June 25, 2010
Barcelona, Spain

It’s early in the morning here in Barcelona– the part of day they refer to as ‘madrugada’ in Spanish… near dawn.  I’m just wrapping a few things up here before heading out on a long drive.

My weekend plans entail meeting up with a rather eclectic group of bankers, investors, and diplomats in a remote location high up in the mountains. We’re gathering at an old monastery that’s been converted into a luxury boutique hotel… one of those places that you’ll only find in Europe.

Before I get going, I want to take a minute to thank you for taking the time to fill out yesterday’s survey.  People from over 60 countries provided their valuable feedback, ranging from the Tanzania to Croatia to Afghanistan to Bolivia. It’s amazing how diverse our group is.

I’m still going through all the responses, but so far I’m really encouraged by what I’m reading, and I hope to be able to make our publications more beneficial for everyone.

Regarding this week’s questions, I want to spend a few minutes making some clarifications. On Wednesday, I wrote what was probably among the most important letters that I’ve published about the British government’s overnight tax code changes.

This is really important because it provides a clear example for the rest of us to start taking action now… politicians have the power to make changes, literally overnight, so that we all wake up in the morning to a completely different reality.

Planting multiple flags is a great way to take action.  Every country has some merit, something good that it offers. One country may have a great banking system but terrible courts (Panama). Another may be great for citizenship but bad for tax residency (Italy).

The idea is to pick and choose the best parts about each jurisdiction and apply those benefits to your life.

Protecting yourself from tax code changes, such as what happened in the UK, could mean a variety of different strategies. For many nationalities, it may mean holding assets in a foreign structure, and never repatriating those profits.

For other, less fortunate taxpayers (specifically from the US), offshore tax shelters cannot be employed without serious penalty. In this case, one of the best solutions that I outlined in Wednesday’s letter is the self-directed, tax-deferred structure known as an Open Opportunity IRA.

Through this structure, you have the flexibility to invest in alternative assets (physical gold, foreign property, etc.), plant multiple flags, and be in complete control of your own money.

This is a completely legitimate strategy, just as much as a 401(k) or traditional IRA– you can read about it yourself in the tax code. There are some basic rules, however, and you need to follow them in order to maintain the integrity of the structure.

Regardless of which strategy you pursue, the time to take action is now… as I outlined in Wednesday’s article, these massive changes can occur overnight. I encourage you to re-read Wednesday’s article to learn more.

Moving on, Keith asks “Simon- My grandmother was born in Switzerland in the late 1890s and lived there until she was 95 years old. I know some countries allow you to acquire a second passport from grandparents, is Switzerland one of those countries?”

No. If she were Italian, Lithuanian, Polish, or a few others, you would be in luck. Unfortunately, Switzerland’s nationality law does not pass on generational blood lines for individuals who do not have significant ties to Switzerland.

To make matters worse, being naturalized in Switzerland as a permanent resident is also an extremely long and difficult process. I know people who have been living there for nearly 20-years and have not become citizens yet.

The bottom line on Switzerland– there are a lot of great aspects about the country, but you shouldn’t consider planting a citizenship flag there.  Look at better options like Belgium in Western Europe, Brazil or Paraguay in South America, or Singapore in Asia.

Lastly, Dirk asks, “Simon– I have been following your letter with growing fascination over the past weeks; can you recommend a certain threshold over which you should start looking to plant multiple flags– is there a minimum net worth?”

There is no net worth requirement for planting multiple flags. You can be flat broke and still plant an electronic flag with a foreign email provider to safeguard your privacy. Furthermore, many people may find that planting business flags overseas could be a path to creating wealth.

The truth is that it might be easier to make your fortune outside of your home country, in a place where economies are moving forward rapidly and your skills can be of great value. After all, everyone has something that he or she excels at, and there are several places in the world where those skills are in demand.

As for planting certain financial flags, it really depends on the situation. A young entrepreneur, for example, may benefit from creating a foundation of offshore bank accounts and structures, even though s/he does not have much money or income at present.

Others who might not have significant assets but steady income from a job may also benefit from establishing a foreign bank account to safeguard their growing savings.

The important thing is to have a firm idea about specifically what you need, and why. Don’t haphazardly plant flags that make no sense in your life, i.e. there’s no need to establish a foreign company if you don’t expect to operate a business or understand the tax implications. Don’t open a foreign brokerage account if you have no investment capital or prospects of building investment capital.

When planting flags, think about your own situation and what makes sense. Once you do I’m sure you’ll see planting flags as I do… not just a way to hedge your bets or protect your assets but as a way to really live your life through deep, rewarding experiences and unimaginable opportunities.

June 23, 2010
Oxford, England

Yesterday in the UK, something happened that has significant implications for us all.

Old western economies are clearly losing their dominance. Particularly in Europe, the costs of broken pension plans and entitlement programs are bankrupting entire economies.

Yet, national governments continue to perversely borrow and consume; politicians have been acting like degenerate gamblers, borrowing money from anyone they could, blowing it all on terrible bets, borrowing more money to make even worse bets, and actually expecting different results.

Something needs to change… and it appears that Britain is the first major western government to face the music. As such, British Chancellor of the Exchequer George Osborne unveiled yesterday what has been touted as ‘emergency’ budget austerity.

Osborne’s budget cuts deep. It hits the elderly, it hits low income workers, it hits single mothers, it hits business owners and investors… it even hits the Queen, who will see her multimillion pound salary frozen for several years.

To give credit where credit is due, Osborne should be commended for looking his nation in the face, speaking about a very grim reality, and being candid about the tough sacrifices that everyone will have to make.

But here’s the scary part, and what we need to learn from:

While there was significant talk in Osborne’s speech about spending cuts, most line items have yet to be fully determined. What they are absolutely clear about, though, are the tax changes.

Britain’s VAT, for example, will increase from 17.5% to 20%.  Many personal income tax rates will rise as well, particularly for high income earners.  These changes will be phased in gradually… except for one.

Osborne announced that Britain’s capital gains tax will increase from 18% to 28% for higher income earners. Yet unlike the other changes which are phased in over time, capital gains tax change occurs IMMEDIATELY.

There is a serious lesson here: governments have the power and willingness to make major changes overnight. With the stroke of a pen, they can impose capital controls, higher taxes, gold forfeiture, confiscation of retirement savings, or anything else they can dream up.

Britain’s emergency budget underscores this point even more, and reminds those of us who aren’t in the UK that we need to prepare NOW.  Why? Because other countries won’t be far behind, including the United States.

At a certain point, President Obama will be forced by circumstance to look the American people in the eye and ask them to sacrifice… and pay higher taxes effective immediately.

Also, it’s likely that the US government will get its hands on private retirement savings some day soon… there’s about $5 trillion out there, and at some point that they’ll mandate a portion of all managed retirement accounts to be held in the ‘safety’ of US Treasuries.

I can’t stress this enough– proper financial planning should be an integral part of your multiple flag strategy.

To protect yourself from overnight tax hikes, this means using existing, legitimate tax shelters.  US tax code, for example, provides a means for people to set aside tax-deferred savings for retirement through an IRA or 401(k).

Most of these entities, though, are unfortunately engineered to generate profits for the financial institution who manages the account, rather than the individual who is busting his butt every day to save for retirement.

The best solution that protects your savings from rising tax rates and government confiscation is to hold your investments in an Open Opportunity IRA structure.

Similar to a regular IRA, an Open Opportunity IRA allows you to generate tax-deferred (or tax-free) returns on your savings. Unlike a regular IRA, this structure gives you complete control and flexibility to do what you want with your retirement savings– like planting multiple flags overseas.

With an Open Opportunity IRA structure, you can buy foreign property, store gold overseas, establish an offshore bank account… as well as invest in all the other instruments that you might already be investing in right now with your retirements savings.

The big difference? It’s nearly impossible for the government to get their hands on it.  And if you start investing through this tax deferred structure, you won’t wake up one morning to higher tax rates that will pummel your investment returns… which is exactly what happened in the UK this morning.

This is one of the biggest no-brainers for US taxpayers… even if you’re just starting out, establishing one of these structures provides a long-term solution to generate tax-deferred or tax-free savings as you make contributions over time.

Terry Coxon is a leading expert in this industry; he’s authored numerous books on tax and personal finance issues, and his latest e-book is one that you should absolutely own.

In Unleash Your IRA, Terry explains the real magic behind these structures– how to set one up, how to protect yourself and your assets, and all the amazing things you can do while still following the tax rules.

Click here to get this book now.

I strongly urge you to take action now… continuing to kick the can down the road is a very dangerous course of action given all the warning signs around us.

June 15, 2010
Rio de Janeiro, Brazil

Here’s the best way that I can describe Rio de Janeiro– it’s what you get when you mix the gorgeous vistas of Vancouver with the beach culture of Miami, the chaos and squalor of Mexico City, and the carefree attitude of the Caribbean.

Rio is one of those places that everyone has an opinion about… and the opinion is completely binary. Book a trip to Rio and tell your friends– I guarantee you’ll get one of two responses:

“Wow. I’m jealous, I’ve always wanted to go…” or
“Are you crazy?!? You could get killed there.”

The city has that reputation– free loving, sun drenched beautiful people with a passion for life and partying, as well as the low life criminal thuggery that plagues the city streets.

Like most rumors, both of these contain elements of truth.

Yes, Brazilians are gorgeous and fun loving, but there’s more to their lives than sexual hedonism. And yes, there is crime in Rio, but you’re not going to get stabbed on the street for the 15 cents in your pocket.

The truth about Rio is that it’s a major work in progress… and it probably always will be. They’re trying hard to eradicate poverty, mostly by redistributing income from the wealthiest Brazilians and increasing police presence in the legendary poor ‘favelas.’

This is why it makes sense to either bank in Brazil, but not live there… or to live in Brazil, but not bank there. You don’t want to get caught up in the country’s tax net.

As an aside, Brazil is one of the easiest places in the world to meet people.  Brazilians are extraordinarily friendly and welcoming people. This is different than, say, the folks in New Zealand… who are quite nice, but not especially inclusive.

Brazilians will literally take you by the hand and bring you into their group… and unless you have a major personality disorder, you’ll have at least 30 new best friends within your first 24-hours on the ground, even though neither of you will understand each other’s language.

One of the people I’ve met on the ground here is a special forces police officer named Fabio. We were talking about crime in Rio, and what an awful reputation it has internationally.

Rather than tell me about it, Fabio and I spent an entire evening driving around in the worst favelas to get a boots on the ground taste.  (* he was off duty and we were in my rental car, so it’s not like I had an official police escort which biased the observations)

From what I saw, the poorest, ‘most dangerous’ favelas seemed quite similar to the worst neighborhoods I’ve seen in Detroit, South Dallas, Los Angeles, London, and Hong Kong… but without the luxury of electricity or four walls and a roof.

The people who live in these areas are unquestionably poor… in sharp contrast to the high life condos on Copacabana and Ipanema beaches. But being poor does not make them murdering rapists, which seems to be the reputation that these favelas have in the press.

As I mentioned, the government’s solution to address the poverty has been to tax the income of other Brazilians and dump those funds into grants and public works projects around the favelas.

This simply doesn’t work. It’s like the trailer park tenant who wins the lottery– give that guy a million dollars and he’ll be right back in the trailer park within 3 years.

Lifting people out of poverty requires much more consideration than simply throwing money at the problem. Poverty is often something that people are born into… but they stay that way because they lack opportunities to develop the vision and skills required to deal with the outside world.

Ironically, the private sector has started addressing the issue in its own way. Fabio took me to a couple of nightclubs that are located in the worst favelas. As it turns out, they’re quite popular with the locals… rent is low so the drinks are cheap.

All the workers I saw, from the parking attendants to the bartenders to the bouncers, were all from the favelas… earning a decent wage and developing real world skills.

It seems, in my opinion, to be a much better solution than forking over a bunch of money to the tax collector.

Now… if you’ll excuse me, I have to get going… I was a complete bonehead and managed to lose one of my passports, so I have to dash off to the consulate to get it replaced. And Brazil plays its World Cup opener today, which basically means the entire country is on holiday this afternoon.

More to follow tomorrow on passports.

June 11, 2010
Santiago, Chile

As I mentioned in yesterday’s subscribers-only letter, I’ve been to Chile numerous times, and I like it more each time I’m here. For this trip, which is unfortunately short, I wanted to survey the countryside to see the extent of the earthquake damage.

It’s easy to have already forgotten February’s 8.8 earthquake in Chile, roughly 500x stronger than Haiti’s.  That’s because there was scant media coverage, limited outpouring of international support, and no celebrity telethon.

While most of the world was fixated on Haiti, Chile got down to the business of picking itself up, dusting itself off, and putting itself back together… mostly by itself.

As I discussed yesterday, I think the manner in which Chileans got back to work and started functioning normally again is a real testament to how advanced and civilized this place is.  I’m absolutely convinced that the country has a very bright future.

I’ll be in Brazil later this weekend, taking in the World Cup games with some local friends and sorting out some immigration issues that I hope to be able to tell you about soon.

For now, let’s move on to this week’s questions.

First, Pat asks, “Simon, I am very interested in using a law firm outside US to start the process of internationalizing myself. I’ve run across several firms online that provide such services, but I’m curious to know whether they are legitimate.”

