The Invisible World Financial freedom and privacy

The Invisible World F in an c ial F r e e d o m & P r iv ac y

Lance Spicer

Trident Press

Copyright  Lance Spicer 1994-2003 This book is copyright. All rights reserved. Apart from any fair dealing for the purpose of private study, research, criticism or review as permitted under the Copyright Act, no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means – electronic, mechanical, photocopying, recording or otherwise without prior written permission of the publisher.

Published by Trident Press Pty Limited PO Box 3068, Bangor NSW 2234 Australia Email: [email protected] Web Site: www.tridentpress.com.au ISBN 0 646 31051 8

This Edition November 2003 First Edition January 1995, Second Edition February 1997, Third Edition August 1997, Fourth Edition March 1998, Fifth Edition January 1999, Sixth Edition March 2000, Seventh Edition October 2000, Eighth Edition November 2003

Australian Produced and Manufactured

Disclaimer The material in this book is of the nature of general comment only, and neither purports nor intends to give any accounting, legal, tax or investment advice. Readers should not act on the basis of any matter in this book without first considering, and if appropriate taking, professional advice with due regard to their own particular circumstances. The author and publisher expressly disclaim all and any liability to any person or organisation, whether a purchaser of this book or not, in respect of anything, and of the consequences of anything done or omitted to be done by any such person in reliance, whether whole or partial, upon the whole or any part of the contents of this book. In no way is it the intention of the author or the publisher to encourage readers to evade tax or any lawful responsibility that they may have. The author and the publisher will not accept any responsibility for any errors or omissions. Always seek professional advice from a Licensed Investment Adviser or Solicitor prior to acting upon any information in this book.

Table of Contents Introduction

1

Australian Tax Considerations

5

A Strategy for Building Wealth Offshore

19

Tax Haven Strategies

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Tax Havens Albania Andorra Anjouan Antigua Austria Bahamas Barbados Belize Bermuda British Virgin Islands Campione Cayman Islands Channel Islands Cook Islands Costa Rica Delaware, USA Dominica Dominican Republic Dubai Gibraltar Hong Kong Ireland (Eire) Isle of Man Labuan Liechtenstein Luxembourg Madeira Malta Monaco Nauru

64 80 82 85 86 89 93 99 102 104 108 113 114 118 127 130 132 134 136 137 144 148 150 152 157 163 166 170 174 176 179

Netherlands

181

Table of Contents Netherlands Antilles New Utopia Panama St Kitts and Nevis St Lucia St Vincent and The Grenadines San Marino Seychelles Singapore Switzerland Turks and Caicos Vanuatu Western Samoa The World Wyoming, USA

183 187 189 193 196 198 202 204 206 207 223 226 229 231 231

Examples of actual Tax Haven Schemes

232

The Skase Case

235

The Story of the Late Dr Peter Clyne

239

Money Laundering - What is it exactly?

246

Second Citizenships

250

Final thoughts

251

International Resources

253

International Maildrop Directory

255

Caribbean Basin Initiative

263

International Tax Arbitrage using The Dutch Sandwich

264

Index

267

Other Trident Press books

270

Financial Freedom & Privacy Chapter 1 Introduction Welcome to the eighth edition of the Invisible World. Earlier editions of this book have been purchased by readers in Greece, Finland, Italy, UK, USA, France, New Zealand, Fiji, Tonga, PNG, Poland, Portugal, Gibraltar, Canada, Japan, Mexico, Puerto Rico, Hong Kong, Singapore, Malaysia, Germany, Holland, Lebanon, Ireland, Isle of Man, Israel, Chile, India and of course Australia, as well as a few others I have forgotten. In all, many thousands of books and it is now officially classed a best seller, several times over. To all those who bought the earlier editions, I thank you, and thank you for buying this edition. In this edition you will notice quite a few changes, names, fax, numbers addresses in addition to a few extra tips and ideas. The sort of information in this book is constantly changing, which tends to keep me busy at reprint time. For anything that is out of date, I do apologise, things keep changing daily and it is hard to keep up with it all. As far as I can ascertain, this is still the only book of its kind written and published in Australia. There are a few newsletters published that sometimes discuss some of the same subjects but this is the only book that covers everything you need to know about how to build wealth offshore. I've read many books by other authors and their whole perspective is from an American or European point of view and quite often they can lead you astray due to the fact our laws and regulations are quite different. This book is the result of many hundreds of hours of research and real life experiences in my employment with companies that have been involved in offshore transactions. As you will discover I was involved in the cleaning up of some of the financial records of Qintex, which collapsed in 1989. My discoveries and results of research are revealed in detail in the chapter entitled 'The Skase Case'. Those of you that purchased the earlier editions will notice that some of the information furnished in those editions has changed and some of my opinions have changed also. This is part and parcel of this industry, laws change, economic circumstances change and other tax havens improve

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The Invisible World leaving what were once leaders to flounder in the wake of progressive jurisdictions. As an example, Switzerland was very much second best in comparison to Austria, now the Swiss are on top again and won’t give into the OECD on bank secrecy. Where applicable, I have updated prices and any changes in corporate regulations. I have included three times as many banks and incorporation agents as the first edition back in 1994. I believe this book is on a par with any comprehensive text on this subject in the world. No other book will give you this level of detail and practical information. Currently, there are organisations advocating an Inheritance or Wealth Tax or even the reintroduction of Death Duties. This is very alarming as it appears that in the future taxes like these may be introduced to alleviate budget shortfalls and the increasing welfare budgets that are being demanded by socialist organisations such as ACOSS (Australian Council of Social Services). The UK has an inheritance tax as does the US in the form of Estate Taxes. It's only a matter of time, however, it would be a very brave government that proposes such a tax! The GST of course, is the first new tax introduced in recent years as it's the only tax that both the Labor (remember, it was Paul Keating’s idea before it was John Hewson’s, remember him?) and Coalition parties believe will work in increasing net revenue. Virtually every other major economy has one. Unfortunately, state and federal governments have been running “real” deficits for quite a few years now and apart from a couple of states, it's getting worse. What has all this talk of increased taxes have to do with tax havens? Well, if you use the United States as an example, most rich, and even a lot of middle class people have their wealth stashed away in offshore companies and offshore banks where the US state and federal authorities can't touch it. The United Kingdom is also much the same. If a tax of this nature was introduced or even suggested by any senior government official, I would have a massive best seller on my hands, just like several American authors. They make an exceptional living out of writing on this one subject. You are obviously a forward thinking person or maybe you're just a little curious to find out what goes on in this Invisible World of tax havens and offshore bank accounts. On top of all this talk about sinister new taxes, there is the problem emerging in Australia imported from the US, litigation. Some time ago a woman in the US sued McDonalds for burning herself with a cup of coffee, the payout? US$4,000,000. If McDonalds can't defend themselves against

