Nearby tax havens like the Cayman Islands, Panama, Barbados, and the Bahamas have become prominent financial centres rivalling the industrial cities such as London, Tokyo & New York for business.

The pint sized Cayman Islands now boast more commercial banks (530) in the commercial registrar than in all California. The dollars on deposit in Cayman banks exceeds $390 billion, which is also more than all the commercial banks in California.

The Bahamas, just 50 miles off the coast of Florida, was once the 3rd largest financial centre in the world next to New York and London.

Today the Bahamas still ranks in the top ten, just behind the Cayman Islands.
There are more than 390 banks and trust companies registered in Nassau.

The Bahamas - the Cayman Islands and Bermuda have:

Guarantees against future taxes are provided by these governments for periods up to 50 Yrs.

Exempt trusts can receive guarantees up to 100 years.

Question: Do you have contacts in the Bahamas who are trustworthy and what are the costs, I will incur in setting up a company in the Bahamas?

Answer: : My partners include a mid-size Law Firm with an office here in downtown Nassau & a U.S. Tax Consultant. The lawyers have over 40 years of business  experience here in the Bahamas.

The total costs of forming an IBC (International Business Company) here in the Bahamas are as follows:

TOTAL COST (First Year) = $2100 U.S.

ANNUAL MAINTENANCE

(registered office, trustees, registered agent) paid annually, from the date that the company documents are issued

$600 pa

ANNUAL GOVERNMENT & ASSOCIATE FEES

$250 pa

OUR ADVICE TO THESE ENTITIES ON AN ANNUAL BASIS

$200 pa

TOTAL COST (2nd Year) = $1,050 pa US Dollars

Our law office will also be the registered office & registered agent for the IBC. (Their address fax number and telephone numbers, will all be made available). We use two trusts in the business plan with a non U.S. person (IR code refer to them as non-resident aliens) to act as trustees.

Lawyers and Banks charge substantially more to do the same thing. Lawyers also charge extra for drafting the trust instrument. Some Law firms and Banks charge upwards of $5,000 just for the trust indentures. Administrative fees at the larger banks can also make their costs skyrocket.

It's Tom's opinion that a trust indenture drawn by a Bahamian Lawyer or trust company is all but worthless to a U.S. Taxpayer, they simply are not trained or knowledgeable in U.S. Tax Law .

Question: Is it necessary to use a trust and holding company in a business plan?

Answer: (THR) We think so. It is our opinion that you should try to circumvent the United States CFC provisions (IRC § 957(a)).

If you are fortunate to find a foreign partner who can own 50% of your offshore company that is one recognised plan.

Eleven U.S. shareholders each owning 9% of the offshore company is also a legal and approved structure for avoiding the CFC status. For the U.S. taxpayer who wants to remain independent (without partners), his plan probably should include a company & a trust as outlined in my book.

Question : How long does it take to form a company in the Bahamas?

Answer: (THR) If a client wants to form a company through the mail (five day turn around by overnight carrier UPS) he/she should contact me by email and then arrange to send $2100 - via mail to an address to be advised.

Please feel free to contact me if you have questions ...

1. We will prepare all the documents, forward the appropriate fees to the government registrar, etc.
2. A company can be registered without the client even coming to Nassau.

3. It takes (1) one day for the government to stamp and return the Memorandum and Articles of the Company .

When you are ready to incorporate use this form.

More FAQ's from the Tax Haven Reporter - Newsletter.

Question: What extra forms must I file with the IRS after the company is formed.

Answer: (THR) The Bahamian IBC and Trusts will legally have no income tax returns to file with the IRS . They will not be CFC's (Controlled Foreign Corporations).

Neither you nor the offshore managers have to file Forms 3520, 3520-A, 5471 or any other information regarding the IBC to the IRS.

Question : Who opens the bank and securities accounts for the IBC's?

Answer: (THR) Investors will be able to open a bank and security account for their IBCs so they alone have signature authority over the accounts, and that's the way most clients want it. We have arrangements with several of Nassau's Major banks.

We can provide you with the bank's application form, signature cards, bank brochures etc., so you can open your account without physically flying into the Bahamas.

You can obtain a VISA and/or debit card from the Bahamas largest bank, but you will need a reference letter from your local U.S. banker, but these are easy to obtain

The Bahamian banks we deal with have been in operation here in Nassau for over 30 years. These banks have subsidiaries in all the other tax havens, including the Caymans', Hong Kong, Monaco, Zurich, Gibraltar, The British Virgin Islands and Jersey in the Channel Islands.

One is a giant British bank with more than 2,000 offices worldwide. One of the banks has no offices in the United States.