I’ve worked with a lot of these firms over the years, mostly because I wanted to test their integrity and competency. Some are certainly legitimate, while others are crooks. But here’s the honest truth about the whole thing-

Generally, when dealing with offshore service providers, whether they be lawyers, real estate agents, etc., the firms which come up in the top listings in Google are competent at search engine optimization, but little else.

They specialize in factory-style solutions, churning out cookie-cutter products and services that only scratch the surface of your situation.

The best offshore service providers out there keep a low profile and don’t really advertise, especially in mainstream venues. To get in the door, you have to know someone, and do a lot of homework on the ground. I’ve personally burned through dozens of offshore lawyers alone, just to be able to find the gems.

The last thing you should understand is that most of the law firms you’ll work with can’t provide the comprehensive services that you’re looking for. An attorney may be able to build a trust, but doesn’t know anything about foreign property.

Similarly, a foreign real estate agent may be able to find you a great property, but doesn’t know anything about second citizenship… and a passport facilitator doesn’t know anything about where to store your gold overseas.  And none of them understands the tax implications in your home country.

I’m currently working on a solution to this problem by pulling together several of my global contacts to provide comprehensive advisory services. This would be a single group that can give actionable advice across all areas of internationalization– property, banking, citizenship, etc. More to follow.

Next, Richard asks, “What do you think of Nevis versus Panama for incorporation?”

The most popular corporate entities of both jurisdictions offer similar benefits– neither jurisdiction taxes domestic corporations on foreign income, neither requires annual reporting, and both offer bearer share entities.

There are, however, substantial differences that you should be aware of– Nevis is a British common law jurisdiction. For most foreigners, this is much more comforting than Panama’s civil law system should you ever get dragged into court.

Also, US taxpayers should know that Panama is on the IRS ‘per se’ corporation list; Nevis is not. This means that a Panamanian SA will always be considered a corporation for US tax purposes.

Consequently, if you operate a Panamanian company that has US tax liability, the IRS will tax both the corporation and shareholders on profits. A Nevis company can elect to be taxed as a partnership, eliminating the double taxation.

If the company has no US tax liability, however, then this difference is of little significance.

Next, Barry writes, “Simon- regarding the social housing program you discussed in Panama, I’m concerned that the government will create artificial demand for housing and spur a bubble, similar to what happened in the US. Thoughts?”

You make an excellent point about governments’ ability to create bubbles. But the hard numbers in Panama make a very compelling case for supply and demand– quite simply, there are roughly 50,000 housing units needed for lower/middle class Panamanians.

Most banks and local developers are happy to ignore this market and focus on overpriced gringo projects. As such, the government is providing incentives to help close the gap.

Several years from now, there may be a bubble in this segment… but for now, I think Panama social housing is one of the strongest real estate opportunities in the western hemisphere.

To learn more, the best person to speak to about it is Ulrich Schwark, a German real estate professional in Panama who develops these properties. You can contact him here.

Lastly, I need to update you about the proposed tax changes in Uruguay. A few weeks ago, the Uruguayan government began discussing new legislation that would tax residents on their foreign assets and income– clearly a negative for anyone thinking about establishing Uruguayan residency.

The government has since clarified that it only intends to tax citizens, not residents. This still seems like a negative, in my opinion, since many expats want to move to Uruguay in order to obtain a second passport.

For now, the changes are just propositions and have not been ratified… so we can bring up the topic again once the new tax code is finalized.

June 7, 2010
Panama City, Panama

My weekend in New York City with fellow Atlas 400 members was really spectacular and first class all the way. There were about 50 of us in total, all with varied and interesting backgrounds from all over the world– a renowned heart surgeon, a music business mogul, a couple of best-selling authors, successful entrepreneurs, etc.

I want to tell you a lot more about the event because I think it underscores how important it is to develop diverse personal relationships bound by common philosophical beliefs… but today I want to spend a few moments talking about something else– Panama.

I stupidly booked myself on a rather unfortunate 6am flight from New York to Panama on Sunday morning. I’m not a morning person, so I don’t quite know what I was thinking, but it ended up being rather serendipitous.

Prior to takeoff as I was resting in my seat trying to ward off the prior evening’s wine selection, a man sat down in the seat next to me and immediately began striking up some idle banter… I’m sure you’ve been there– chatted up by an early morning type A personality who apparently receives caffeine intravenously?

In most cases I’d be polite enough to explain that I need to snooze… but for this gentleman, one quick glance out of my half-opened eyes sent the alarm bells blazing… his entire appearance screamed ‘US government agent.’ It might as well have been tattooed on his forehead.

I perked up and look around a bit more, noticing 5 or 6 more of the usual suspects– all of whom were with me in the first class cabin, mind you… that’s US federal tax [debt] dollars at work.

Given my past experiences with these types, I’ve found that a lot of them take pride in what they do, and they want you to know it. For ‘security’ reasons, they can’t tell you exactly what they do, but they’ll dance around the issue until you’re convinced that they’re either Jack Bauer or James Bond, even though it’s not true.

As a rule of thumb, the guy who tells the loudest war stories is the one who was the furthest away from combat. Needless to say, my seatmate regaled me with ‘hypothetical’ stories about drug busts, asset seizures, and money laundering operations, with the standard caveat of “well I can’t give you any specifics, but…”

Here’s the big takeaway that I want you to understand: Panama has a small army of US government representatives crawling around, including military and drug enforcement in particular.

It’s also been reported that the IRS is even setting up an office in Panama, though my sources on the ground here have indicated that this has not happened… at least, not yet.

A few years ago, Germany shocked the world when it announced that one of its intelligence agencies had infiltrated Liechtenstein’s LGT bank by paying a 5 million euro bribe to a bank employee for information on 750 foreign account holders.

It seemed rather strange to me that Germany publicly acknowledged that it had covertly invaded another sovereign nation, and induced a local of that sovereign nation to violate the law.

Most people didn’t seem to take notice of the legality of Germany’s actions… instead, the global community cheered Germany’s efforts to crack down on financial privacy.

Frankly, I wouldn’t be surprised if the US government were engaged in similar activities. I don’t know of too many bank employees in Panama (or Belize, Cayman, etc.) who would turn down a few hundred thousand dollars to provide a list of foreign account holders.

Here’s the bottom line: governments are waging a dirty, no holds barred fight against financial privacy, and the penalties are severe. If you don’t disclose a foreign account as a US taxpayer, the IRS thinks that it’s entitled to 50% of the account value. In Australia it’s even more Draconian.

Consequently, you shouldn’t open a foreign financial account in the hopes of hiding money… that’ll just land you in court next to Wesley Snipes.

You should, however, open a foreign financial account in order to protect your savings from exchange controls, confiscation without due process, frivolous lawsuits, currency depreciation, and more. It is probably the single most important flag you could plant for your money.

Afterwards, don’t make a secret of it. Ensure you follow the proper disclosure protocols for your home country… in the United States, that could mean IRS 1040 schedule B and Treasury form TDF 90-22.1.

Despite the presence of so many government agents, I still think Panama is a reasonable place to bank, especially for smaller account sizes. The institutions are solid and well capitalized, and many of them still work with North American citizens.

Belize is another jurisdiction to consider for smaller account sizes, between $10,000 and $250,000. Beyond that, I would strongly suggest more developed jurisdictions like Switzerland, Hong Kong, and Singapore.

Meanwhile, if you’re really looking to go ‘off the grid’ with your money, your best bet will be nonreportable items like precious metals and real estate… but we’ll save that for another time.

June 4, 2010
New York City

Today, my friends and colleagues from the Atlas 400 group are gathering in New York City for another weekend adventure. It’s something I’ve been looking forward to since our last event in Panama.

As you’ve heard me describe before, the Atlas 400 is a private group of successful, like-minded individuals who meet at world-class locations to discuss their ideas, socialize, and forge lasting personal and business relationships.

I go out of my way to attend the events, and I’m pleased that a handful of Sovereign Man subscribers have joined the club. If you’re interested in learning more about the club, you can read more here.

Afterwards, I’m hopping on a plane for Panama where I have a short, 3-day trip planned before heading on to Chile, Brazil, and then Europe.

More on that next week; for now, let’s move on to this week’s questions.

James asks, “Simon– Can you tell me if precious metals held in an offshore depository such as Brinks or Viamat are required to be reported on TDF 90-22.1? No one else seems to be able to tell me for certain, and I have even offered to pay for the advice.”

No payment necessary. TDF 90-22.1 is the Department of Treasury form that US taxpayers must file by June 30th of every year if they have a financial interest or signature authority in a foreign financial account.

Under current law, the term ‘financial account’ refers to banks and brokerages, not physical bullion stored overseas. Thus, if you hold precious metals in an overseas vault, you do not need include that information on this form.

If you have a financial interest or signature authority over at least one bank or brokerage account, and the total value of those accounts exceeded $10,000 at any time during the calendar year, you would need to file the form by June 30th of the following year.

Additionally, if you have a foreign bank account, you will also need to check box 7a on Schedule B form 1040 when you file your taxes.

Next, Robert asks, “Simon– does Singapore tax companies on income they earn outside of Singapore, and then bring into Singapore? I am a Canadian who owns and operates a business that can be done entirely online, and I’ve been considering Singapore as a jurisdiction.”

Good choice. Singapore is a great place to structure an online business. In general, profits that are generated outside of Singapore are not taxable there as long as the funds are not repatriated to the country.

In practice, many Singapore companies earn money outside of the country, and they bank in a place like Hong Kong to ensure that none of the profits ever enter Singapore. Through this approach, the company has effectively eliminated its Singapore income tax liability.

This is a very clear example of how a business can benefit by planting multiple flags– structuring the company in one location and banking in another.

Durabo asks, “Simon, have you heard of Anglo Far East Bullion Company? They are a precious metal storage facilitator, and I’m wondering if you have any experience with them.”

Yes, I do have experience with them; I have met with the principals at their headquarters in Panama, and I generally find their service to be very expensive. There are cost effective alternatives for bullion purchase and storage, such as Best Safety Boxes in Panama, or Das Safe in Vienna.

Last, Kevin asks, “Simon, is there any chance of becoming a Colombian citizen and obtaining a second passport?”

Yes, but it’s not a country where you would really want to pursue citizenship.

First of all, it takes several years, and the process is very bureaucratic. During some of that time period, you cannot leave the country for more than 6-months at a time.

Eventually, if you are finally able to obtain citizenship, you may be signing yourself or your children up for military service in the country.

The biggest reason, though, is that Colombians have some of the worst visa restrictions on the planet; it is a poor travel document, and there are much better/easier options out there.

Instead, I’d suggest considering Ecuador, Brazil, Paraguay, and Singapore. These countries are much stronger travel documents, and you’ll have a much easier time acquiring them.

Subsequently, you could still spend a great deal of time in Colombia, either as a tourist, or applying for residency. This is another multiple flags example– citizenship in one country, residency in another.

That’s all for this week, have a great weekend.

May 28, 2010
Chicago, IL, USA

Chicago is a really beautiful city– one of my favorites in the United States, actually, along with Austin, TX and Sheridan, WY. But while I enjoy being back in the US as a tourist from time to time, I’m itching to get out of here.

The travel I’ve just scheduled is a bit insane. Next week, I’m traveling to New York for an Atlas 400 event. Immediately after, I head to Panama… then Chile, Brazil, Madrid, London, Norway, Lithuania, Lebanon, South Africa, Zimbabwe, Kenya, India, Pakistan… and more.

I’m looking forward to the travel and meeting up with old friends on the road. Most of all, I’m looking forward to bringing you even more boots on the ground insights, especially as we gear up for our new premium service.

More to follow on this upcoming trip soon. For now, let’s jump into this week’s questions.

First, Gene asks, “Simon, I do alright, but the majority of my money is tied up in retirement savings. I’m afraid of what’s happening in the stock market right now, and I’m thinking about buying gold instead. Do you think that gold is a good buy at this price, and can I do this with my IRA?”

Great question. I mentioned a few weeks ago that it’s really difficult to ‘value’ gold as an investment speculation. Unlike a company whose balance sheet and management can be probed, or real estate that generates income and agricultural yield, it’s impossible to determine the fair price for gold.

As a speculation, I have a tough time chasing anything that has enjoyed a huge run-up, though I do believe that gold is seeing some breakaway fundamental changes right now in the way that investors are perceiving risk.

That being said, as a means to hold and protect your savings, gold probably makes a lot more sense, regardless of the price level. I hold physical gold, and I don’t really care what the spot price is. Why? Because it holds its value in relation to ‘stuff’ irrespective of the changes in paper currency.

This, after all, is the true nature of savings.

With your retirement savings, you can buy gold (and silver) through what my friend Terry Coxon calls an “Open Opportunity IRA”. This is a self-directed structure that puts you back in control of your own money and allows you to invest in just about anything, including most classes of bullion.

For US taxpayers, this Open Opportunity IRA is really a no-brainer for anyone with more than a few bucks in his retirement account… and if you haven’t already, I’d encourage you to give Terry Coxon’s book a try. It’s called Unleash your IRA, and he tells you exactly how to do it yourself.

For Canadians, the tax code now allows RRSP-ownership of certain gold coins. They must be of at least 995 purity and produced by the Royal Canadian Mint.

For Brits, the ISA retirement structure leaves few options for holding bullion.

Next, in response to my article about Uruguay no longer being a tax-free residency jurisdiction, ‘lf’ commented, “Unless Simon will come up with an idea how to get Martian passports, I doubt that a viable option really exists.”

I find this perspective troubling.