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Financial Freedom & Privacy this sort of thing, how will you? Your assets are at risk and therefore so is your future and that of your family. If all your assets were owned by offshore companies and in effect, you owned nothing, that's all they can get off you nothing. The current popular financial schemes in the US concentrate on what they call "Asset Protection". If you want to see where Australia and the rest of the world is going, look at America! For example, these are some real cases that have occurred….. it makes you think doesn’t it? • January 2000 – Kathleen Robertson of Austin Texas was awarded US $780,000 by a jury after breaking her ankle tripping over a toddler who was running amuck inside a shop. The owners of the store were shocked by the verdict considering the child was Mrs Robertson. • June 2000 – Karl Truman was awarded $74,000 plus medical expenses when his neighbour ran over his hand while he was stealing his neighbour’s car’s hubcaps. • August 2000 – A Philadelphia restaurant was ordered to pay Amber Carson $113,500 after she slipped on a spilled soft drink and broke coccyx. Amber had evidently thrown the drink at her boyfriend just moments earlier! Are you horrified? You should be, these things are starting to happen here too. Just imagine someone in your business premises, or even your home hurting themselves and then suing you into oblivion? Then to top it off, the insurance company says they won’t pay due to YOUR negligence! You end up wearing it. You could lose your house, your business and your savings. Now, you understand why so many people are considering placing substantial amounts of their assets into offshore structures and why the subject of this book is becoming increasingly popular. This book has been written on the basis that you have very little knowledge of the subject and I try to explain the best way I can, the intricacies of Australian Tax regulations. Although it seems complicated, I suggest you read this chapter a couple of times if it doesn't stick the first time as it is vitally important to know what you're up against before you make any plans. In writing this book it wasn't my intention to lead you astray and have you breach tax laws or any other laws, but simply to inform you how it's done in the Invisible World and to give you the legal options available. What you do with this information is entirely up to you. I suggest

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The Invisible World you work within the framework of the law because the alternative may leave you with serious legal problems. I hope you enjoy the book and get something useful out of it, and if not, I hope it's satisfied your curiosity as to what other people get up to in their “Invisible World”. All the best.

Lance Spicer Sydney, Australia November 2003

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Financial Freedom & Privacy Chapter 2 Australian Tax Considerations There are a few issues that must be considered before using any information in later chapters of this book. Some of them may apply to you, some of them may not, but they should at least be considered and a judgement made about whether you have exposure in any of these areas. There is one rule above all others that must be adhered to in respect to your offshore business dealings, all transactions should be 'arms length'. Tax avoidance measures under Division 13 of the Tax Act allow the commissioner to reallocate income and expenses if he deems transactions not to be 'arms length'. So, if you set up an offshore business structure, ensure it appears arms length in the commissioner’s eyes. Tax Havens - Can they still be useful? In July 1990 an Accrual Taxation System was introduced in relation to Controlled Foreign Companies (CFC's). The introduction of this system reduced the benefits and therefore the use of tax havens. The government in January 1993 introduced further legislation to close up some major loopholes that still existed. These changes are known as the Foreign Investment Fund (FIF) measures and are discussed further in this chapter. The past use of tax havens by huge companies has seen some of these companies avoid many millions of dollars in tax. These days due to changes in the law it has made the use of tax havens for privacy fairly difficult, but not impossible as long as amounts transferred are small and infrequent. What is meant by small? Less than A$5,000 can be paid to an overseas company without being reported to the government by the bank. The bank can also report any transaction or transactions it feels could be suspect regardless of the amount involved. Therefore, payments of a 'legitimate' nature (with an invoice) under A$5,000 to a foreign company will generally escape the view of prying eyes. Why do I pay tax on income I earn overseas? Section 25(1)(a) of the Tax Act makes the point that a taxpayer, whether an individual or a company, who is a resident of Australia is taxable

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The Invisible World on all income from all sources whether made inside or outside Australia. Certain income derived by foreign companies or trusts is attributed to Australian taxpayers on the Accrual Taxation System despite whether they actually receive the money or not. Secrecy laws in certain tax havens are quite often used in this situation, much to the frustration of the tax department. What is meant by Attributable? Basically, attributable means, regardless of whether you received the cash, the income will attract tax in Australia. If it's not attributable, this means it will only attract tax when the income physically enters Australia. When the money enters the country, one of two things can happen. It will be taxed at the normal rate less any tax you paid overseas (foreign tax credit) or it will be deemed exempt and you pay no tax (this can be tricky). I've included a few of the little tips further on. Controlled Foreign Companies (CFC’s) A CFC is a foreign based, but Australian owned or controlled company. The Accruals System is a reasonably complicated one. What it attempts to achieve is to attribute foreign source CFC income to Australian taxpayers. To establish if your foreign CFC income is going to be attributable to you in Australia you must work through this rather complicated testing procedure. Unfortunately, I know of no easier way so please bear with me on this one. Step One Establish if the country in which you have a CFC setup is a listed or unlisted country. The following countries are Listed, and have been listed since 1997. • Canada • New Zealand • France • Germany • Japan

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Financial Freedom & Privacy • UK • USA Step Two If your country was Unlisted (not on the above list) does it pass the Active Income Test? To qualify as active income you must answer yes to the following questions. Has the CFC been in existence at all times during the statutory period (ie full year)? Has the CFC a permanent establishment - not a post office box? Have you maintained accounts in accordance with accounting standards? Has more than 95% of your gross turnover qualified as Active? Active income is income that is not dividends, interest or royalty payments. These are regarded as Passive, everything else could be regarded as Active. Further explanation of Active income is made on page 8. If you answered YES to all questions, then no CFC income will be attributable to you (ie. Not taxable). If you answered NO to any question, then I'm afraid you'll be paying tax on your CFC income. Step Three If your country was Listed: Did it derive income that was Designated Concession Income? (i.e. Not taxed or taxed at a special low rate in that country.) or income sourced in unlisted countries that is not taxed? If you answered NO then you're off the hook and no attribution of income will be made. Of course if you answered YES you must keep answering questions. Step Four If you answered yes to Step 3 in relation to Designated Concession Income, Did this income qualify as Active Income? (see Step Two)

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The Invisible World If you answered YES this type of income is not attributable Step Five If you answered yes to Step 3 in relation to income sourced in unlisted countries that is not taxed and/or you answered no to Step 4, then does the income qualify for the section 515 exemption? The section 515 exemption applies to FIF income that would normally be attributable but is deemed exempt under certain total investment limits. The limits are that the total you, your associates and your family have invested in all non-resident companies, trusts or life policies does not exceed A$50,000. Now this means your investment not your income. This part of the legislation is a little vague, but my interpretation is that if you had A$35,000 invested in a company in a listed or unlisted country, and it was returning a dividend equaling say, 30% return on investment this would be deemed tax exempt until such time as the gross amount invested exceeds $50,000. You can capitalise your profits, but the total can’t exceed $50,000 per family in total investment. Remember though, bring any profit back and you must pay tax on it. Therefore, if your total investment offshore is only A$50,000 or less, then your income is not attributable. If your investment was greater, brace yourself, you could be paying tax. As you can see the Tax Department doesn't make it easy. Foreign Investment Funds (FIF’s) Unfortunately, this is another piece of long-winded bureaucracy gone mad, but I'll try to simplify it as best I can. Introduced on 1 January 1993 to close up some fairly major loopholes that the CFC legislation didn't cover. The FIF measures apply where a foreign company or a trust, although not controlled by Australian residents, is an attractive investment vehicle because it allows for the accumulation of income offshore in low tax-free countries, thereby allowing the investor to minimise his or her liability to Australian Tax. The main difference between a CFC and a FIF is that the CFC is controlled by Australian residents and the FIF is controlled by foreign residents. The loophole allowed you to have a