You can choose which ever bank you want. With either of these banks, clients can open brokers accounts anywhere in the world and trade under the guise of the Bank's name.

The clients IBC does not appear on the stock certificates, and his anonymity is totally preserved.

Masking a clients stock market trades is a traditional way of doing business here in the Bahamas and in the other tax havens. It's done by most all the major banks and trust companies.

Banks in the Bahamas do not have to file tax returns with the IRS.

ASSET PROTECTION TAX HAVEN

A secondary reason people bank in the Bahamas and the other tax havens is for asset protection. The IRS cannot seize, lien on or investigate bank records here.

The government of the Bahamas has a bank secrecy code. All the largest banks in the world have offices here and in Cayman. U.S. judgments have to go through the local courts.

I've never witnessed an IRS court proceeding of any type in this country - ridiculous. U.S. lawyers have a problem too, only citizens of the the Bahamas can practice law here. So, U.S. lawyers need to hire a Bahamian law firm to pursue judgments, etc. Generally speaking, foreign generated judgments are frowned upon by the authorities.

Question: What can I invest in offshore ?

Answer: (THR) There are few restrictions as to what an IBC can invest in. U.S. stocks, bonds and mutual funds are frequently bought through offshore companies because they are not liable to U.S. capital gains taxes.

Treasury bonds, bank CD's, options, futures and commodities are also purchased through off shore companies. No U.S. withholding taxes are payable on such incomes as long as the IBC does not open an office or carry on other business in the United States .

Using these Bahamian Banks you will be able to trade on any stock exchange in the world at a cost equivalent to those incurred using a discount broker such as Charles Schwab.

You can of course, call your own shots on what stocks and bonds or mutual funds the IBC purchases. You will pay only the brokers commission = (3c, per share), plus a nominal fee for having the stock certificates put in the Bahamian Banks name instead of the IBC's.

Question: Who are some of the big names using that haven as a tax shelter?

Answer: (THR) Business people from around the globe use the Bahamas as a tax haven, there are currently over $190 billion dollars on deposit in Bahamian Banks.

• Michael Jordan of the Chicago Bulls purchased the Bahamian Island known as Crab Cay for $3.9 million. Business people from around the globe use the Bahamas as a tax haven.

• Former U.S. citizen Sir John Templeton - knighted by Queen Elizabeth II of England, lives in Nassau . Templeton managed over $20,000,000,000 for clients worldwide. He gave up his U.S. citizenship years ago, probably to escape the USA's 55% estate tax on estates over $2.6 million dollars.

• U.S. treasury secretary Nicholas F. Brady (P.O.Box N-7776) has a home in Lyford Cay. Remember it's his branch of the federal government that was responsible for writing the Treasury Regulations under IRC §951 thru §958 for CFCs back in 1962!

• There are forty or fifty Bacardi's (the rum distillers) living in Nassau, billionaire fashion designer Peter Nygard, Mike Dingman, Sean Connery the list goes on and on.

• NOTE: A few months ago, Michael Jackson reportedly invested $70,000,000 in the new Atlantis Hotel and Casino here in the Bahamas. The opening of the Atlantis complex was celebrated with a $2 million dollar bash. Celebrities from all over the world attended. If Mr. Jackson used a foreign Bahamian company to own his partnership interest in Atlantis, he wouldn't have a U.S. tax liability.

• Offshore rents and other business activities performed in the tax haven itself are not considered sub-part F income under the Internal Revenue Code. M. Jackson would not have to pay taxes on these profits, unless the offshore company distributed a dividend to him. Furthermore, U.S. law suites and court ordered judgments against the company or Mr. Jackson are not enforceable in Bahamian courts.

Incidentally - the Lyford Cay area is a millionaire's row here in Nassau.

Question: How can investors learn more about these tax havens?

Answer: (THR) The Tax Havens of the World ($90 US) Book, & Newsletter ($200 US pa for 12 issues) would be most useful in helping you develop your offshore plan.

As an internet special, customers that order a years subscription to the Tax Haven Reporter Newsletter will receive a 'FREE' copy of ...
"Tax Havens Of The World"

Tax evasion is not illegal in the Bahamas, since we do not have income capital gains or inheritance taxes. Tax evasion is not considered suitable grounds for ordering access to information about an account - from Welcome Bahamas - pg .71 Our #2 Industry Banking.

While a Bahamian Company may offer tax advantages to non Bahamian beneficial owners under certain circumstances, it is essential that the laws of there own country be carefully considered before action is taken.

Unless adequate planning is undertaken, the tax advantages may ultimately be lost to the owner. Consideration must be given to the ultimate disposition of accumulated funds "Touche Ross International" (Bahamas).

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Questions - for Tom Azzara

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