another common scheme involves using annuity contracts or foreign variable life insurance policies to effectively control and own a foreign entity which is to be used in an abusive transactions.

Offshore Internet Business

Businesses conducted primarily by computer are frequent targets of promoters because their businesses are location independent. Promoters offer "kits" giving the guise of a foreign corporation with operations. Transactions are generally routed offshore, sometimes into offshore trusts for additional anonymity, and business receipts are collected via bank accounts or merchant accounts. These schemes generally go after businesses specializing in intellectual property, e.g. the computer software, music, pictures, or video. They may also provide a means of operating offshore gambling activities.

Offshore Wagering

The last decade has seen a proliferation of available gambling websites. These virtual casinos are operated from offshore locations, where the owners feel unbound from U.S. The owners of these casinos often imply that players in the U.S. are not liable for taxes on their winnings, and often flout U.S. law through handling collections and disbursements in ways designed to avoid the I.R.S.

Repatriation of Offshore Funds Using Credit Cards

Credit cards, most frequently either MasterCard or VISA, issued by tax haven domiciled banks are popular for taxpayers wishing to anonymously repatriate offshore monies. American Express cards are used in a similar fashion and differ only in that they are issued directly by American Express rather than via banks.

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