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Financial Freedom & Privacy CFC like company being looked after and controlled by someone on your behalf and the tax man wouldn't know. Now the good news, there are exemptions, the main ones are: Active Business Income (as discussed next), interests held as trading stock, and small investors. Let's look at each exemption individually. Active Business Income If a foreign company is involved in 'Eligible Activities', the Australian taxpayer will not be subject to FIF taxation in respect of their interest in that company. What's 'eligible'? Who knows? What we do know is what's not! Banking and the provision of finance, investments in commodities, life insurance, general insurance, funds management and activities in connection with real estate (other than construction) are all out. Everything else is OK. But there is a snag, it must be able to pass what they call the 'balance sheet test'. This test involves proof that at least 50% of the company's assets were involved in 'eligible' activities. There is another test but this relates strictly to foreign public companies. Trading Stock Where a taxpayer’s interest in an FIF form part of the taxpayer’s trading stock and the taxpayer elects to bring those interests to account at market value, then any income accruing on the FIF will not be subject to taxation. Small Investors If, as a taxpayer you are a person and not a company you can get exemption if your interest in the FIF is less than A$50,000. This limit includes not only you but also your wife or husband, kids, step kids, trustee or your partner. In simple terms you can invest A$50,000 in an offshore trust or company and the profits remain tax free until such time as the funds are repatriated. Are there any other ways to invest offshore and save tax legally? Without being dishonest and hiding your affairs from the tax office by

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The Invisible World using the often impenetrable secrecy barriers established by certain jurisdictions, you have very little room to move being an Australian resident. But there are legal ways to achieve tax savings and they are: Be an employee of an offshore company. If you are an employee of an offshore company and employed overseas for a minimum of 91 days, the salary that you are paid will be exempt from Australian tax as long as it is not exempt in the country you were paid. In other words you must pay tax in the offshore country. What you could do here would be to establish a company overseas that earns enough income to pay you while overseas 'working' for the company for three months. You would pay local personal income tax, which of course would be in a jurisdiction with lower rates than our own and possibly in a country where company tax is high, this way you reduce your company profit to nil by way of your salary. You do this each and every year while taking an overseas holiday at the same time. The trick is to find a country with low personal tax and company tax based on profit that will grant you a permit to work for your own company. For instance, Guernsey would be fairly good choice at a maximum 20% on your wages compared with a top rate of nearly 50% here. One thing to remember though is that the income you earn whilst overseas may be taxed at a lower rate but when it comes time to calculate your Australian tax, the offshore income will be added to your local income to calculate your tax liability. This means your marginal rate will be increased but you won’t be taxed on the offshore income. For example if your total income was all offshore income, your local tax would be zero, but if your local income was $5,000 and offshore income was $15,000 you will be taxed on the $5,000 as if you had earned $20,000 (ie $5,000 x 20% = $1,000 tax, plus Medicare levy). Refer to sections 23AG and 23AH of the Tax Act for more information. Profits earned from an offshore branch of an Australian company. You will be exempted from Australian tax on profits earned in a 'Listed' country as long as profits are subject to tax in the 'Listed' country. The Act stipulates that the tax you pay must be of a nature that taxes your profit. Which means flat tax situations are probably going to be knocked back. The profits must also not be Designated Concession Income in the listed country. Designated Concession Income is income that has been either not

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Financial Freedom & Privacy taxed at all, or taxed at concessional rates (under some incentive scheme for instance) in a listed country or is income from an 'Unlisted' country. Where profits are earned in an Unlisted country, the income will be taxed in Australia less any foreign tax paid. Why is this available only on 'Listed' countries? Because the taxation office believes that 'Listed' countries have tax rates similar to our own. This way it believes you won't receive a benefit investing in a 'Listed' country. In the past people have incorporated a branch in the Canton of Zug in Switzerland (a listed country up until 1997), diverted most of their income to that branch, paid local company tax of around 10% of their profit. This meant that they can bring the money in to Australia without paying more tax because they have paid the normal tax for a resident company based on their profit. Most of Switzerland has a company tax rate of around 37.5%, the Australian Tax Office must have overlooked Zug in Switzerland. Refer section 23AH of the Tax Act. Seek residency offshore The other loophole which is a little on the radical side is to adopt Perpetual Traveler status, or cease being a resident of Australia, just enjoy long holidays here. This is definitely a desperate move, but on the other hand if your playing with millions, maybe it's worth it, ask Mr Murdoch. We talk a little more about being a “PT” further on. The Other Alternative used by Thousands And of course there will always be those people with absolutely no conscience at all that will set up an offshore company and bank account in a 'high secrecy and low tax' country. They'll arrange for that company to earn a sizeable income (possibly through foreign investments or transfer pricing) and not advise the Tax Office of their offshore company's existence. Obtain a cash card from their offshore bank that's connected to Cirrus or Maestro international banking networks and draw down cash from Australian ATMs completely undetected and undetectable. And what's more astonishing, they've been doing it for years. Have these people no shame! Read on and all will be revealed on exactly how these scoundrels do it. I don't know how they can live with themselves! Was Gordon Gekko (Michael Douglas in the movie Wall Street) right when he said "greed, for want of a better word, is good!" I suppose it depends on how much tax you pay each year. If you were to undertake a scheme such as the one mentioned above, it could be

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The Invisible World deemed illegal by the tax office and you could be fined or worse! Always seek professional advice before doing anything. Double Tax Agreements (DTA) - Will they affect me? Australia has DTAs with basically the same countries that I listed as 'Listed for CFC purposes' earlier in this chapter (with the notable exception of Luxembourg). As very little of the contents of this book concerns these countries, there isn't much need to look too deeply into DTAs. But we do look at some of the advantages and tricks that you can use when we get to the chapter on Tax Haven Strategies. Contrary to what the name implies, they do not tax you twice, they can save you a lot of money by ensuring that you don't pay twice when dealing with two countries that have signed treaties. In some instances they can be used to your advantage, by paying tax in a country with lower tax than say another that may have otherwise been your country of residence. You see, the point of DTAs is that you only pay tax once. DTAs are often used when one treaty country has slightly or possibly a substantially lower rate of income tax. If structured correctly, the amount of tax paid can be lower than would normally be paid if the investment was left in Australia. This only applies to certain types of income and only applies between treaty countries. Is there a general Australian Government Policy on Tax Avoidance? Absolutely, this policy is wide-ranging, complex, and controversial. The general anti-avoidance provisions of the Tax Act are contained in Division 13 and comprising Sections 136AA to 136AG and apply to arrangements entered into after 27 May 1981. Basically, it goes like this, if the Commissioner believes that transactions you have undertaken are of a 'sham' nature or if he believes (and the courts believe) that what you have done has been a deliberate attempt to avoid tax then they can fine and reassess you on the suspect transaction. Also, if they deem the transactions not to be at 'arms length', they can also apply Division 13 as we said earlier.

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Financial Freedom & Privacy Is it possible to be a perpetual traveler to escape paying tax in Australia and what is the definition of a resident of Australia? Firstly, let's define 'resident', this area appears to be a little grey to me. Obviously, a resident pays tax in the country in which he or she resides. A resident is defined as someone who dwells permanently or for a considerable time, who has their business interests or job and family within that country. In my opinion, a resident would be a person who spends more than half of his or her time in that particular country or the country where they spend more time than any other. Citizenship and nationality do not constitute liability to taxation. Also, keep in mind that a person can be a resident of more than one place (Lloyd v. Sully). The whole question of what defines a resident could take a chapter on its own so I suggest if you are serious about the residency issue, seek professional advice from a solicitor. Now to the question of being a perpetual traveler. A perpetual traveller is somebody that travels the world never staying in one place long enough to pay tax. If you don't mind living on the run - you're welcome to it! For instance, if you stay in most places for more than six months tax traps will start closing just about everywhere. In Singapore it's only 60 days! I've read that perpetual travelers (PTs) organise their lives in at least 5 countries, and this is OK if you really are looking for a nomadic existence. If this is what you want here's how you would organise it. Country No.1 - Business Base. These are the countries in which the PT earns his money and nothing else. Keep in mind to look for administrations which will look after the entrepreneur with things like free commercial real estate, investment subsidies, interest free loans as well as tax exemptions and which limit bureaucratic regulations to a minimum for this purpose. Some of the Caribbean states are excellent in this regard or you could try the more orthodox addresses such as London, Tokyo and New York. Other possibilities worth looking at are Zurich, Singapore, Frankfurt and Milan - in that order. Why did I miss Hong Kong? Too risky, nobody knows what the Chinese Government will do. Communists can never be trusted, especially when it comes to preserving capitalism. Country No.2 - Passport and Citizenship Issuer. Passport havens whose travel documents can be used in many