Countries change from time to time. It’s happened in the US, it’s happening now in China, it’s happened in Europe. Uruguay is no exception– they went from being a tax haven to jumping in bed with the OECD.

But to say that there are no viable options out there is simply an erroneous, defeatist attitude. Singapore is a great example– there are plenty of jobs and entrepreneurial opportunities available, the residency process is cheap and transparent, and you can become a citizen after 2 years.

I could cite several of other examples… but the larger point is that nothing is going to stay the same forever. You, your country, the environment, the society around you– all evolve and change over time.

The nice thing is that we can generally see major political changes coming years in advance. That gives us time to make preparations. Right now, you probably have a strong sense of the negative changes coming to the Western world, and that’s why we keep having these conversations.

Bob asks, “Simon, I was a bit confused about your article concerning Canadian citizenship. It seems more attractive to be a non-resident Canadian citizen. Is it possible to apply for this status directly without ever being a resident?”

No. You have to actually be physically present in Canada for 3 years out of a 4 year period. Then, and only then, can you apply for naturalization. If you take advantage of the offshore trust investor program, though, you can at least squeak by with a minimal tax burden.

Lastly, Jennifer asks, “Hi Simon. You haven’t mentioned anything about your sustainable community project in a while. Any update?”

Here’s the bottom line: I absolutely will develop a cost-effective, sustainable, offshore community where the amenities focus more on organic agriculture and livestock instead of golf courses and water parks.

Considering that I’m heavily involved in 3 operating businesses, multiple other investments, and I still write this letter each day, I simply don’t have the bandwidth to give a real estate development my 100% effort at this time… and I refuse to attempt something that I can’t give 100% to.

Given the upcoming offshore conference that we’re planning, as well as the pending launch of a premium service, I suspect it will be at least another 9-12 months before I’m ready to make that sort of commitment.

I appreciate all the emails expressing interest in the project, and I want to be clear that once I can allocate the time, it will be a top priority.

May 27, 2010
Chicago, IL, USA

Uruguay is one of the countries that generally receives a lot of praise and positive commentary in the expatriate blogosphere. It’s often referred to as the “Switzerland of South America,” or compared directly to Paris… probably by people who have been to neither Switzerland nor Paris.

The truth is that Uruguay is a very pleasant country in many respects. It’s relatively clean, quiet, safe, and not very corrupt. Punta del Este, more specifically, is a great town with a hip and sometimes chaotic nightlife for a few months out of the year.

Other parts of the country can leave a bit to be desired… the poverty, blight, and disrepair are more noticeable, and a ridiculous array of taxes and high import duties ensures that only the wealthiest residents have access non-basic goods.

More importantly, though, Uruguay’s reputation as a tax haven and offshore financial center is completely undeserved. I’ve been saying this for a while, most recently on February 26th of this year. It appears that the government is now trying to put an end to the argument altogether.

It started in 2007 when the government imposed a personal income tax. Over the last few years, the country has laid down for the OECD, reducing its attractiveness as an offshore banking center.

Now, Uruguay’s left-leaning government, led by President Jose Mujica, recently unveiled draft legislation to tax all residents on their worldwide income, as well as a wealth tax on the $8 billion worth of assets that Uruguayan residents hold outside of the country.

As the vast majority of Uruguayans have no income or assets outside of the country, the new tax code changes only affect wealthy locals and foreign residents… a small minority in this country of 3 million people.

While the Uruguayan culture is typically not one of blood-sucking socialism at all costs, the enormous demographic gap between those with assets overseas (a small minority) and those without (the majority) suggests that the bill will likely become law.

In my book, this knocks Uruguay off the list of countries where someone should live as a declared resident. It may still be a great place to spend a lot of time, though it would be much more advantageous to do this as a perpetual tourist.

Specifically, one could establish permanent residence in a place like Panama or the Bahamas, then live in Uruguay as a tourist. US, Canadian, and EU citizens are allowed to stay in the country for 90-days at a time; once the 90-days are up, you can hop a 1-hour flight to Buenos Aires, spend the weekend, and fly back to Uruguay.

It’s unclear right now whether Uruguay’s new measures create a tax liability on the worldwide income of non-resident Uruguayan citizens; if not, an Uruguayan passport may still be a reasonable document to acquire… as long as the applicant doesn’t plan on living in the country.

For example, one could travel to Uruguay, establish permanent residence, pay the taxes for 3-years, acquire Uruguayan citizenship, then leave the country for good.

Overall though, I think there are much better options– Paraguay, Brazil, Chile, and even Belgium.

More to follow.

May 20, 2010
Quad Cities, IA, USA

The New Zealand government just announced something that I find rather surprising… but a step in the right direction. Concerned about debt levels, both public and private, they’ve announced changes to the tax code which encourage savings and investment, and discourage consumption.

Specifically, the government is planning measures which cut and simplify income tax rates, ranging from 10.5% to 33% (down from as high as 38%). The corporate income tax rate will be cut from 30% to 28%.

Meanwhile, the changes also include an increase to the national sales tax from 12.5% to 15%. In the long run, this should be favorable for New Zealand economy because the new scheme encourages the replenishment of a large pool of savings… this is critical to long term economic growth.

Overall, I’m bullish on New Zealand and would recommend it as a place for you to consider as an expat destination.

Over the last few months, I’ve occasionally published some letters from my friend Mark who has been living there and exploring the country for his own expatriation. Mark quickly became an expert in NZ residency, immigration, and real estate, and I think his letters served our group quite well.

Mark recently returned to the United States after almost a year on the road, and he’s written a very comprehensive e-book about New Zealand that covers all aspects of living, working, and investing there.

Below is his latest letter since he returned from down under:

Since I last wrote about New Zealand lifestyle and immigration, serious macro-economic changes have begun to unfold. Simon speaks at length about these in his daily missives, so I don’t need to elaborate. What is important to us is predicting how these changes might affect New Zealand, and therefore impact a decision to relocate there, either full or part-time.

But before making the decision to uproot and take the plunge into this new lifestyle, culture (yes, it’s a bit different than where you live now) and system of law and taxation, let’s review the reasons why New Zealand is so desirable.

As a reader of Sovereign Man, our guess is that you believe the world is currently on an unsustainable path, financially and perhaps socially. We are squarely within that camp, and therefore wanted to find a place where we could ride out the storm.

In our first post herein we listed 10 reasons New Zealand was a good choice:

1. Geo-politically and physically ‘Remote’
2. Abundant and reasonably priced lifestyle type properties
3. Plenty of water. Ocean, lakes, rivers…
4. Reasonable annual sunshine hours
5. Clean environment
6. Educated, English speaking population
7. Safe, clean and readily available organic food
8. Physical safety and the rule of law
9. Fair taxation
10. Accessible, high-quality health care

These are factors we evaluated when choosing New Zealand. We said that it didn’t tick all the boxes, as taxation is as predatory here as it is elsewhere. But, now that situation seems to be improving.

As for the other criteria, NZ has those in spades. So now let’s review why it’s a good choice if the world falls apart, even temporarily.

First, you will want to live as far away from the angry masses as possible. And, make no mistake; they ARE getting angrier by the day.

New Zealand is about as geographically remote as you can get while still remaining a part of modern civilization. If Doomsday is your prediction then stay away from the cities. Thankfully you’ll have lots and lots of empty space and small towns to choose from.

Secondly, New Zealand is basically resource independent. They do import fossil fuels, but their electricity generation relies heavily on renewables like hydropower and geothermal.

In fact almost 70% of the power is generated from renewable resources. Auckland is power hungry, and grid interruptions can occur there, but the South Island, with its small population and immense hydropower resources is adequately supplied.

Third, New Zealand has ample food production to sustain its small population. Remember, without food and water nothing else matters. Think about how you would provide food for your family if the supply lines shut down in the urban centers of the U.S. and Europe..?

Fourth, the people, Kiwis are by nature, good-natured! They aren’t the most gregarious, the funniest or even the most polite at times, but they ARE kind at heart and peace-loving.

We would much rather be facing tough times surrounded by strangers in New Zealand than in almost anywhere in the U.S. Your average Kiwi is a survivor; they either live on a farm or are likely only one generation removed from that lifestyle.

Finally, we believe New Zealand is relatively safe from geo-political events. Yes, it is an ally of the Empire; however it’s more like Switzerland in this respect. Their anti-nuclear stance, in our opinion, just increases its rating as a ‘safe place’.

Moreover, New Zealand is likely not a terrorist target, or a military target. And, we believe if the global situation rapidly deteriorated, we’d fare better there, than elsewhere in the world.

So, in summary, New Zealand may in fact be an ideal place to ride out a serious economic, social, or geo-political disturbance. You can learn more about how to make it your primary or secondary residence by getting a copy of our New Zealand Retirement, Immigration and Lifestyle Guidebook.

In the e-book, I discuss the reasons why you should consider residency, and even citizenship in this beautiful country. I review the legal steps, introduce you to competent professionals, provide precious metals purchase and storage options, and even show you current examples of real estate opportunities you can capitalize on right now.

Simon again. I’ve read Mark’s book and find it to be the best source of information about New Zealand out there in the marketplace right now, so if you’re possibly interested in migrating to NZ, I’d encourage you to give it a read.

May 14, 2010
Undisclosed location

I want to start off today by once again thanking you for all the well-wishing emails after my operation this week. I read through a large backlog of email last night, and I was truly humbled by all the positive energy and goodwill out there. Thank you.

With that, I’d like to jump in to this week’s questions:

Phil says, “Simon, I sincerely appreciate the info contained in your letter. I’d like to take your advice: get second citizenship, buy property overseas, store assets outside the US, etc. I’m wondering if you can recommend a ‘how to’ guide with specific instructions for these issues?”

At the moment, there really isn’t one out there that covers the specific ‘how to’ details of getting started with multiple flags. I try to cover these issues on a daily basis, but as our conversations cover so many different topics an abbreviated space, I know we could go much deeper.

Right now, I’m working with a very capable partner to draft a multiple flags instructional overview. I suspect it will be exactly what you’re looking for. We should be finished in a few weeks, so stay tuned for more information.

Maldek asks, “Simon, how do you think the Euro/dollar exchange rate will change if Germany leaves the eurozone and introduces its Deutschmark (DM) again?”

Rumors are already flying that both France and Germany have separately threatened to bail out of the eurozone. It will happen eventually– the single currency is absolutely doomed, just as I believe the integrity of the United States are doomed in the long run.

A German factory worker would no sooner pay for a Greek hairdresser’s early retirement than an overtaxed California entrepreneur would pay for a Rhode Island school teacher’s pension.

Yet these are the kinds of mandates that politicians are forcing on people. Voters may act like sheep when their civil liberties come under attack… but put your hand in their wallets and they get militant.

The real irony is that breaking apart the eurozone is a popular idea in Europe, so you can be sure that the dissolution is inevitable.

If the relatively healthier economies in Europe actually did break away– Germany, Luxembourg, Slovakia (yes I’m serious), Netherlands, Austria, Belgium– the resulting economic union would certainly be among the healthiest, most balanced in the western world.

In other words, today’s euro would become worthless, but the future euro would be quite valuable and respected by investors. The major issue is whether the new currency would be large enough to challenge the dollar’s dominance. We won’t know the answer until they piece the deal together.

William writes, “Simon, I bought Terry Coxon’s book “Unleash your IRA,” and it’s probably the best thing I’ve bought this year. I’m amazed at everything I can do with my retirement funds, including buying gold bullion and foreign property, tax free. Is this a good way to plant another flag offshore?”

Absolutely. Terry is one of the most knowledgeable people I have ever known about all matters related to money, and the Open Opportunity IRA structure he talks about in his book is one of the biggest no-brainers I see out there right now.

Why? A couple of reasons.

First, the US government has its targets set very squarely on retirement funds. There are trillions of dollars of savings that politicians could easily regulate.

For example, do-gooders in the Congress could whip up a new law tomorrow requiring that a percentage of managed retirement funds be invested in US Treasuries… you know, because they’re so secure.

Through Open Opportunity IRA structure that Terry describes in his book, you ensure that no one can confiscate your hard earned savings.

More importantly, though, you can take ordinary returns and make them extraordinary by planting a retirement savings flag overseas.

Imagine that you buy an undervalued property in Colombia. The property is selling for $100,000 and yields about $1,500 per month in net rental income.

Over the years, as Colombia’s economy continues to perform strongly, the property appreciates substantially in value. The Colombian peso outperforms the US dollar. And the rental income rings the register month after month with the reliability of a Swiss train. Not a bad deal, right?

Now let’s assume that you bought the property with your retirement funds through an Open Opportunity IRA. Not only do you receive the rental income, the property appreciation, and the currency appreciation, but you get to take it all tax-free because your IRA owns the property.

I could cite you a million more examples, but frankly Terry’s book does a better job. Bottom line, this is one of the best ways to plant and overseas return and make lot more money at the same time.

Finally, Libero asks, “Simon- you mentioned that Italy has a reciprocity agreement with Panama. I just spent about 2 hours searching and can’t find anything. Can you provide more information?”

Sure. I’m not surprised. Google is the Black Hole of accurate information, and most of the people who write about this sort of thing are just armchair expats who parrot others’ work without putting boots on the ground.

I can tell you with 100% certainty that Panama has a bilateral agreement signed with Italy that provides instant residency for nationals of either country to live in the other. In other words, Panamanians can acquire Italian residency, and Italians can acquire Panamanian residency.

