March 19, 2010
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.