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The Invisible World countries without the need for visas and which require very little of its expatriates when it comes to things like tax and military service. Australia and Ireland are perfect. Country No.3 - Domicile. This is where you will be spending a lot of your time, perhaps even living in your own home, during your unavoidable breaks in travel. The Channel Islands, Andorra and Bermuda would all be fairly good. Country No.4 - Asset Management. Preferably, this asset management base should allow you to have trustees or solicitors manage your assets, insurance and business affairs in your absence. Requirements: qualified asset managers, bank secrecy assured by the law, tax exemption for non-residents. The best place is Liechtenstein, followed by Austria, Luxembourg, Switzerland, Channel Islands and the Isle of Man. Country No.5 - Playground. These are countries with a high standard of living, easily accessible without too many bureaucratic regulations (such as visas), as well as no restrictions or limits on the duration of your stay. Suggestions: New Zealand, Caribbean, Pacific countries. American tax consultants advise "long term vacationers" in the US to take the following precautions to avoid being declared as residents liable to pay tax: always have your return ticket with confirmed booking ready, don't register your flat in your own name, don't be available at your US office all the time, don't maintain any US bank accounts (at least, don't have the bank statements sent to your US address) and don't operate with US letterheads. In short, clearly show that your ties with your old residence outside of America outweigh everything else. What is an Offshore Information Notice? The Tax Commissioner can issue one of these to get you to produce documents in 90 days that he believes are relevant to the assessment of your tax bill. The Tax Commissioner must hold the belief that the information is known by the tax payer, the information is held outside Australia and the information is kept by way of mechanical, electronic or other device outside

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Financial Freedom & Privacy Australia. In the case of documents, he must hold the belief that the documents are outside Australia, whether or not they are also available within Australia.

Conclusion to Tax Matters The general theme of Australian Tax Law in relation to offshore dealings is basically to make sure you pay tax at rates similar to Australia if you don't actually pay tax here. Since they introduced CFC legislation in 1990, the opportunities to pay less tax by investing offshore have almost dried up. I once heard Australia described as a "taxation wasteland" by an international finance author. In recent times, there has been some speculation about the Treasury putting pressure on the government to impose some new regulations to stop the growing incidence of people and companies putting money offshore or channeling profits through tax havens. The proposals include taxing all passive income unless it was derived in the US, Britain, Japan, Germany, New Zealand, France or Canada. No plans are being made to change the 'A$50,000 rule'. Despite what the tax office might tell you or what your paranoia suspects, it seems governments around the globe are slowly losing the battle against offshore tax avoidance because they simply can't obtain the information and because it is in the interest of those that could furnish the information, not to. “The government will eventually come to the conclusion the only way to stop the 'Offshore Tax Drain' is to introduce a GST as virtually every other first world nation has. It is only a matter of time, and makes common sense.” I wrote that in 1995, funny how these things happen.

The “Tax Return Questions” The answers shown here are only indicative and are simplified. They don’t make allowances for Active Income, listed countries etc. More information can be obtained from your accountant, so I suggest you speak to him or her before acting on anything you read in this book. These are the questions you encounter each year in your tax return. 1. Did you have either a direct or indirect interest in a foreign Trust or Controlled Foreign Company (CFC)? 2. Have you EVER, either directly or indirectly caused the transfer of property – including money or services to a non-resident trust estate?

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The Invisible World 3. Did you have an interest in a Foreign Investment Fund (FIF) or a Foreign Life Assurance Policy (FLP)? 4. Did you own, or have an interest in, assets located outside Australia during the year which had a total value of AUD$50,000 or more? How in heavens name can you answer NO to all of the above if you setup a IBC or Trust and be telling the truth? There are ways, but you can forget the TRUST, they are impossible to work with as is evidenced by question 2 and by the fact they are under constant attack by the current government. Answers 1. You have an interest in a CFC if: Five or fewer Australians each of which has at least 1% interest and have or are entitled to acquire at least 50% associate inclusive control interest: or; an Australian entity has at least a 40% control interest in a foreign company: or; irrespective of the interests in a CFC, a group of five or fewer Australian entities has “actual control” of the CFC. This means, as far I can determine, that if you are a shareholder holding more than 1% of the share capital or holding a class of shares of less than 1% of the total but entitle you to “actual control”, like voting shares. Being a director would also give you “actual control”. The solution used by the “smart offshore investors”? I’m told they do not become a shareholder of any class of shares and do not become a director. They use Nominee Directors and bearer shares they don’t “bear”. Refer Section 340 of the Act. 2. You shouldn’t use a trust, simple as that. If you did, how would you get around this question? A company is the answer. Even if the trust had an Australian trustee for one day during the year, that trust will be regarded as a resident trust for the whole year and therefore tax is attributable in Australia. DO NOT transfer assets or cash to an offshore Trust. 3. An FIF can be either a company or a trust. This legislation was introduced in 1993 to fill in the gaps left after the CFC laws were introduced. An “interest” in an FIF (company) is the holding of any share in a foreign company. Where the FIF is a foreign trust, either the trustee or any one of them, any beneficiary who is an Australian will find that tax liability is imposed in Australia. The solution to this question is quite often remedied by “smart investors” by using nominee directors and shares not held by an Australian resident. Refer Part XI, section 469 to 624 of the Tax Act

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Financial Freedom & Privacy 4. This refers to the exemption allowed to a natural person on foreign source income derived from an FIF if the value of the FIF is less than AUD$50,000. In section 515(1) of the act there does not seem to be a limit on the amount that could be derived from the less than $50,000 limit although common sense should be applied to avoid the ire of the commissioner. The interest is based on the market value at the end of the financial year. So make sure the interest is below AUD$50,000 on the 30th of June each year. Interest is regarded as shareholding or beneficial ownership either directly of indirectly. Again, this is solved by “smart investors” by either not owning, or by simply owning less than $50,000 worth on the 30th of June. The “smart investor” has now successfully negotiated those questions, not lied, not broken any laws. Totally legal it would seem. This brings us to Part IVA Tax Avoidance Provisions of the Income Tax Assessment Act. Part IVA was put in place to give the commissioner the right to impose tax where schemes or arrangements have been put in place for the sole purpose of reducing taxation. In my opinion there needs to be a degree of taxpayer “interest” in the scheme in the first place and I think having no legal control and no ownership interest would probably eliminate the situation in the first place. Let’s examine the issues anyway. Sham Transactions should be avoided. The commissioner has the right to reverse any transaction that was transacted to conceal the real transaction. Keep all transactions on an arms length and commercial basis. To determine if Part IVA is applicable, the commissioner will ask the following questions: Was there a deliberate “scheme” entered into with the sole or dominant purpose of obtaining a tax benefit? Was it entered into after 27th May 1981? Was a tax benefit obtained? If the answer to ALL the questions is YES, then Part IVA will apply to the offshore investor. Many of the issues we have discussed in the workshop are about accessing investments not available without a vehicle such as an IBC (International Business Compnay). Therefore, the sole or dominant purpose was to invest in investments not normally available in Australia, not to reduce tax. Our answer to the first question is NO, Part IVA does not apply. That’s if it did in the first place anyway!