How do you do this? If you’re an Italian citizen, head to Panama and talk to a local **reliable** immigration lawyer. If you need a referral, drop us a line and my assistant will get you in touch with someone. I don’t like to publish these things for Google to index.

April 30, 2010
Las Vegas, NV

It’s chilly in Las Vegas, but I’m having a great time meeting so many subscribers here at the Casey conference; I’m pleased at how many have turned up for the event, and I’m always humbled by the exceptional people we have in our community.

My only regret is that the conference organizers could not allocate more space for Sovereign Man readers, and I will personally ensure this doesn’t happen next time.

As I need to get going shortly to mingle with all the incoming attendees, let’s jump right in to this week’s questions:

First, a question that I have been asked hundreds of times over the last two months– “Simon, several weeks ago you posted two job openings on your website for people who were interested in working with you. What is the status of those positions?”

We recently filled both of the positions. It was one of the more difficult business decisions that I’ve had to make given the quality and number of applications that we received. We may be hiring again soon, and I will post that to the website as well if/when the time comes.

Second, Dana asks, “Dear Simon, if I trade US/Canadian financial markets from my home in Ecuador, would the government of Ecuador expect me to pay taxes on that income?”

No, especially as a non-resident foreigner. It’s the same in several countries, like Panama. This is one of the reasons for taking a multiple flags approach– having citizenship of one country, tax residence in another, and spending time/owning property in another.

Next, Neil writes, “Simon- I’m an investor and US citizen with residency in Uruguay. I want to hold gold coins in Hong Kong or Singapore, but I have a question– will I be able to open a bank account in Asia so that I will be able to wire money to my account in Uruguay once I sell my gold?”

Even as a US citizen, you should not have any problems opening a personal bank account at any number of multinational banks in Asia… try HSBC or Standard Chartered Bank, both of which have US branches and are accustomed to dealing with the Treasury Department’s arcane regulations.

Once you have the account open, you shouldn’t have any problems wiring the proceeds to your Uruguayan account once you sell your gold. Just remember a couple of things-

1) Singapore charges GST (VAT) on gold sales;

2) Don’t forget to fill out TDF 90-22.1, report of foreign financial account, each year after you open the new bank account;

3) You will have to report the proceeds of your gold sales on your tax return if you turn a profit.

Next, Dave asks, “Simon- I am currently living in Treviso, Italy, and I’m considering moving to Switzerland. However, I haven’t seen any posts about living in or considering Switzerland. What’s your take on the country?”

I like Switzerland. For me, it’s as close to a perfect civilization as it gets in this world. The government is [relatively] hands off, the people are [relatively] intelligent and freedom loving, and the country is quite clean and modern.

On the downside, the weather is too cold for my taste, it’s unconscionably expensive, and the people are boring.

Despite what has happened with Switzerland’s banking privacy, I still think the country is worthy of a number of flags, including banking, residency, citizenship, and tax home. I’ll be spending time there this summer and will report more at that time.

Lastly, Ken asks, “Simon, you wrote about Joel Nagel’s upcoming asset protection conference in Belize yesterday. It sounds worthwhile… but aren’t you negative about Belize?”

To be clear, I have no issues with Belize as a banking jurisdiction. True, I personally do not like Belize as a place to spend much time, but I don’t expect everyone to share my tastes.

I know that there are many subscribers who are very interested in Belize, and Joel Nagel’s asset protection conference is probably the perfect opportunity to go check it out.

Why? Because Joel is one of the best international tax attorneys in the business, so you’ll learn everything you need to know about protecting your assets. Plus, you’ll be able to open a Belize bank account through his personal connections, and you’ll have plenty of time to spend exploring the country to see if you like it.

April 19, 2010
Quito, Ecuador

I don’t have to tell you that world governments are collectively pushing hard against people who abusively hide money overseas.

Governments’ primary motivation at the moment is to make sure that no one is evading their tax obligations; for now, they don’t care much if you pay taxes on your income, and then transfer after-tax earnings overseas.

In a way, though, their offshore crackdowns have become a self-fulfilling prophecy that is creating its own demand.

People who understand what’s going on are now more motivated than ever to take action using legitimate and available tools– proper use of international business structures, offshore bank accounts, foreign real estate, second passports, etc.

Why? Because they don’t want to get caught with their pants down when the window of opportunity closes.

Someday, and likely soon, cash-starved governments will implement whatever measures are necessary to trap capital within an economy, enslaving people to taxation, regulation, and inflation.

These are called capital controls, and I think that they’re an absolutely certain part of our future… though ‘future’ is the operative word. There has been a lot of insidious legislation passed around the world recently, but none so far has been capital controls, at least in developed countries.

A few weeks ago, blogger after blogger set off a wave of panic across the Internet by announcing that capital controls had, in fact, been implemented in the US. They were erroneously interpreting a new law called the HIRE Act, claiming that certain provisions were tantamount to capital controls.

This interpretation was simply wrong.

Frankly, I’m pleased that so many websites are now paying close attention to expatriation issues. It seems like every time I turn around, someone is sending me an article from a new website that is doling out advice on internationalization.

I think this is fantastic, and indicative of a growing concern around the world. The problem is that most of them are armchair expats handing out monkey see, monkey do information from Google or Wikipedia that is totally inaccurate.

Misinformation can cause panic and even direct financial loss… this is why you want to be careful about your advisers and go straight to the source.

For example, if you want information about international taxation, talk to an international tax attorney, not Wikipedia. If you want to know about expatriation, talk to people who have successfully done it, not the armchair expat who watches CNN International.

This is one of the chief reasons why we are in the process of redesigning our website; it will allow subscribers to connect with each other in order to swap stories and advice based on their own personal experiences. More on that later.

Today, though, I really wanted to set the record straight about the HIRE Act. On March 30th I initially responded to the misinformation about capital controls; in that missive, I promised that I would soon conduct an interview with an international tax law expert to shed more light on the subject.

Today is that day… and if you’re interested in objective truth about capital controls without all the ‘Chicken Little’ sensationalism, I highly encourage you to check out this interview with Mark Nestmann.

In the interview, we’ll discuss:

- What are capital controls and why the HIRE Act doesn’t qualify
- What capital controls will look like when they’re implemented
- Warning signs to watch out for in the future
- What you can do today to protect your savings
- Options for opening a foreign bank account

Mark Nestmann is an uncontested expatriation expert. As a trained international tax lawyer, Mark has been in the industry for two decades and authored many books on the subject.

One of them, the Lifeboat Strategy, is a really comprehensive, actionable guide to expatriation.  If you’re wondering how to develop a legitimate strategy for going offshore, you should absolutely start with his book.

(as an aside, Mark is putting the finishing touches on a new update to the book which he will list at a much higher price. Anyone who purchases the Lifeboat Strategy today at the lower price will be automatically sent the updated version at no charge.)

I hope you enjoy the interview.

April 15, 2010
Medellin, Colombia

Each year, the junior class at West Point must take a compulsory class in International Relations. Cadets call it “Sosh,” and the major milestone of the class is a mini thesis that ties together current events and irrelevant IR theories.

If memory serves, the deadline is right around Thanksgiving break, and the paper must be turned in by 1600 hours sharp, not a minute after.

The exercise, along with just about everything else at the academy, is supposed to reinforce the Army tradition of timeliness. In this case, though, cadets take the opportunity to poke fun at deadlines.

It’s called the Sosh run– they dress up in strange outfits and make a mad dash across campus with term paper in hand, mocking the deadline. It’s a real crowd pleaser as you can see in this video.

I’ve always thought that tax day could be spiced up a little bit in this way… with large crowds gathering outside the post office at 11:50pm to watch costume-clad taxpayers colorfully parade their disdain for the IRS.

I’d be there cheering them on (or parading) because I despise the IRS. It’s nothing personal, I simply abhor the legalized robbery of wealth from productive citizens to further finance bureaucratic waste.

It is precisely this waste that is driving the US into the ground. Don’t get me wrong, I truly love the country– it’s beautiful, boundless, and as diverse as it gets… but I loathe the corrupt charades of all politicians who further their own ends at the expense of their constituents.

Each year around this time, the government’s wallet gets a little bit fatter with the money that they have confiscated from productive citizens…they’ll blow through it in no time, and then go back to the well for more tax collections and more debt issuances.

Is there anything we can do about it?

Some people simply choose to not pay into the system. Don’t go this route.

Most tax protestors stand behind an argument that there is no actual law requiring an individual to pay income tax. Now, I’m no attorney, but I don’t understand what they are unclear about.

IRC (Title 26 of US Code) section 1 states: “There is hereby imposed on the taxable income of every individual… who is not a married individual a tax determined in accordance with the following table:”

Seems clear to me…

Law or no law, though, it doesn’t really matter. The court system will throw us all in jail if we don’t pay.

The smart move is proper planning.

We’ve discussed Open Opportunity IRAs before as a structure to defer or eliminate taxable gains on everything from gold coins to operating business income.

A properly deployed offshore structure can generate similar results, with the added benefit of additional privacy and asset protection.

Offshore structures get a bad name because people use them to hide money and assets. That’s the wrong idea. The name of the game is full disclosure.

If you file the proper forms and stay within the letter of the law, offshore structures can be a powerful tool that in some cases may even completely eliminate US tax liability.

Moreover, I think the full scope of planning should include planting multiple flags like a foreign bank account, overseas property, and second citizenship.

You might not be ready to leave unless/until things get really bad. But with minimal effort, you can safeguard your assets, reduce your taxes, and have an overseas landing pad ready to go that is generating tax-free income while you wait.

These are the sorts of topics that I will be discussing at the sold-out Casey Research summit in Las Vegas this month. I’m looking forward to meeting subscribers, and I have personally requested that the conference organizers open up a few more slots to our community.

If you’re waitlisted, or you just can’t make it out to Las Vegas, there is something else that you should consider if you want the information.

Recently, my friend Porter Stansberry asked me to participate in a private, members-only teleconference to discuss expatriation strategies. I was joined on the call by one of the world’s premier tax attorneys who specializes in international banking.

We spent about an hour on the phone, feeding off of each other’s knowledge, and it was precisely what I will be discussing at the Vegas conference, including some valuable insider tips on passports and bank accounts.

What I didn’t know at the time was that Porter conducts these ‘closed door’ teleconferences regularly. He invites some of the sharpest experts he can find in the investment world to discuss their ideas with a select group of subscribers.

At first glance, I thought this service was expensive at $800… until I realized that it’s much cheaper than attending a live conference, plus you get 12-full months of expert opinions, plus archive access.

I fully intend on participating again on future calls as a panelist, and that’s why I asked Porter to make this private service available to our community… I wanted to make sure that you still have the opportunity to get this information.

If you’re interested, you can find out more about it here. And try not to laugh when they refer to me as “one of the most dangerous men in America…”

April 9, 2010
Panama City, Panama

My time is winding up here in Panama and I’m trying to sort out my travel for the next few weeks. I need to be in the US for two conferences by April 26th, so that gives me about 2-weeks to kill.

I’m thinking about heading to Medellin, Cuenca, Lima, Santiago, Asuncion, Buenos Aires, Florianopolis… but let’s face it, that may be a little ambitious for two weeks, even for me.

If you have any input on what you’d like to see from South America, leave me a comment.  In the meantime, on to this week’s questions:

JC asks: “Simon- Last year, the IRS hired more agents to specifically target those who have offshore bank accounts. Won’t having a foreign bank account now make me more of a target?”

Here’s my take– If you are talented and make any money, you will be a target… and that’s the bottom line.

Considering that the IRS is hiring another 16,500 more agents to enforce the new healthcare bill, you can bet that just about everyone in the US is a target.

You can either have a foreign bank account, keep your money safe, and be a target… or you can not have a foreign bank account, hold your money hostage to excessive inflation, regulation, and taxation, and still be a target.

The only people who will not be targets are the unproductive who receive the handouts… oh yeah, and members of Congress and the Treasury Department.

Alan asks, “Simon- Thank you for the great service you provide. I was looking to set up an alternative residence in Costa Rica, but after your very informative letters I have decided on Panama. Has Panama has signed TIEAs with other countries as requested by the OECD?”

Don’t discount Costa Rica entirely; the country does have something to offer the right person. For my money, though, Panama is more stable, more open, more economically free, and amazingly enough, less bureaucratic.

Regarding tax information exchange– One year ago, our friends at the OECD made a “gray list” of countries that are noncompliant with international standards for the sharing of tax information.

Panama was on this list, and the government committed to achieving compliance… this requires that Panama sign tax information exchange agreements (TIEA) with at least 12 other compliant countries.

As you could imagine, the OECD conducts annual progress reports.  Fortunately, though, the negotiation of TIEAs takes quite a long time.

Panama has started by building a database of double taxation agreements (DTA), some of which have tax information exchange provisions. To date, Panama has finalized DTAs with Barbados, Mexico, Italy, and Belgium, with France, Qatar, and the Netherlands on deck.

My sense is that Panama’s strategy is to follow the minimum standards, drag out the process as long as possible, and avoid the US and Canada at all costs.

Finally, the ‘Captain’ asks, “Simon, you’ve said that governments may appropriate the trillions of dollars held in retirement accounts. Such a law would bring howls of disapproval from retirees– could the government really pull a fast one on such a significant swath of voters?”

Yes, they could. Politicians all over the world have been doing it as long as the concept of government has existed.

