President Calvin Coolidge has been ridiculed for supposed limited intelligence. In reality, he was but a man of few words. Unfortunately, one of his most memorable quotations no longer applies fully today as it did in his time …
“The chief business of the American people is business.”
Today anyone attempting to start or conduct a business in the United States faces discouraging obstacles in high and uncertain taxes, government edicts and a maze of state and federal regulations.
So why don’t more Americans “go offshore” when there is so much potential business abroad?
Probably because they aren’t aware of the attractive possibilities for profit. But there are many jurisdictions friendly to Americans seeking to do business offshore. While I often write about getting a second passport and dual citizenship, doing business can be a way to gain offshore asset protection and opportunities at the same time.
Tax Free Offshore … If You Know Where to Look
Even though U.S. persons (citizens and permanent residents) are taxed on their worldwide income, there are many places where local business taxes are reduced, or where business may be totally tax exempt.
One way that these places exempt foreigners who live or do business there from taxes on income earned abroad is by a “territorial” tax system. This means imposing taxes only on income earned within the country’s borders.
Special Use Tax Havens:
Countries That Want Your Business
Many countries impose the kind of taxes we know and dislike – the high kind. But these are tempered by government policies of granting special tax holidays, concessions, or rebates to favored business enterprises they want to attract and promote, usually to increase local employment.
These concessions typically include:
- corporate tax credits for local job creation;
- tax exemptions for manufacturing and processing of exports; and
- tax benefits for international business or holding companies, offshore banks, insurance or other selected industries.
In the U.S., critics call this kind of domestic business tax break “corporate welfare,” but many nations (including the U.S.) offer these business inducements to foreigners. Among nations that offer generous special tax concessions to foreign-owned businesses are Chile, Portugal and Barbados.
Tax-Free Zones: Exactly What They Sound Like
Closely akin to special use tax havens are “tax-free zones” established within specified areas of some countries. These zones are used as trans-shipment points for finished goods, such as the Colón Free Trade Zone in Panama or the Hong Kong free zone.
Other tax-free zones are major bases for industry, business and finance. They are complete with well-developed infrastructure and favorable laws to attract business to the zone. A good example is the Jebel Ali Free Trade Zone in the United Arab Emirates, although at the moment the UAE economy is in a major downturn.
Benefits for Americans Who Move North
Canadian law favors a special independent class of preferred immigrants including investors, entrepreneurs, the self-employed and those who will add to the “cultural and artistic life” of the nation.
For potential investor visa applicants, the government rolls out the proverbial red carpet, officially known as the “Business Migration Program.” Business experience, marketing skills, contacts within Canada, an adequate credit rating and available funds all greatly increase your chance of success. Applicants are usually required to submit detailed business proposals or general business plans, which must accompany the application for permanent residence.
America May Not Want Your Business,
But Someone Does!
I’ve only scratched the surface of countries that may be right for your business. But clearly, taking your business offshore may allow you to enjoy greater financial privacy, lower taxes, and a better business climate.
Bob Bauman, JD
Legal Counsel, The Sovereign Society