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The Invisible World If you lie in your tax return, you could be fined or worse, charged with a criminal offence under the Crimes (Taxation Offences) Act 1980. First offence could be 6 months jail plus a fine. I’m not encouraging you to evade tax, what I’m doing is educating you on schemes that I have seen and read about. It is always interesting to find out what the other half are up to. Of course the commissioner may view the answers our “smart investor” gave as not good enough. According to the professionals I have spoken to, and from my own experience, the “smart investor” would have one hell of a good argument. If it didn’t work, why is one third of all the world’s private wealth sitting in tax havens? As I said before, this is an illustration of how others have arranged things, check with your accountant first. You should be seeking absolute privacy and confidentiality in your personal lives and finances, by not paying your due income tax is breaking the law and will land you trouble. Remember, Tax Minimisation is Good! Evasion and Avoidance are Bad!

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Financial Freedom & Privacy Chapter 3 A Strategy for Building Wealth Offshore A Word of Warning: Before I start talking about Offshore nesteggs there is something that should be made very clear, the purpose of this chapter is to illustrate ways people have built wealth offshore with nobody knowing. It is not intended to encourage tax avoidance or evasion within Australia (or anywhere else for that matter), it is intended to provide you with methods to maintain your privacy and confidentiality within the realms of the law. If you are unsure about any matter in this book consult your accountant or solicitor for professional advice. There are many reasons people establish an 'Offshore Nestegg'. Damages claims, nosy relatives, business partners, professional negligence claims, product liability, an unfriendly divorce or even personal bankruptcy. You may think that none of these things will happen to you, but that's what everybody says - until it does! It takes time to set up a structure offshore and to get to know how to use it. If you try to set it up when you need it - it's already too late, because if you did, you would be guilty of 'fraudulent conversion' or tax evasion. In America for example, police can now freeze your assets and even confiscate them - before any proof of guilt or admission of guilt is made! Who knows what changes will be made to the law here in Australia. We've all heard talk of death duties and even an insidious 'wealth tax' that a future government may introduce. Imagine for instance, if a wealth tax was introduced, and they taxed your income based on assets that you'd worked hard for and already paid tax on. It would be so easy for the banks to advise the Tax Office that Mr Smith has $100,000 in his bank account. They already have the technology in place! Apart from all the sinister reasons, you may just wish to spend the money on yourself overseas - and nobody back home has to know about it.

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The Invisible World You can also invest offshore to facilitate the running of your own Offshore Business and the tax breaks that come along with it. There are also great opportunities to invest offshore with returns that make local investments seem fairly miserly. We'll discuss these options in the Tax Havens section of the book and later in this chapter. Wealthy people can afford advisers, accountants and bankers to help them establish offshore structures using trusts, foundations and companies to take over ownership of their offshore and sometimes onshore wealth. The prevailing attitude of these people is, "you can't be taxed on what you don't own". Which is fine if you can afford the fees involved in setting up and administering these types of structures. If you prefer to avoid the cost of setting up complicated offshore structures, and all you require is a simple but effective structure, then this chapter will assist you in being able to do it for yourself.

Strategy Overview Your Visible World, onshore, includes your house, your car, your boat, your business, your insurance policies, everything that's visible to your neighbours and friends, solicitors, tax commissioner, police, creditors, councils and any other government departments. It includes your tax deductible expenses, credit cards, your club and association memberships. It's where you pay tax and where you have reportable bank accounts in your own name or in the name of a company that files annual returns and pays tax. It is, if you're smart, low profile. Your Invisible World, offshore, this can be anywhere else. It's where you don't generally reside, work or pay taxes, and it's where you have private money and investments that no one else knows about. Remember that the country in which you are visible may be the very same country or countries in which others are invisible. Ideally, you should hold your invisible wealth in countries or jurisdictions that have strict bank secrecy laws. If you establish and operate your nestegg properly it will be virtually impossible to trace - even by the best private detective and the most determined government department.

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Financial Freedom & Privacy In this Invisible World you'll submit no reports to governments. You will be a “non-entity”. The fact you're a non-entity in your Invisible World is what makes it so precious. Where there's no smoke, there's no fire. Where there are no clues, there's no trail to follow. Keep in mind at all times, never, ever, leave a paper trail to your invisible world. If you make just one transfer, draw one cheque from your visible world onshore, the whole lot has just been destroyed. You can set up multiple invisible nesteggs offshore but remember to treat them as separate entities and try not to create paper trails between them. If you do create a link between two nesteggs, it's not the end of the world - it just means that two nesteggs have now become one. Lastly, you must establish ways to deposit and withdraw from your nestegg and these are also discussed at some length later in this chapter. Your strategy should be to gradually take as much money as you can spare out of your visible world and put into your invisible world. The simplest and fastest way for ordinary people to do this is to set up a structure of offshore bank accounts. You can have more than one bank account within any one structure and you can transfer funds freely from one bank to another without disturbing the structure's integrity. The only restriction (as mentioned above) is you shouldn't transfer funds to a different structure (either onshore or offshore).

What is the best kind of offshore bank account? The first thing to look for in choosing your main offshore bank account is that you should be able to use it exactly as you use your onshore bank. Ideally, in a worst case scenario, you should be able to walk away from your onshore bank and continue your financial life with your offshore bank without interruption. This means that your offshore bank should be a bank that you can use on a relatively normal basis, one that you can use to withdraw cash, to pay offshore bills, to make repayments on offshore assets, to purchase on credit and to transfer funds. In particular, your bank must be able to issue you with various plastic

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The Invisible World cards (this will be covered in more detail later in this chapter since it's a key and fundamental service that you must demand). If you can, try to avoid offshore banks that make it easy for you to send them money, but don't make it easy for you to withdraw it. They claim you'll have instant access to your money but in reality, expect you to write to them every time requesting a bank draft (bankers cheque) or remittance. These types of written instructions can take up to 2-3 weeks before you eventually receive a bank draft. You then have to deposit it into another bank account from which you can only draw cash after the draft has cleared. Later, after you've established your daily use bank, by all means hunt around for the deposit taking banks that give the best rate - and then switch money around between them. The other things to look for in your offshore bank should be the following: Correspondent banks or branches in key-currency countries Member of SWIFT - for transferring money fast (from offshore bank to offshore bank only, never onshore) Offers Debit Cards or Cash Cards and Credit Cards Will accept cash deposits Requires no references Accepts instructions by mail, fax or phone Will hold mail Computer records held in-house and offshore Reasonable bank charges Has a single point for giving instructions Offers comprehensive 'All-in-One' banking It's very important to have one contact in the bank that handles all things in relation to your dealings with the bank. The last thing you want is to be shunted around the bank while you're ringing from Australia. Another good idea is to get a master account number for all your accounts if possible - this tends to make things a little easier. When it comes to the transfer of your money there is something you should always keep in mind, currency never leaves it's own country. For