To be clear, though, I’m not suggesting outright appropriation; I do believe that governments want to get their hands on retirement accounts as a way to fund their deficits, but it will most likely come in the form of new taxes and regulations.

For example, the government may require a certain amount of retirement funds be invested in their own debt securities; they may also change retirement fund tax incentives, or simply charge an outright fee on accounts that are over a certain value.

In the US, you can already see the federal government trying to get its hands on retirement money; they’ve recently made a regulatory change that allows taxpayers to convert from a traditional to a Roth IRA.

This conversion requires the taxpayer to immediately pay taxes on the gains from their retirement account, effectively giving the politicians an instant windfall that they wouldn’t be entitled to for another 10, 20, or 30 years.

To me, this is step 1 in a long succession of future tax and regulatory changes aimed directly at retirement accounts. Once again, politicians will punish the savers and productive in favor of the idle and irresponsible.

To me, the best way to do something about it is to set up an Open Opportunity IRA– it’s a self-directed structure that puts you in total control of your own retirement money.

With an Open Opportunity IRA, you can diversify your retirement funds in an overseas bank account, foreign property, and even physical gold locked away in an offshore vault. It allows you to plant an important overseas flag with the money that you have been saving for your entire working life.

I’ve mentioned before that my friend Terry Coxon, a renowned economist and best-selling financial author, has released a new e-book that walks you through this structure step-by-step.

If you have an IRA and are concerned about the government targeting your retirement money, I strongly encourage you to consider his book.

March 19, 2010
Pattaya, Thailand

My time here in Thailand is finally coming to an end, at least for now. On Monday morning, after I stop by the US embassy to pick up my renewed passport, I’ll be headed to Hong Kong.

I should briefly mention something about passports. Starting in 2007, the US government began manufacturing all new passports with RFID chips– small devices which record and transmit data.

Malaysia was actually the first country to issue RFID passports back in 1998; since then, most of the developed word has adopted them. The data which is collected/transmitted varies by country but generally includes some personal information as well as some travel data.

The RFID chips have a range of up to 10 meters, and many countries do not have encryption devices.

I’ve spent the last year searching around the world for an embassy in some remote country that hasn’t moved to RFID yet. Unfortunately, I was unsuccessful, so from now on I’ll be walking around with a passport that transmits my personal information.

My understanding is that there are passport ‘shields’ available which absorb most of the transmissions, and I will definitely be looking into this more closely.

On to this week’s questions…

William says, “Simon, thank you for the IRA information this week. I know that Congress has changed the law– do you think that now is a good time to consider the new IRA structure? Can I use it to move my retirement funds overseas?”

Great question. First of all, I must apologize because this only applies to US citizens.

32 million Americans will need to make a decision this year; it’s a unique situation because, this year alone, there are several things coming together: first, the IRS has changed the rules, making it a smooth process to switch from a traditional to Roth IRA.

If you combine that with the devaluing rules, and the concept of an Open Opportunity IRA, you’re looking at a potentially enormous tax savings… but only for a limited time while the IRS keeps this window of opportunity open.

Also, once the structure is established, it’s really a fantastic vehicle for moving cash overseas, or even buying foreign property in many instances.

If you want to plant a flag overseas with your retirement savings, this is really the best way to do it, and the time to do it is now while you can still save on the taxes.

Sarah asks, “Simon- you stated that you would report on Malaysia. I’m more interested in establishing a non-US flag there than in Singapore.”

Malaysia is really a wonderful place… it’s Singapore without the costs, and Thailand without the chaos. I’ll dedicate a whole missive to it, but briefly here’s what you should know:

Malaysia is an easy place to plant a residency flag. You can stay in the country for 90-days without a visa, easily renewable for another 90-days. If you want to stay longer, the “My Second Home (MM2H)” program is one of the best economic residency programs in the world.

MM2H provides a 10-year visa for foreigners who meet basic qualifications– people under 50 have to deposit roughly $90,000 in a local bank, half of which can be withdrawn after 1-year for the purchase of a home. People over 50 need to deposit about $45,000 or prove a $3,000 monthly pension.

Like the Panama pensionado program, the MM2H visa entitles you to a variety of discounts and benefits with things like vehicle purchase and education.

The program is also very streamlined. Like Singapore, you can begin the application process online and check the status of your application on the government’s website, www.mm2h.gov.my

Ralph asks, “Dear Simon, Could you give us your opinion on the best country/countries to incorporate a business in? Thanks for your informative E-letters. Looking forward to the next.”

This is a tough one because it really depends on many factors– your home tax country, what do plan on doing with the new business, where you plan on living, etc.

In fact, the most important thing you should understand about offshore planning is that there is no “one size fits all” solution.

For example, a manufacturing company owned by a US citizen may want to look into Ireland because of the comprehensive tax treaty with the United States.

An IP holding company owned by an expat Australian, Brit or Canadian, on the other hand, may want to strongly consider Labuan, Malaysia. Malaysia has a tax treaty with Australia, Canada and the UK, but not the US.

In the Western hemisphere, a lot of people tend to look into Panamanian structures. For a passive holding company, this might make sense… but for an operating business, I would stay away from Panama because it’s not a common law country.

The bottom line is– always seek the right advice from a tax professional in your home country who understands proper overseas structures. I have contacts in the US and UK if you need.

Lastly, Libero asks, “Simon, you mentioned not so long ago about a special clause for Italian citizens somehow being able to obtain Panamanian citizenship. Can you provide more details?”

The governments of Italy and Panama signed a bilateral treaty several years ago that entitles citizens of one country to obtain RESIDENCE in the other… so an Italian citizen can obtain Panamanian residency, and vice versa.

This treaty only grants residency, not citizenship. To be clear, there is no fast track Panamanian citizenship program, at least not a legitimate one.

Panamanian naturalization is a long, difficult, and muddy process… I know some people who have been living in Panama and married to a local for 20-years, and they have been denied citizenship.

If you’re looking for second citizenship, I would suggest somewhere other than Panama. Try the southern cone countries that I wrote about a few weeks ago.

Have a great weekend.

March 16, 2010
Pattaya, Thailand

Several months ago, I told you about a strategy for building substantial wealth and planting an important flag with your Individual Retirement Account.

There are a few trillion dollars worth of retirement savings trapped in the United States, the vast majority of which is eeking out inadequate returns that make the money managers rich and leave the rest of us grateful for crumbs.

With this important strategy, though, anyone’s IRA can be unchained and free to invest in whatever you see fit– physical gold and silver coins, foreign real estate, Asia/Pacific currencies, etc. But these examples only scratch the surface.

It’s called an Open Opportunity IRA, and at the time, I described this strategy as the biggest investment “no brainer” I’d seen in a long, long time. Today, it makes even more sense… and here’s why:

This year, for the first time ever, the IRS has opened up a window for everyone to convert their traditional IRA into a Roth IRA.  Frankly, I think they provide these retirement incentives because they know that social security is broke, so they try to give responsible savers an extra leg-up on retirement.

The huge plus for making the conversion to Roth is that when you eventually withdraw the money, it’s tax free.  Naturally, though, the IRS will tax you on the value of your retirement account when you make the conversion… but if you have one of these Open Opportunity IRAs, you can cut the tax bill in half!

For an IRA worth $200,000, the savings could be nearly $40,000. It works, and it makes a lot of sense.

Furthermore, most people have unfortunately little control over their retirement savings… they’re only able to invest in pre-packaged products with often meager returns.  That’s because the large, retail money managers have a larger incentive to make themselves rich than to make you rich.

What most people don’t know is that IRA’s were designed to be much, much more. Being able to take the gloves off and invest your retirement funds in just about anything on a tax-deferred or tax free basis is really the best game in town.

When I first started talking about this last year, it was before the IRS conversion change… and I didn’t really have a great resource to refer you to.

Fortunately, my friend Terry Coxon, best-selling author and renowned economist, just released a new e-book about the topic this week.  It’s called Unleash Your IRA, and I cannot recommend it more highly– it’s a highly actionable guide that walks you through Open Opportunity IRAs step-by-step.

If you have an IRA, you should consider this book. Terry is highly respected for good reason– his thoughtful work is always full of value and insight, and in his new book, he takes on a topic that EVERY American needs to fully understand and exploit… and yet it’s something that almost nobody knows is even possible.

Click here for more information.

Blair is in her early 40s from Southern California.  She’s intelligent, fairly aggressive, and an experienced financial executive at a mid-sized manufacturing company. In total, she has about $250,000 in savings, some of which she used to buy property in Panama.

She is single with no children and has been traveling to Panama to plant flags since 2006. She plans on (semi) retiring there in another 5-years and has unfortunately learned a lot of hard and costly lessons.

At the height of the global property boom, Blair bought a unit in an ocean-view condominium tower in the San Francisco barrio of Panama City. I like San Francisco– it is well located and presents a nice mix of local Panamanians and foreign expats.

At the time, however, San Francisco was put under a building moratorium because the neighborhood was severely overcapacity with its infrastructure.  Waste treatment facilities were overburdened to the point that raw sewage was washing away construction sites, water utilities couldn’t get pressure to higher floors.

Of course, Blair’s real estate agent didn’t mention any of this to her. He cheered her on to make the purchase, encouraging her wise decision-making and investment acumen at every step along the way.  He looked good, sounded good, and had even lived in Miami for a while… sounds like a trustworthy fellow worth his salt, right?

Wrong. Blair was terribly misinformed. Aside from the sewage and the lack of water pressure, even her beloved ocean view was gone before the building was even complete– another building was erected between her bedroom window and the sea, built by (you guessed it) the exact same developers.

Like many gringos, Blair found her real estate agent on Google and was initially impressed by his English skills and claims of knowing important people in the country. She admits to being taken as a fool and quite literally is paying the price for it.

(It is exactly for this reason that I put together my Panama Black Paper, released in September and December, which names names of people in Panama to do business with, and people to avoid like the plague.)

Because Blair has such a long-term view, though, she has taken everything in stride.  She feels that, by the time she semi-retires in five years, she will be able to recoup what she invested in the condo.  Meanwhile, as Panama City’s infrastructure improves, she has been able to generate positive rental cashflow on the unit.

She has since wised up to the city life, and these days she is actively searching for a new property outside of Panama City where it is cleaner, quieter, but still accessible.

By the time she is ready to move there, she expects several new multinationals to have relocated to the nearby Panama Pacifica commercial park located just outside of the city.  This commercial park, she believes, will present a lot of opportunity to entrepreneurial-minded people who can provide essential business services.

Because she expects to be generating business income in Panama, she plans on registering a Belize company to conduct the business, thus planting her business flag outside her country of (future) residence.

She told me that she already made this mistake once– two years ago she searched for “Panama companies” on the internet and purchased a corporation from one of the service providers who popped up.

As it turns out, a Panamanian corporation was the exact opposite of what she needed, and the Panamanian lawyer she spoke with had no earthly idea what her US tax implications would be as a result.

Blair has since straightened out her tax situation once she finally found a competent US tax attorney who had expert knowledge of international business structures and was willing to help her out without breaking the bank.

Aside from planting a residency and business flag, Blair has moved some money to a European bank; she feels comfortable in Austria because she does not live there or do business there, so the government has little cause to milk her.

Lastly, she is planning on eventually acquiring second citizenship, possibly through a South American program that I will be discussing next month.

Her ideal vision for the future will be living outside of Panama City as a citizen of a South American country, with her business based in Belize, generating revenue in Panama from multinational firms, and banking her capital in Austria.

Because her foreign business will neither be engaged in US trade nor generating US-source income, her company will not be subject to US corporate income tax. Additionally, as an expatriate, she will be able to pay herself a salary of roughly $90,000/year tax free.

I think one of the key lessons here is that planting multiple flags is not always a do-it-yourself process. As Blair’s story demonstrates, there are potential landmines along the way, though expert advice is available to ensure a smooth journey.

Knowing how critical this expert advice is, in the last few months we provided you with key contacts in the Panama Black Paper, and introduced you to a top international tax attorney.  Next month, we will be discussing South American residency and citizenship programs, so stay tuned for that.

I’m heading out the door to Africa, so I’m keeping it short today… hopefully I won’t get lost in the mountains this time, wish me luck.

Last week I wrote about four jurisdictions that I am comfortable with to store gold overseas– Panama, Austria, Hong Kong, and Singapore.  Remember, one of the key benefits to trading paper currency for gold is that it anonimizes your money. Storing it overseas in a private facility keeps it outside of the financial system.

As last week’s letter was just a short overview, I promised that I would shortly send you my updated report on moving and storing gold overseas.

As promised, I finished the update and am making it available for you to download here:

http://www.SovereignMan.com/gold%20report%202010.pdf

I hope you find the information valuable– it discusses the four jurisdictions in more detail, plus a few more, and also provides some specific tips for actually moving precious metals overseas.

Let me know what you think and if you have any additional questions.

Additionally, I received a few emails from subscribers who had trouble listening to the interview with the international tax attorney from yesterday– if you want to download the audio file, you can do so here:

http://media.libsyn.com/media/withoutborders/OffshoreStructures.mp3

all you have to do is “Right Click” (or “control” + click if you have a Mac) then “Save As” to save the file to your computer.

If you own a business or are planning to start one, you absolutely will not want to miss that interview (unless you enjoy overpaying your taxes or don’t care if you get sued). We discuss how you can set up a business overseas, reduce your tax burden, and safeguard your assets.

Tomorrow I plan on sitting down and answering some overdue questions, so stay tuned for that.