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Financial Freedom & Privacy example, if you want to remit Australian Dollars to a multi-currency account you hold at Cater Allen Bank in the Isle of Man, don't simply give instructions to remit the dollars to Cater Allen Bank, Isle of Man. What you must do is give instructions for them to remit the funds to Cater Allen’s correspondent bank in Australia, ie to the National Australia Bank, Melbourne, for the credit of Cater Allen’s account with them, where they are held to your order. A "correspondent" bank is a bank's bank. The fastest way to transfer funds is via the SWIFT system, which is a global clearing system for bank to bank transfers. Keep in mind that some banks don't belong to SWIFT because it costs money, so check first otherwise delays could occur if they are using the old telegraphic transfer system. If you wish to advise the bank by fax, be warned that most banks will not carry out your instructions until they have received your original signature. So look around for a bank that will act on a faxed signature as this will save time with your transfers. Two banks that do provide 'Fax Banking' are Rothschilds in Guernsey and Anglo-Irish Bank in Vienna. The next thing to do is to get a single or multi-currency cheque book for use offshore. There are certain situations when a credit or debit card won't do the job. Here are a few examples. If you wish to make an investment, it's a lot easier to use a cheque than asking your bank for a bank draft. Banks are starting to place restrictions on how cards can be used, particularly for mail order transactions, this is when a cheque could come in handy. If your nestegg is on the other side of the world the last thing you want is to be juggling amounts between accounts in the one bank. So attempt to get an 'All-in-One' account for convenience sake. This way your debit and credit cards can be linked to your cash account. When you've set up your bank account, arrange for the bank to send your statements and notices to an onshore maildrop. You can then pickup your mail each week at your onshore maildrop thus avoiding mail being delivered to your home and the prying eyes that go along with that. A further tip is to stay away from US currency accounts in all US and

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The Invisible World foreign banks as the US government requires all banks to submit details of these accounts to them. While this shouldn’t be a major problem for Australians or Kiwis, the information exchange treaty between the countries concerns many people. Solution, a company established in the right tax haven can provide anonymity or bank in British Pounds or Swiss francs. If you would like far more detailed information on secret banking procedures as well as many other secrecy tips, I suggest you obtain a copy of Invisible Banking. There is an order form in the back of this book.

Bank Secrecy Now to an extremely vital issue - Bank Secrecy - this is the cornerstone to everything you do with your nestegg. The following is a list of countries often used as 'financial centres' and their ratings of bank secrecy: EU countries -except for Luxembourg, no EU countries have bank secrecy protected by law which threaten any penalties in cases of violation. The fact that your bank in France, Germany, Italy or Spain does not inform on you to curious third parties may at best be attributed to private agreements based on the principles of good faith as well as traditional common law. Be cautious in these countries. The OECD changes will have an effect here after 2005. Andorra Bank secrecy is not legislated, but appears to function to a certain degree. I've read that it is a recommended hideaway for money in cases of marital disputes since even your spouse won't get any information. Austria Kreditwesengesetz or the Bank Law of January 24, 1979 states that any bank employee that passes on information will be subject to one year's imprisonment or a fine equivalent to one year’s salary. Information will only be released to authorities in case of criminal proceedings. Bahamas Bank law of 1965 prohibits the relaying of any information regarding bank

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Financial Freedom & Privacy or trust transactions gained through "the fulfilment of one's duties or in carrying out one's legal functions", except if the Supreme Court should request the information. US appointed private detectives have repeatedly tried to get on to the accounts of its citizens by employing suspect practices, sometimes with success. However, those people could not be convicted since the information was not gained through legal means. The Bahamanian government considers the American actions such as this unlawful. Therefore, attempts by other governments would be regarded in much the same way. Be aware of the implications of the Caribbean Basin Initiative which involves exchange of information under the Mutual Legal Assistance Treaty (MLAT). Information between certain Caribbean nations and the US does exist and it could implicate others. Now co-operates with OECD. Barbados Bank secrecy is legally protected, violations incur heavy penalties. Bermuda Bank secrecy is not assured by law, but the provisions of the British common law which is also valid here, appear to effectively prevent the passing out of confidential bank and trust information. Cayman Islands A law passed in 1976 threatens anyone who divulges Cayman Islands bank information gained in the course of his work with a penalty of US$5000 or 2 years imprisonment. According to the government's interpretation, it is also illegal to help foreign tax investigators get information. One snag, as the Cayman Islands Bank went bankrupt in 1974, the receiver in bankruptcy saw himself unable to give the creditors any kind of information regarding the claims and liabilities due. Now cooperates with the OECD Channel Islands Bank secrecy has not been legislated, but it is usually effective in practice, especially for non-residents. Of course, if you were a multi-millionaire criminal wanted in England, you wouldn't exactly deposit your ill-gotten gains in a Guernsey or Jersey bank, but for the average Australian, the outlook is pretty good.

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The Invisible World Costa Rica Protection of bank secrecy provided for in Articles 265, 266, 615 of the Commercial Code, though no penalties are levied. Dominican Republic Bank Law No.70 enacted in 1965 stipulates a maximum penalty of 100 pesos or 1 year of imprisonment for passing on bank secrets. Hong Kong Prior to the Chinese taking over bank secrecy was based on British common law, and on various Banking Ordinances, which stipulated penalties of up to HK$100,000 or 2 years imprisonment for violations. In practice, getting information from local revenue offices through official channels was possible and common. Foreign authorities are generally not given any information, but this is no guarantee. Bank secrecy is definitely a thing of the past, at least as far as the Chinese government is concerned when it wants information. Communist governments can do anything they like, particularly when they can summon up tanks and troops and kill a few citizens from time to time. Isle of Man Law of 1975 stipulates a fine of 400 pounds for passing on internal bank affairs to third parties. The banks are extremely guarded in giving out information to foreign tax authorities. The EU is trying to weaken IOM privacy laws, but so far no luck. Liechtenstein Bank secrecy guaranteed by the same article (47, Paragraph 1 and 2, Law on Banks and Savings Banks) as in Switzerland. However, the group of people under obligation to maintain secrecy is bigger in Liechtenstein even liquidators, the tax commissioner and other "representatives" belong to this group. The latter could be anybody, eg. a indoor plant supply person putting pot plants in the bank or the manager of a computer centre working closely with the bank. Also, the complex international agreements, which undermine the Swiss system, are not applicable to Liechtenstein. According to Liechtenstein's Revenue Code (Article 9, Paragraph 3) details regarding Holdings and other companies are subject to bank secrecy and nothing can be given out. Bank secrecy may only be lifted when dealing with money that is derived from serious crime. As far as bank secrecy goes

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Financial Freedom & Privacy - a star performer! Luxembourg Bank secrecy has been protected since 1981 and not only on behalf of private persons, including money hungry heirs (bank employees called to the witness stand in inheritance proceedings need not testify) but extends even to foreign authorities in tax evasion cases. (They refer to Article 2 of the European Legal Assistance Agreement: "Legal assistance may be denied in cases when the request is made with regards to criminal acts which are seen as fiscal crimes".) With this the protection, Luxembourg is even better than in Switzerland. Only in the case of serious crimes does the European Law Enforcement Treaty (of which Luxembourg is a member) compel it to give out information - but even in this case, it is not a judge who has to make the final decision before the account details can be exposed. Without the express approval of the Minister of Finance, nothing can be done. Malta This is what Mid-Med Bank (Overseas) Ltd., Valletta, writes in its leaflets sent to EC customers: "According to the Malta International Business Activities Act, 1988, we are prohibited to give away information on the financial transactions of our customers. Disclosure may only take place if a Malta court so orders. Court orders of this type will only be decreed in case of proven unlawful business such as money laundering." Netherlands Antilles Bank secrecy not legally protected. But reasonably OK if you don't carry a Dutch or US passport. Panama Bank Law No. 17 enacted in 1959, states that bank employees, who reveal the existence of bank accounts, account balances or the identity of account holders, with up to 6 years in jail, and fines up to US$10,000 or both. Even local authorities have no right to information except in criminal cases. Foreign authorities as a rule, will not be given any information. Singapore No clear legal declaration of bank secrecy. Be cautious before investing.