January 12, 2010
Estepona, Spain

There is really a great deal of information out there about offshore corporate structures… frankly it’s mind numbing. Do a search for “offshore corporation” and you will undoubtedly return over a million websites promising you fast incorporation in Panama or the BVI, as well as a host of ‘benefits’ for that particular jurisdiction.

Are these benefits real? Does it make sense to structure a business overseas?

Yes. Planting a flag overseas provides asset protection benefits, and in many cases, significant tax benefits… even if you are a US citizen. It is possible, for example, to generate corporate profits free of tax liability, and to defer personal income tax liability indefinitely.

Let me first back up for a moment and explain some of the lovely US regulations that govern foreign corporations for US taxpayers. (as an aside, you should realize that I am not a tax attorney, nor does this constitute tax advice)

The first is section 957 of the Internal Revenue Code pertaining to “Controlled Foreign Corporations (CFC)”. A CFC is any foreign registered company with more than 50% direct or indirect ownership by a US person.

If a company is deemed to be a CFC, the IRS essentially views it as a domestic US company and expects the foreign company to file a tax return every year.

That’s where places like Panama come in. Some people try to get slick and form a Panamanian company, hiding behind their lawyers as nominee directors. If their name is withheld from a public registry, the US government will never know about their ownership interest… right?

Guess again. Basing your tax strategy around another human being keeping your secrets in just plain absurd. Your lawyer may be a good guy, but when push comes to shove and the US government comes knocking, he’ll sing like a canary.

Let me underscore this point again even more clearly– do NOT expect to hide profits through an offshore company without the government finding out. They will find out. Privacy and secrecy are gone, at least for now.

Fortunately, there’s a big fat silver lining. Most people do not realize that there are perfectly legitimate ways to structure your business interests overseas and realize significant benefit.

Big businesses do this all the time; large multinationals have subsidiaries and affiliate offices all over the world. Consider Boston Scientific, which manufactures products in Ireland and then ‘sells’ them around the world. The company only pays a 12.5% tax to Ireland on its profits from those sales, rather than 30% to the IRS.

You might be thinking to yourself right now– “Great… except I don’t plan on opening a multi-million dollar medical device manufacturing facility in Ireland.” Believe it or not, in many ways it’s even easier for some small businesses to capitalize on this concept, especially if you have an online presence. Here’s why:

A foreign corporation is subject to US income tax, depending on the situation, if any of the following are true–

First, if the foreign company has a permanent establishment in the United States; ‘permanent establishment’ is ordinarily defined by specific tax treaties, but usually includes things like an office, factory, or workshop.

Second, if the foreign company is engaged in a “US trade or business” or has US-source income; income source rules are defined by Internal Revenue Code section 862.

For example, if a business produces inventory, the source of income is where the inventory is produced; if a business performs personal service, the source is where the services were performed. For businesses that sell inventory, the source of income is where the products are sold.

As you can see, these rules clearly favor many types of enterprises, including e-commerce businesses, some service providers, overseas manufacturers, and businesses owned by expatriates.

Foreign corporations that fit these circumstances are not subject to paying US taxes. The company may be subject to tax in its own jurisdiction, but many (BVI, Cayman Islands, Labuan, Singapore, etc.) do not tax corporations on income earned outside of their borders.

In this manner, the corporate entity is free of tax liability. However, when the corporation makes dividend distributions to its owners (US taxpayers), the US citizen will pay tax on those distributions.

Presently, the dividend tax rate is quite low, but you can be sure that the Obama administration will raise the dividend tax in the future. If the corporation does not distribute profits to the owners, however, the individual has no immediate tax payment due and effectively defers his tax liability indefinitely.

Here’s an example– you are a US citizen and own an e-commerce company based in BVI. You have no permanent establishment in the US and have no US-source income by the IRS rules. The company does not pay tax to the US, nor does it pay tax to BVI.

Assume your company nets $1 million annually. You do NOT distribute this income, and rather invest all of your profits with a 20% annual return. At the end of 10-years, your business has accumulated $25.958 million.

Now assume the same business is structured in the US paying 30% to the government. At the end of 10-years, the business will have accumulated $13.536 million.

The compounding power of tax-deferred profits is extraordinary– you make an extra $12,422,575.54 with a properly structured foreign company.

This week I’m going to be interviewing one of the country’s premier international tax attorneys who specializes in offshore business structures. As a personal favor to me, he has agreed to walk you through the regulations and explain how you might be able to realize these benefits.

January 4, 2010

Reporting from: Malaga, Spain
Welcome back; I hope you had a relaxing holiday.

I spent 10-days with my family combing through the Italian countryside and drinking some unbelievable wine from a local grape called “Primitivo.” It’s a distant cousin of the California Zinfandel, and is only found in this region. A bottle from the best vineyard will set you back about 9 euro.

For New Year’s Eve, I saw a fireworks show that was simultaneously the most disorganized and explosive I have ever witnessed… so literally for me, the new year began with a bang.

I’m optimistic about 2010. I know a lot of people in the financial community who think that ‘this is it,’ that 2010 shall bear the worst economic cataclysm in history, causing widespread doom and agony.

Sure the conditions are ripe for stock/bond market crashes, a currency crisis, and multiple sovereign debt defaults.  But these are a far cry from a gloomy end of human civilization.

It’s not that I have tremendous faith in world ‘leaders’ (as ridiculous a moniker as that is to use); last month’s debacle in Copenhagen only further underscored how perverse and ineffective the existing political process is, and everyone is really starting to see it.

The Social Contract is deteriorating rapidly, and in the end, the one thing that you can count on is that people will ultimately do what they perceive to be in their self-interest.  This is what drives markets and trends.

As the protracted effects of government stupidity become more apparent, one such trend that I see emerging this year is the rise of the sovereign individual– the rebirth of the multiple flags approach.

I’ve talked about this before and I wanted to start off the year with a quick primer since it is a recurring theme of this letter. To be more specific, I absolutely implore you to plant multiple flags as part of your New Year resolutions.

The idea, originally conceived by international finance guru Harry Schultz, suggests diversifying different aspects of your identity across multiple ‘flags,’ or geographic jurisdictions.

As an example, Schultz coined the term ‘three-flags’ in the 1960s, suggesting that an individual should have citizenship in one country, residence in another, and businesses in another.

Later authors expanded on this idea by adding other ‘flags,’ including places to bank, places to ‘play,’ places to house electronic assets, etc.

Many writers today talk about ‘five flags’ or ‘six flags,’ but frankly I don’t see a limit on the number of things we can diversify geographically: email, citizenship, residence, banking, brokerages, gold/silver deposits, business registration, e-commerce, customer base, phone/fax, financial instruments, postal mail, etc.

So what’s the point? Why should you do this?

Diversifying geographically increases your freedom, your privacy, your sovereignty, and potentially reduces your tax burden. It protects you against bank failures, market changes, litigation, divorce, overzealous governments, and “NGC’s” (non-government criminals).

Perhaps even more importantly, planting multiple flags expands your existing contact base and opens a lot of doors to new opportunities.

Think of it like a life insurance policy– even if the worst never happens, it gives you great peace of mind and in many cases can rank as a significant asset.

While everyone recognizes these benefits of life insurance, no one actually expects to die anytime soon… so they put shopping for a policy on the back burner, sometimes until it’s too late.

In this case, the time to start diversifying internationally and planting multiple flags is now… before it’s too late– before currency controls are imposed, before tax codes change, before the last remaining foreign banks close their doors to foreigners.

I could cite you examples all day long, but I will list just a few hypothetical cases–

Imagine getting sued, losing the case, and having your financial assets commandeered by the court. Now imagine if your assets were safely offshore in another country.

Imagine being investigated by the government and having your email archives turned over to the authorities. Now imagine if your email server were in another country.

Imagine being robbed (taxed) by the government because your business is structured within its jurisdiction. Now imagine if your business were registered in another country.

Imagine having everything in your home country taken from theft, coercion, and litigation. Now imagine having cash and gold locked away in a secure, private vault overseas.

Imagine the social decay in your city getting so bad that riots and violent crime are a common occurrence. Now imagine having property overseas.

I’m sure you get the idea. Putting your assets, your business, your citizenship, your residency, your family’s livelihood under one flag, one government, is putting all of your eggs in one very frail, weak basket.

Technology makes it incredibly easy to diversify, and I see more and more people waking up to that reality each day. It takes only moments to set up an offshore email account, a few minutes to lease a private vault, and just a couple of hours to set up a company in Singapore.

The possibilities are truly endless, you just need to find the right tools and the right flags that work for you. Yes, even if you are a US citizen who is taxed on worldwide income, there are still several options available to live a multiple flags lifestyle.

I will be discussing the options in future letters, as well as individual case studies.

I receive a lot of subscriber questions, and while I cannot answer them all, I wanted to specifically address three of them that key in on recurring themes in this community– second citizenship, investing, international opportunities, corporate structures, banking, and gold/silver storage.

1) Paul asks– “I was wondering what your 1st choice would be in setting up an online business offshore.  Which country would be best for business structure, hosting, and merchant accounts?”

There are a lot of great reasons to have an online business– portability, scalability, maneuverability. You can go from zero to profit very quickly, and the Internet allows people to live and work anywhere on the globe.

Most importantly, though, online enterprises provide a great opportunity to easily plant multiple flags in a cost efficient way; you can live in one country, have citizenship in another, have your business structured in another, process credit cards in another, and have your servers based in another.

This prevents significant influence from any single government over your business. As to the right jurisdiction? This is a tough call because it really depends on your country of citizenship and your country of residence.

The United States, for example, is one of a handful of countries that tax its residents on their worldwide income. Some people with online businesses think they are smart because they structure their business in some Panamanian IBC and/or process credit card transactions offshore.

Then they don’t report the income and hold everything offshore.

Not only is this a completely bonehead move, it’s largely illegal. The IRS has clear rules for what it calls ‘check the box’ entities, as well as how to determine the source of income.

I’m going to be talking about this much more in the future, but for now, the bottom line is simple: with a well-structured plan, it is possible to set up an online business to maximize your personal tax advantage while minimizing sovereign risk.

There is great danger, however, in establishing an overseas structure without performing substantial research into the tax implications of your home country.

I’m going to help you solve this problem in a few weeks– early next year, I will bring you some really valuable information from some top North American tax advisers who specialize in offshore structures; they’ll teach you what you need to watch out for.

For instance, you may want to consider structuring your business in a country that has a comprehensive tax treaty with your home country. Switzerland is a great example that has treaties with both the US and Canada. Zero-tax jurisdictions like Panama or BVI do not have tax treaties.

More to follow on this in a few weeks, it’s an incredibly important topic that merits more than a short-answer.

2) Peter asks: “What do you think about Israel? In spite of all the political unrest in the news, Israel has a growing GDP and has a decreasing trade deficit.”

This is a great question.  My take on Israel is that it’s a great place for second (fairly valuable) citizenship.  If you’re willing to convert to Judaism and live in Israel for a bit, you can obtain an Israeli passport fairly easily.

Other than that, I’m not keen on investing in the country; it’s too closely tied with the United States, and there is no ‘blood in the streets’ discount that you would expect of a nation perpetually at war.

If you compare Israel to a place like Sri Lanka, there is no contest when it comes to value.

3) Stefan asks: “I have an account at DBS (Singapore) but they do not give any information about bankruptcy protection. Do you know anything about this? Do you prefer other Singapore banks? Any idea for a safe deposit box in Singapore?”

I can’t comment specifically on DBS, but you should always, ALWAYS, feel comfortable with the balance sheet of your financial institution. Banks in the US are backed by the FDIC, and this gives some people confidence in their account value.

I am not one of them. I bank overseas because I trust in the financial solvency of overseas institutions, but it means I have to do my homework.

Even the most cursory analysis can say a lot about a bank– what is their ratio of liquid assets to deposits? Does the loan portfolio consist of ticking time bombs? How well are they provisioned against loss?

This is why I wrote about Islamic banking a few weeks ago; based on requirements of their religious law, Islamic banks tend to have higher capital adequacy ratios, providing a greater cushion against insolvency in the event of a financial cataclysm.

There are several Islamic banking institutions in Singapore, though overall I’m quite confident in the country’s financial infrastructure. I rely on it myself.

As for gold storage in Singapore, look at Cisco-Certis. Their facilities have fantastic security, and the boxes are reasonably priced.

The US Internal Revenue Service was feeling rather proud of itself yesterday; IRS Commissioner Doug Shulman held a press conference to release the final results of 2009 amnesty program.

Over 7500 taxpayers came forward this year to confess hiding income in overseas bank accounts; this number is substantially greater than the several hundred which usually step forward.

Obviously, the unity of insolvent western governments against overseas ‘tax havens’ coupled with the UBS/Swiss banking debacle has lit a fire under noncompliant taxpayers… and of the 7500 individuals who came forward under the amnesty program, their bank account sizes range from $10,000 to over $100 million.

To be clear, having an overseas bank account is not illegal… it’s actually a smart thing to do. Generating offshore income, hiding it in an overseas bank account, and not telling the government about it, though, is illegal.

The Obama administration continues to beef up the IRS with financial and manpower resources– 800 new agents are currently being trained specifically to go after international tax evaders. They have even announced opening up new offices in places like Beijing and Panama… though I’ll believe it when I see it.