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The Invisible World Switzerland I have devoted a section to Swiss banking secrecy in the Swiss section of Tax Havens. Again they have proven themselves to be the leaders in Bank Secrecy. Turks and Caicos In time these islands will achieve bank secrecy laws the equal of the best in the world. Currently, they are making legislative changes to achieve this end. But the somewhat primitive infrastructure currently in operation, offers no guarantee for real confidentiality, for example, all airmail out of the country goes via Miami in the US. However, the T&C are a good incorporation destination. United States, Great Britain, Canada, Australia and New Zealand Don't even think about it!

Cash, Debit and Credit Cards Quite often when you open a substantial account with a bank, say over US$5,000, you will be offered a Debit Card or Cash Card. Credit cards usually require a higher deposit. The Debit Card is one of the most convenient ways to withdraw cash from offshore accounts. The introduction of the ATM has changed the way we bank. It allows banks on the other side of the world to be almost as convenient as the one down the street. I recommend everyone who banks offshore to acquire a Debit Card or Credit Card. Keep in mind some banks will only issue Credit Cards on corporate accounts. How to get the best out of using Cash, Debit and Credit Cards When establishing your offshore bank account make sure you can have card access to your cash. This is a point I should reiterate when it comes to Austrian Sparbuch accounts, most of them are inconvenient to withdraw from due to the fact that you can’t attach a cash or debit card to most of them and in the instances that you can, they usually don’t work outside of Austria. Where current accounts have been established with offshore banks,

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Financial Freedom & Privacy the easiest way to withdraw funds onshore is via a bank issued Debit Card, Cash Card or a Credit Card that can be used here in Australia and overseas. But note, for the card to be any good to you, it must be connected to one of the worldwide card networks Cirrus or Maestro (Visa and MasterCard). If it isn't, it won't work at ATM's in Australia. Most banks offshore make it pretty clear that their cards work in thousands of ATM’s worldwide but make sure by asking before proceeding with the account. Let’s look at the different cards available from offshore banks: Cash Cards You can use cash cards to withdraw cash from ATM’s and you can withdraw about $500 to $1,000 per day, everyday, or about $180,000 to $360,000 per year! A good point about Cash Cards is that no credit checks are necessary. With a card you can get to your offshore money as easily as going to the local ATM. Keep in mind when using ATM’s that the only thing that's recorded is your Cash Card number, not your name. It only recognises the issuing banks ID number and the account number. All transactions involving the onshore bank and the offshore bank are grouped together and funds are transferred between banks in one lump sum via the banks clearing system at the end of each day. The following day your offshore bank debits your account. Meanwhile, the cash-dispenser clearing system isn't the least bit interested in your withdrawal, it's only interested in recovering the cash (and the cash of thousands of other withdrawals) from your offshore bank. Even if someone did want to know who was using this card in Australia, they couldn't find out because of the overseas bank secrecy laws involved. Cash Cards are global and most ATM’s in Australia will allow the use of offshore issued cards from major banks as long as the offshore bank is connected to Cirrus or Maestro. Keep in mind, your obligations as far as tax is concerned – you should declare any income you withdraw from ATMs, of course if you withdraw “capital” there is no need to declare that. Debit Cards These are becoming more and more popular here and overseas as people become wary of credit. They work in much the same way as a credit card, but instead of you receiving a bill, they take the money from your bank account (which of course is offshore). They are accepted in exactly the

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The Invisible World same way as credit cards i.e. you can use them to purchase things and also use them in ATM’s to obtain cash advances. The downside is that when you use them to purchase goods onshore, the merchant will record your name on the voucher, and this is generally regarded as a no-no due to the paper trail you create. When onshore, use it in much the same way as cash card, and when offshore use it any way you want. The Debit Card is probably the most popular product offered by offshore banks and a must for all offshore investors. Credit Cards Generally, the same as debit cards, except with one exception, the offshore bank may want a fairly large cash deposit as security to cover the possibility that you may not pay the bill, and being in Australia it makes their job of recovery very difficult.

Privacy Tips when it comes to Cards Before you obtain one, incorporate an IBC, and have the card issued in the company’s name. This will reduce the chance of anybody seeing your name on the card. In addition it muddies the water even more for anybody trying to track your account down. make sure it’s either Visa or MasterCard linked so it can be used everywhere in the world. Don't use CREDIT CARDS for large purchases as you may be remembered. Don't use CREDIT CARDS in places you're known or close to home. Only use them Offshore for purchases unless it can’t be helped. A Final Warning Be careful about carrying these cards around with you in case you lose them or you have an accident and somebody that shouldn't, notices your card. It sounds paranoid, but accidents can happen. Keep it hidden in a safe place. Trust nobody!

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Financial Freedom & Privacy Some Banks that issue Cash, Credit and Debit Cards Bank of N T Butterfield PO Box HM195 Hamilton HM AX Bermuda Ph : 0011 1 441299 3826 Fax : 0015 1 441 292 4365 www.bankofbutterfield.bm Bank of Bermuda PO Box HM 1020 Hamilton HM DX Bermuda Ph: 0011 1 441 295 4000 Major bank in Bermuda. It has a wide range of services available including Cards. http://www.bankofbermuda.com Standard Chartered Grindlays - Offshore Financial Services PO Box 80, 13-15 Castle Street, St Helier, Jersey JE4 8PT, Channel Islands Reception tel:0011 44 1534 704000 Fax 0015 44 1534 704600 New Business Enquiries Open 9.00am to 5.00pm (GMT), Monday to Friday tel: 001144 1534 704000 Internet Helpdesk Open 8.00am to 5.00pm (GMT), Monday to Friday tel: 0011 44 1534 704999 Mortgage Services Open 9.00am to 5.00pm (GMT), Monday to Friday tel: 0011 44 1534 704221 Fax 0015 44 1534 704602

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The Invisible World Lost/Stolen Cards 24-hour service tel: 0011 44 1534 880599 Debit Card Activation Open 9.00am to 5.00pm (GMT), Monday to Friday tel: 0011 44 1534 704346 TRUST CORPORATION Standard Chartered Grindlays Trust Corporation (Jersey) Limited PO Box 766, 15 Castle Street St Helier, Jersey JE4 8ZH Channel Islands New Business Enquiries Middle East/North Africa - Stephen Ross South Africa/South Asia - Justine Wilkinson Europe/Americas - Frances Leonard Asia Pacific Rim - Jacqueline Loh tel: 0011 44 1534 704300 Fax 0015 44 1534 704630 Local offices around the world LONDON Standard Chartered Grindlays - Offshore Financial Services PO Box 33244, 54 Jermyn Street, London SW1Y 6WL, United Kingdom Reception tel: 0011 44 20 7016 8300 Fax 0015 44 20 7016 8333 DUBAI Standard Chartered Bank - Offshore Financial Services PO Box 999, Al Mankhool Road, Dubai Indra Mohan tel: 0011 9714 508 8105 Fax 0015 9714 352 0566 HONG KONG Standard Chartered Grindlays - Offshore Financial Services