With their new mountain of resources, I expect the IRS to go after a few noteworthy tax dodgers (Wesley Snipes, Bradley Birkenfeld) in highly publicized trials. My prediction, however, is that most people the IRS finds will more than likely be subject to financial penalties, probation, and suspended sentences.

Why? Because incarceration costs money, and the government needs tax revenue. Someone who can make $100 million and stash it away in a Swiss bank account is more useful to the government creating jobs in society rather than playing the harmonica behind bars.

Regardless of the penalties, though, trying to ‘hide’ money in offshore accounts is just a dumb thing to do. There are a lot of people out there who think that their trustees and banking secrecy will protect them from tax authorities.

They won’t. Depending on the discretion and secrecy of another human being is a sure-fire way of getting caught. No banker or trustee in the world can withstand the pressure of the federal government and its limitless resources.

There is a bit of good news in all of this, though.

The Obama administration has recently abandoned its plans to go after overseas corporate income. Current tax code allows US corporations to defer paying taxes on income earned overseas until that money is repatriated to the United States. Obama wanted to change this law, but has recently abandoned his plans.

I’m sure that US companies threatened the administration with another round of deep job cuts if the tax hike were passed… and considering that Obama needs their support for changes to climate, healthcare, and financial regulations, he walked away from the idea altogether.

Entrepreneurs with overseas income can greatly benefit from this tax rule; with a properly planned business structure, businesses can defer paying taxes on overseas income, indefinitely, until the funds are brought back to the US.

Let me know if you’re interested and I can refer you to some knowledgeable and by the book tax attorneys who will give you expert advice.

THE BEST GAME IN TOWN:

Legitimate tax deferral strategies are often the cornerstone of good tax planning.  Find out what options are available for your particular situation and take action right away.

For individuals, an easy way to do this is with the Open Opportunity IRA structure that I have mentioned a few times. I don’t want to beat a dead horse, but it’s a no-brainer strategy.

The best way to find out more about this strategy is to check out the guide written by our friend and noted Economist, Terry Coxon. Check out Terry’s Guide, Unleash Your IRA

I need to start off today’s missive with an important update. Last month I wrote a few articles about something that I believe is an absolute no-brainer if you have retirement savings– setting up a self-directed IRA.

Most retirement savings plans are locked in to a handful of investment options– employees are forced to make a selection among four or five choices, most of which are poorly managed funds run by the same institutions that clearly demonstrated their incompetence last autumn.

A self-directed IRA provides a mechanism for an individual to allocate his retirement savings in whatever way he chooses– whether his own portfolio of equities, physical gold, foreign real estate, overseas bank accounts, private placements, etc.

With a self-directed IRA you can take control of your retirement savings to ensure that some bumbling moron at a bankrupt financial institution doesn’t lose it all investing in Fannie Mae. More importantly, you can ship your savings offshore in a perfectly transparent, legitimate way.

I believe in this approach so much that I went through the trouble of negotiating a subscriber discount with Checkbook IRA, the same service providers that set me up with my self-directed IRA structure a few years ago. These guys are an honest, efficient, highly competent family operation, and I was grateful that they extended a $500 discount to subscribers.

I am writing about this again today for two reasons. First, I’ve exchanged a few emails with Jordan Sheppard at Checkbook IRA, and due to the amount of volume they are receiving and limited capacity within the shop, the discount will be discontinued effective next Friday, October 16th.

Second, and perhaps more importantly, I’m concerned about the direction that the market is going to take. There are a lot of people whose retirement savings are literally trapped in some blue chip index fund.

These are the same people who probably had a bad feeling last August that things were about to get really bad. They watched with horror as their positions took a 70% nosedive.

Fortunately, the last six months has been a period of irrational exuberance, and markets have recovered 50% from their lows. As markets tend to be forward-looking, though, can we realistically say that near-term prospects for the US economy are rosy?

Not by a long-shot. The Dow hovering near 10,000 makes about as much sense as lipstick on a pig.

Top line corporate revenue growth is weak at best, and there are numerous long-term factors which hamper earnings growth, namely: baby boomer retirees pulling their capital out of the market; costly health care regulation; increased corporate taxes; capital flows to emerging markets; etc.

Each of these factors has a negative bearing on long-term equity valuations. It is difficult to predict what will happen over the next few months, but given the carnage that we all experienced last year, it is probably more sensible to make low risk investments that mirror our economic outlooks.

To me, this means companies that are trading a steep discount to net asset value, precious metals and certain commodities, Asian currencies, foreign real estate, and carefully selected private placements.

This is why it is so important to unlock your retirement savings– with a self-directed IRA, your money will be protected from idiotic fund managers if the market takes another leg down.

If you currently have a retirement account that boxes you in to limited investment options, or keeps all of your savings within the United States, I’d highly encourage you to find someone that can set you up with a self-directed structure.

I’m comfortable recommending Checkbook IRA since I have worked with them in the past, and they understand unique needs like using a retirement account to buy physical gold and store it overseas.

If you give them a call, make sure you mention the Sovereign Man discount, which is good until October 16th.

“We are very concerned with what’s happening in Panama, or to put it another way, what’s not happening.”


– Jeffrey Owens, director of the OECD Centre for Tax Policy and Administration

Earlier this month, a group of tax commissioners, finance ministers, and NGO representatives descended upon Los Cabos, Mexico for the 5th annual “Global Forum on Transparency and Exchange of Information” sponsored by our friends at the OECD.

You will likely recall that the OECD published its ‘black list’ and ‘gray list’ of non-compliant financial centers, coinciding with the G20 summit in London this past April.  Offending nations ranging from Uruguay to Switzerland immediately scrambled to have their names stricken from the list.

The OECD called this month’s forum in Mexico to make sure that remaining tax havens have either already stepped into line, or are breaking their necks to get there.

The primary regulation in question is the OECD’s controversial standard for information exchange, known as “Article 26.”  This is the standard which requires countries to exchange information with other nations for the purposes of tax reporting, regardless of domestic bank secrecy laws.

Austria, Belgium, Luxembourg, and Switzerland were the last of the OECD members to hold out on Article 26, but each has recently caved to pressure and acquiesced to violating their own laws for the sake of international tax information exchange.

With a united OECD standing against them, smaller countries who were holding out against Article 26 compliance have no remaining support, and you can be sure that each of them will fall into line: this is evidenced by the spate of “Tax Information Exchange Agreements” signed by smaller countries in the last month.

29 exchange agreements have been minted this month alone by countries like Gibraltar, San Marino, Andorra, Liechtenstein, Monaco, Aruba, Anguilla, and Nevis.  Conspicuously missing from the list?

Panama.

In the introduction to this missive, I quote the venerable Mr. Owens as he responded to a reporter’s question in Mexico– why does Panama attract such little scrutiny since it has not signed any tax information exchange agreements?

Panama was placed on the OECD’s “gray list” in April as a “jurisdiction that has committed but not yet substantially implemented the internationally agreed tax standard.”  In order to be taken off the list, gray list jurisdictions must sign exchange agreements with at least 12 other jurisdictions.

Apparently Mr. Owens’ remarks lit a fire under the Martinelli administration in Panama; the country recently announced that it would begin sharing tax information and is close to inking deals with Spain and Mexico already.

You can expect deals with the United Kingdom, United States and Canada to be close behind.

So does this spell the end of Panama as a financial center?  No. Likely it means the survival of Panama as a financial center because noncompliance will threaten its financial infrastructure.

BNP Paribas, for example, which is one of France’s largest banks, recently announced that it would close all branches in non-compliant countries, including Panama.  Similar announcements by other banks will likely be forthcoming.

Consequently, if Panama does not want to lose the integrity of its financial center, compliance is a must.

The unfortunate reality of the global financial system is that traditional tax havens like Panama, Hong Kong, BVI were specifically designed to hide money; this veil of secrecy has now been ripped to shreds by the OECD, and privacy is no longer a reason to hold money offshore.

Governments are scrambling to become compliant, and sooner or later every bank in every jurisdiction will be coughing up depositor information to foreign tax authorities.

That’s the bad news.

The good news is that banking offshore still provides substantial benefits for consumers and their after-tax income, namely:

• Many overseas banks are stronger, more liquid, and better capitalized than western banks, and they don’t depend on an insolvent organization to guarantee deposits
• Overseas banking provides opportunities for currency diversification
• When western countries begin imposing capital controls (we know they’re coming), your money will be safe in a foreign bank, allowing you to freely withdraw, transfer, and invest your capital as you see fit without asking permission from the government.

Despite the OECD’s actions, I still believe that banking overseas is a smart move for everyone… just be sure that you personally comply with your reporting obligations. US Citizens, for instance, must report overseas bank accounts to Uncle Sam every year, and if you received a penny of interest, it must be reported on your tax return.

Right now, your retirement funds are probably locked up and being managed by a handful of bureaucratic monkeys– the same ones who thought the US real estate market would always go up and the Dow would hit 20,000.

But there’s an easy way to take control of your financial destiny– to invest your retirement funds in whatever you like, wherever you like, including foreign real estate.

I’ve long believed that buying property overseas is the single best way to move money out of the country, protecting your capital from a depreciating currency, exchange controls, and government scrutiny. Foreign property is not reportable, and it’s a hell of an insurance policy in case things get really bad.

You probably have the money to buy foreign property sitting right in your retirement account… but you can’t use it because you had to park your funds into one of six paltry mutual funds.

Taking control is critical.  If you have an IRA or a retirement plan and are not taking advantage of this simple self-directed structure, you could be making a huge mistake.

So… given the extreme volume of questions that I have received on the subject, I once again turned to my friend and partner Matt to help find the answers.  Matt, who is a very astute investor and entrepreneur, went straight to the source– Steve Sheppard, the founder of CheckBookIRA, a company that sets up these self-directed IRA structures.

Matt got Steve on the phone to explain a little more about how the program works– the interview could be the most informative 23 minutes you’ll have this year.   You’ll love how Steve’s wife uses her IRA to make 35% a year (tax free)  in the cattle business.   Near the end Steve says some really great things about our subscribers and mentions the discount that we negotiated specifically for our subscribers.

Do yourself a huge favor… Grab a pen and paper, go to a distraction free environment and set aside the next 23 minutes to listen to this interview.

Click here to download the mp3 file:

http://media.libsyn.com/media/withoutborders/Skype_20090901_1807.mp3

Maximizing the flexibility of your retirement account is an enormous untapped area of Low Hanging Fruit for US investors.

In fact, this might be the single easiest thing you can do right now to grow your retirement assets while shielding them from the lost decade yet to come.

With a properly structured, self directed IRA, you can gain complete control over your retirement funds, and, according to IRS rules, invest in anything other than collectibles and life insurance so long as there is no self-dealing involved.

You can invest in:

- Gold that you store in your home
- Foreign real estate
- Gold stored securely overseas
- FOREX, hard money loans, Options, Stocks & Bonds

And of course much more…

The structure is simple.  You invest your IRA funds in a special LLC.   You’re appointed the Manager of the LLC and direct the activities of the LLC whether that be buying farmland in Argentina, a condo in Panama City, a Perth Mint certificate, or a big pile of gold coins to be stored in an Austrian vault.

There are rules, of course.   Everything needs to be set up properly, so don’t proceed without consulting an expert.

The good news is that setting up this structure isn’t rocket science and once you do it you’ll be glad you did.

=====

Update: Spring 2010 — Friend of Sovereign Man and noted Economist, Terry Coxon, just released an e-book called Unleash Your IRA. In our opinion, structuring your IRA properly is something you should do right now and Terry’s guide explains how to do everything step by step.

I can barely type today… I’m actually one-handing it this morning. Why? Because my other hand is thrust victoriously in the air celebrating the renomination of Comrade Bernanke to his post at the Federal Reserve.

Yes, the man who has overseen the most unprecedented expansion of the central bank’s balance sheet in history is going to get a few more years in the saddle.

As you know, I normally don’t comment too much about what’s going on in the United States.  Frankly I don’t really care. I occasionally follow the insipid perorations of the Obama administration as if watching silverback gorillas mate at a local zoo… neither impacts my life, and both are curiously amusing.

In this case, though, I am forced to pause and consider the greater implications on my investment portfolio and determine if there is (a) any money to be made, or (b) any money to be rescued.  I think both.

Recent budget figures released by the federal government indicate a ‘higher than expected’ deficit over the next several years… just like the ‘higher than expected’ death toll in Iraq, and ‘higher than expected’ unemployment figures. Clearly these monkeys never get anything right (no offense to monkeys).

With trillions of dollars looming in the administration’s budget shortfall, you can be sure that taxes are going to rise. It is an absolute certainty. Obama may somehow be able to keep his promise to not raise income taxes on ‘the middle class,’ but they will make up for it in other ways.

Namely, I am afraid for people’s retirement accounts.

Pensions, 401(k)’s, and IRAs represent an enormous, untapped pot of wealth for the US government. Rules allowing for tax-deferred contributions are on the books, which means that the government won’t be seeing most of this money for several years… until they change the rules.

In my assessment, US politicians are going to hatch a scheme to levy a one-time tax on retirement accounts, or require that a certain percentage be invested in the great ponzi scheme of US treasury securities.  Either way, you can be sure that your on-shore retirement savings will be beaten senselessly.

So how to save your savings? One idea that may be worthy of your consideration is to park retirement funds in overseas property.  Internal Revenue Code allows you to invest IRA assets in property, and there is absolutely no geographic restriction whatsoever, so that bungaow in Belize or mountain cabin in Boquete are on the table.

Like other IRA assets, the property purchase must be for investment purposes, not personal use; this would include both rental income as well as speculation for capital appreciation.

There are a couple of key benefits to this plan.

First, retirement funds would no longer be on shore and subject to political control.  This is critical if you want to maximize your financial freedom and keep your money away from politicians.

Second, in most cases, buying property in a foreign country will diversify retirement funds out of the dollar. This will protect savings as the world moves away from the dollar as the world’s reserve currency.

The fact that Bernanke is going to be at the helm for another several years buying the Treasury’s debt almost assures the dollar’s demise.  Carefully selected overseas property investments can mitigate this financial disaster, at least for retirement savings.

Talk to your tax adviser to see if this makes sense for you, and let me know if you want more information on the topic.

Did you ever notice that when you put the words “The” and “IRS” together it spells “Theirs” ? How appropriate.

One of “Theirs” initiatives that I pay attention to is its voluntary disclosure program. This program provides steps for people who have not reported overseas income (and bank accounts) to come clean without criminal penalty.

Recently I found out that more people have come forward to confess their sins under the program guidelines in a single week than all of last year combined.

People are obviously scared… and watching Joe Biden’s jaw clench as he emphatically proselytizes about ‘patriotic duty’ and ‘sacrifice’ to finance irrational and unconstitutional spending initiatives, it’s easy to understand why they’re scared.

This is yet another reminder that as long as anyone holds a US passport, s/he is subject to full disclosure annually.  Contrary to popular belief, leaving out some of the details is not a viable solution.

In fact, a tax attorney who I know quite well once remarked “failure to fully report ALL of your income will land you in worse trouble than not filing a tax return at all.”

Bottom line: don’t cheat. File the forms properly, and tell Uncle Sam about your overseas accounts.  The alternative is just not worth it.

Remember, the whole point behind opening foreign accounts isn’t about tax fraud or even mitigating taxes; the key reason is to get your money in a safer, free place where you can control it and safeguard its purchasing power.

Besides, the day that “Theirs” decides to take a little dip into your savings account, you won’t be frozen out without a lifeline. Given the rapid increase of individual and small business audits, I unfortunately see this as being commonplace in the near future.

The strange thing is that, despite the administration’s constant trumping that only the wealthiest Americans are being targeted, “Theirs” is indiscriminately shaking everyone down in its grab for cash.

The Joe Biden ‘sacrifice’, after all, is everyone’s burden.  Everyone… except for the government.

The much-heralded Obama budget cuts, which will ‘save’ $243 million, include nickel and dime line items like the Justice Department’s now-infamous double-sided copy paper concession (although Congress’s recent $200 million private jet purchase has pretty much burned through those savings already).

One of my favorite line items is how the Forest Service plans on saving $1.8 million by not painting brand new vehicles.  This, of course implies that they’re buying loads of new cars… roughly 600 based on my calculations.

Clearly the Forest Service must need new cars pretty badly to be spending so much on cars during this time of penny pinching…. except that the Forest Service isn’t actually required to pinch pennies– its discretionary budget increased by 8.9% for 2010.

According to the Forest Service’s own website, in fact, the President’s budget (and the 8.9% increase) “reflects our Nation’s (with a capital ‘N’) highest priorities…”  I won’t dwell on the absurdity of these priorities, but I will point out some basic math.

The 8.9% budget increase represents $465 million, out of which they were able to squeeze out a reduction of $1.8 million, or 0.3%.  That, my friends, is real pocket change you can believe in.

At some point when this seems too absurd for reality, the solution of expatriation will become abundantly clear. One of the benefits of internationalizing yourself is that you will start to view these events as if watching tree sloths at your local zoo– curious, slightly funny, but largely irrelevant.

…. somewhere I can hear Howard Beale.

A few days ago, in response to questions about how to get started with offshore asset protection, I mentioned Mark Nestmann’s book The Lifeboat Strategy.  Mark is a trained international lawyer and one of the world’s top offshore asset protection experts.  I own his book and think it’s a fantastic resource, especially for those looking for initial answers.

The number of questions I received from readers in response to the book was overwhelming, so as a special service to Notes subscribers, I decided that we should pin Mark down for an interview.

I called my partner Matt, one of the savviest, most intellectually curious global entrepreneurs I know, and asked him to conduct the interview… as you will see, Matt didn’t pull any punches.

Personally I think he caught Mark a little off-guard, so you’ll hear a lot of candor.

Mark and Matt cover a lot of ground in the call, including:

1. Why demand for offshore asset protection is exploding
2. The most important thing you should be doing right now to protect your assets
3. Why politicians just don’t get it, and the future of currency controls
4. Strategies that anyone can use to legally safeguard their assets

Some of my favorite quotes:

“Anyone who wants to make a serious committment to investing outside the dollar needs a foreign bank account…”

“If you do it in the right way, you don’t necessarily have to report any of it…”

“It’s very hard for the Treasury to tell you to repatriate a house…”

“This is something that anyone can do– it’s private, it non-reportable…”

You can listen to the unedited, unscripted call below.  It’s about 35 minutes, and I think Mark’s valuable insight is well worth your time.  He’s not a Chicken-little fear-monger, rather a common sense professional with first-class knowledge.

For more information about Mark, go to http://www.MarkNestmann.com.

Let me know if you like this sort of thing and I can dip into the Rolodex a bit more to interview other experts in privacy, asset protection, investing, and lifestyle design.  Also, if you have any specific questions for me or Mark that weren’t answered in the interview, please leave a comment and I’ll do my best to get an answer.

Yesterday I wrote to you about Lithuania and all the great things it has to offer– it’s inexpensive, has second citizenship, a low flat tax, and beautiful women.  These are all great reasons to visit from time to time (and obtain a passport if you are so fortunate), but today I want to tell you why you should not invest any money here, at least not for now.

I don’t trust Russia.

Last winter in a dispute with Ukraine, Russia shut off the gas pipes and brought several European countries to their knees; the episode underscored how vulnerable Europe is to the whims of Putin, and Lithuania sits right on the fault line.

In 2004, the country began talks to ascend into the European Union; as part of the talks, Lithuania agreed to decommission its Soviet-era nuclear power plant that supplies 80% of the country’s electricity.  The reactor is due to be shut off at the end of this year, and they have NOTHING to replace its capacity.

The government assumes that they will be able to buy electricity from Russia. I don’t.  Putin proved last winter that he would gladly choke off the rest of Europe from their energy supply if it served Russia’s interests… and I believe that similar situations may rise again.  Lithuania already receives its natural gas supplies from Russia, and adding electricity demand is potentially catastrophic.

Lack of stable energy supply is a giant red flag for foreign investment, whether it be starting a business or buying property.  In fact, I think that the Lithuanian property market will probably experience a second shock when the government imposes a national property tax.

Lithuania is currently running a deficit around 4% of GDP; the government has come under intense pressure from the European Union to cut its deficit, and the only thing on the table right now is a tax increase.  This situation underscores the insanity of supranational alliances– on one hand, the European Union is demanding that Lithuania spend less money to reduce its deficit, meanwhile NATO is expecting the country to increase its military spending… they must be expecting the Latvians to invade.

I have personally spoken with two government ministers here since I have been on the ground; the Minister of Education and Science, and the very youthful Minister of Justice (MiniLove in Newspeak).  Both are intelligent, libertarian-leaning men who understand that the EU’s requirements are hypocritical and detrimental… but admit that they will likely impose a tax increase in order to comply.

The best part of the conversation went something like this-

Me: What is the greatest risk to Lithuania?

Minister of Justice: Our government.

I couldn’t agree more.  Given the coming energy crisis that I expect, and the increase in property tax, I expect the property market to take a big hit.  There will be blood, and you can expect me to be there afterwards to find the best deals… because once the bottom hits, this place will have a lot of potential.

Tomorrow, I will be answering the mailbag and addressing some of the issues that many of you have been asking about it.

This always happens to me.

Whether in Buenos Aires, Beirut, Rome, Bangkok, Zurich, or now Helsinki, I always seem to get caught up in some sort of protest.  To be honest, I love protests… I think it’s great when people finally have enough of the system and demonstrate their unwillingness to continue going along with government policies. This happens frequently in other parts of the world, and the less developed the country, the more chaotic the demonstration.

This is a far cry from the United States where police forces set up “Free Speech Zones” to constrain demonstrators and keep them from disturbing the establishment.  Participants in large scale U.S. demonstrations like the recent Tea Party Protests are vilified by the mainstream meadia as lunatics and discredited by the White House press office.

I was fresh off a very long flight from JFK to Helsinki that started out with the plane sitting on the runway for almost 4 hours.  Having missed my connection to Lithuania, I took the opportunity to head into town and see how Helsinki has changed since my last visit in 2006.

And there it was. In the middle of an absolutely spectacular day in downtown Helsinki were a few thousand highly charged protesters, most of them women, some of them masked.  They were chanting in unison and waving a combination of anarchy flags and pink balloons.  My Finnish is a bit rusty, but I fortunately found some young ladies to interpret the noise. (videos to be posted soon)

“They’re upset about the fact that homosexuals in Iran are exterminated, and that Finland does nothing about it.”

This seemed to be an extraordinarly segmented argument to me, considering that the Iranian government rids itself of all types of dissidents, regardless of sexual orientation. Even still, coming from my personal perspective of having once been a misused pawn of US foreign policy, I firmly believe that governments should stay out of the affairs of other countries.

Regardless of my disagreement, however, I would defend to the death their right to protest (Ibid Tallentyre/Voltaire)… mostly because direct action is a powerful change agent that shakes people from their apathy, and, ideally, makes politicians sit up and take notice. After all, governments should be afraid of the people, not the other way around.

I fully expect the volume of protests to increase around the world as more people grow fed up with the system and finally begin to demand action. Most of these will be economic in nature.  In Finland’s case, the economy is hurting. The government consumes over 50% of the economy and pays for it by milking its citizens for everything they’re worth.  Effective income tax rates exceed 60%, coupled with a Value-Added Tax of 22%.

And what do they do with all those taxes? Hire legions bureaucrats to administer the collection of taxes.  This is a politician’s definition of ‘job creation,’ though it amounts to nothing more than a mafia kickback. Consequently, Finns have little incentive to work hard and take risks because the government has eliminated the upside potential.  I would not invest in Finland, and I’m sorry to say that the US is headed in this direction.

As a final note, I am traveling with a small amount of gold and silver (as I tend to do). The 10 ounce silver bars must be making funny faces at the security guards as they go through the x-ray machine because my bag has been searched before every flight so far.

Even though the inspectors find thousands of dollars in cash and precious metals in my briefcase, I am never detained. This is because, at least at the moment, traveling with gold and silver is not illegal in most countries.  Some countries like Taiwan and Uruguay do have reporting requirements, though, so check before you go.

PS- For anyone interested in heading to Europe, FinnAir has some great deals. Business class from New York to Helsinki is around $2,000 and economy is roughly $600.  The business class cabin is comfortable and worth the price, in my opinion.

Today I confessed my sins to Uncle Sam.

No, I’m not talking about anything sinister. But in a mad dash through a US stopover today, I dropped US Treasury form TDF-90 in the mail:  “Report of Foreign Bank and Financial Accounts.”

It went something like this:

“Forgive me uncle for I have sinned. May last confession was April 15th. Here is all the information on my foreign bank accounts, including those for which I only have signature authority.  I am confessing this intensely private information despite the fact that I have no financial interest whatsoever in said account, and the account holder does not even fall under your jurisdiction. I understand that being party to financial accounts outside of the United States must be inherently evil, and I look forward to giving you more of my money next year.”

This form is required by the US government for all persons that have a financial interest or signature authority in any foreign financial account– banking, brokerage, etc.  In my case, I listed all the relevant information for a Panamanian bank account– I am very confident banking there as my research from this trip indicates strong liquidity levels and tight loan standards devoid of significant exposure to US agency debt. I am required to submit this form by June 30th.

Our Uncle certainly has a way of keeping tabs on us: disclose or go to jail.  It’s an unfortunate no-brainer, and if you have similar accounts you need to do the same… the alternative is simply not worth the risk, though I understand that sometimes they allow conjugal visits at minimum-security federal prison camps.

I’m using particularly strong language today to illustrate a clear point: there are right ways to go offshore and wrong ways… and dodging legal obligations is like playing Russian Roulette. It really hurts one out six times.

Simply put, Uncle Sam wants our money… and I say ‘our’ because, chances are, if you’re reading this missive, you fall in the unfortunate category of people who are actually productive and whose tax dollars pay for everyone else’s stimulus. I’m convinced this tax burden is going to increase, and they are going after every penny to which they feel entitled (in their sole discretion of course).

Offshore structuring makes a lot of sense: there are much safer places for your assets than a dollar-based US bank account where your wealth can be inflated away, frozen, stolen, or sued.  And as I am sitting here in the business lounge at JFK Airport going through subscriber emails as fast as I can, I see many of the same questions.

Many of you are asking for specific contacts for banks, brokerages, lawyers, etc. I am working on the right framework to help you… but I need to be clear about something.

I have spent several years and tens of thousands of dollars traveling around the world and building up contacts. I know who is good because I do/have done business with them, and I know who is bad because I have been swindled by some of them and lost money. My trusted contacts are trusted for a reason, and I would be betraying that trust if I just published their contact information all over the internet.

Bear with me while I work on a few ways to share the right information with some of you.