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Financial Freedom & Privacy Room 1401, Henley Building, 5 Queen’s Road, Central Hong Kong tel: 0011 852 2820 3891 Fax 0015 852 2868 4758 SINGAPORE Standard Chartered Bank - Private Financial Services Division # 10 - 08, 6 Battery Road, Singapore, 049909 Tel: 0011 65 6530 3586 Fax 0015 65 6438 2187 Satndard Chartered offers a wide range of services including Current Accounts, Deposits, Debit, Cash and Credit Cards. Multi-currency accounts etc. Accounts can be opened by mail. Banking by phone and Fax available. The Extra Value Deposit Account comes with an International Debit card. Minimum balance is A$2,000. Other accounts as low as A$1,000. Accounts are also offered in Australian Dollars. International Corporate Debit Cards available to use with the added anonymity of an IBC. Lloyds TSB Bank PO Box 160 25 New St St Helier, Jersey JE4 8RG Channel Islands Ph : 0011 44 1534 503100 Fax: 0015 44 1534 503047 They offer Current accounts with Card and Chequebook access from a minimum 2,000 pounds opening balance. Offshore Premium Account, 2,000 pounds to open, tiered interest, Debitcash card called the TSB Bank card, VISA system - includes sterling cheque book Lloyds TSB Bank (Isle of Man) Limited P O Box 8 Victory House Prospect Hill Douglas, Isle of Man IM99 1AH Tel: 0011 44 1624 638200 Fax: 0015 44 1624 626033

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The Invisible World Cater Allen Bank Carrick House, Circular Rd Po Box 62 Douglas, Isle of Man, UK IM99 1DZ Phone: 0011 44 1624 644700 Fax : 0015 44 1624 620200 Formerly the Tyndall Bank. The Corporate Visa Debit Card will only accept UK, IOM and Eire companies. Personal accounts are no problem. Some of you may wish to open bank accounts in some of the tax havens detailed so I have included additional banks in each tax haven listing. Another thing to remember is to avoid banks if possible, that have trading branches in Australia as you could have co-operation between branches if somebody decides to put pressure on the Australian branch. Of course, avoid Australian banks offshore if you can. If you are not Australian, avoid banks of your home country for the same reason.

How to inject money into your Offshore Nestegg Firstly, let's look at what not to do if your aim is financial privacy. Don't draw a cheque on your onshore account and deposit it into any of your offshore accounts. Don't transfer funds from your onshore accounts to your offshore accounts. Don't have any transactions between any onshore and offshore accounts. Don't have any transactions between your offshore nesteggs. Here's how to fund the account - Next time you travel overseas, take a little extra cash in the form of British pounds or Swiss francs and open an offshore in the country of your choice. Don't take too much cash, as it's illegal to take large quantities of cash out of Australia, USA, UK and most other western nations and most banks offshore will not except large amounts of cash anyway. Travellers cheques are an ideal way of opening accounts and

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Financial Freedom & Privacy depositing as they don’t leave a traceable paper trail. Simply go to the bank and obtain some travellers cheques, sign them and write in the name of the account in the payee area and send them via courier to your bank. This is a safe, secure and private way to transfer funds. While you're overseas, use your onshore Cash, Debit or Credit Card to withdraw cash and deposit it into your Offshore structure. Keep in mind this transaction will appear on your onshore card statement as a cash advance, so try to keep the transaction small and consistent with your normal spending habits. If you decide to use this method, start withdrawing cash onshore to establish consistency. Purchase small collectibles or antiques and re-sell them offshore. Stamps, old Australian and rare stamps are good overseas, coins and jewellery are also worthwhile. Do this only if you know what you're doing. Invest in a single premium Swiss Insurance Policy. Make an onshore lump sum payment for a Swiss franc Policy (which is traceable). Then borrow back 90% of the premium and deposit it back into your nestegg structure. The interest rate is low and you get insurance coverage. Another way is to establish an offshore company, in which you may have an interest. Then that company will bill your onshore business interests for services or products provided. These charges must be of a 'legitimate' nature or the Tax Office may reject that expense unless it’s been incurred on a 'commercial' and 'arms length' basis. That is to say, you should receive goods or services commensurate with the amount you've paid.

How to withdraw funds from my Offshore Nestegg Once you've established your offshore nestegg you can use it to purchase anything you like offshore. You can use it to set up an 'invisible' business, 'invisible' investments, 'invisible' houses or just to enjoy travel. The rules to the onshore withdrawal of money from your offshore nestegg are: Use your global cash card to withdraw funds from ATMs of local banks. Use your Offshore debit card or credit card in places you're not known.

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The Invisible World Use travellers cheques for private withdrawals by requesting your bank to issue them when you are overseas on a business trip or holiday. You will need a bank that has branches worldwide to do this.

How to setup and use an Offshore Company Before you set up your offshore nestegg structure, consider using the added 'camouflage' of an offshore company - this will provide maximum privacy. If you use your own name, it will appear on bank computers but this may not be the end of the world because you will be protected by bank secrecy laws in the jurisdiction you have your accounts. Well, sort of, as long as you are not a money launderer! Anyway, it's always better not to have your name on any paper trails. Offshore companies don't take a lot of time and effort to setup. Also, depending on which country you decide to use, won't cost a fortune either. First of all choose which country or jurisdiction suits you based on your nationality, residency, business, family and tax situation. It might be an idea to have a quick look at some of the 'Tax Havens' detailed in the next chapter at this point. Of course the ideal country should have at least most of the following features: Low government set up costs and annual fees. Reasonable professional costs such as accountants and solicitors for registered office facilities etc. No filing and reporting requirements. Allows Bearer Shares. These are shares where the current owner can't be traced, without of course a court order that charges you with money laundering or criminal activity. Many jurisdictions, while still allowing bearer shares, do require the holder to be registered, confidentially. No need for nominees. Use your own language or at least use it as a second language. Europe is pretty good as far as English is concerned. No need for local representation. Possibly a country that has no visa requirements. Again, Europe is good as you can travel freely once you pass through the formalities of your port of entry.

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Financial Freedom & Privacy If you are after a fairly straight forward offshore shelf company, try looking at the advertisements in some international newspapers (British Sunday Times, Hong Kong papers etc) as you may find cheaper alternatives to some of the incorporation agents mentioned in this book. A little about Bearer Share companies, they can be purchased for cash and therefore very few personal details have to be given. The shares are just like having a $100 dollar note in your pocket, you can simply take it out of your pocket and give it to someone else. Some offshore shelf company formation agents can also help with the provision of a foreign national to be a genuine 50% owner in your offshore company. Also, they can assist with a registered International Business if you prefer that option over a company structure. Here are the names of a couple of incorporation agents that may be of assistance to you, although I've listed more in the 'Tax Havens' section of the book. OVERSEAS COMPANY REGISTRATION AGENTS Suite 1707, Australia Square Tower, 264-278 George St, Sydney 2000 NSW Australia PO Box N63, Grosvenor Place Post Office Sydney 2000 Phone: (02) 9251 5822 Fax (02) 9251 5050 Louvre Group www.louvregroup.com Louvre Fiduciary Group Limited, Suite 7, Provident House, Havilland Street, St Peter Port, Guernsey, GY1 2QE Tel: 0011 44 1481 727249 Fax: 0015 44 1481 7143 INTERNATIONAL COMPANY SERVICES LTD Gran Via Carlos lll 84, 3 planta, 08028 Barcelona, Spain

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The Invisible World Tel:0011 34 93 496 5703 Fax:0015 34 93 496 5701 email:[email protected] CAYMANX TRUST COMPANY 34 Athol St, Douglas Isle of Man IM1 1RD Phone: 0011 44 1624 646 900 Fax: 0015 44 1624 662 192 OVERSEAS COMPANY REGISTRATION AGENTS Grosvenor Court Tower St, Ramsey, Isle of Man IM8 1JA Phone : 0011 44 1624 811000 Fax : 0015 44 1624 811 001 Email: [email protected] This company is the largest incorporation company in the world and the Isle of Man office is the Head Office. These companies can assist in forming companies in virtually any country or jurisdiction in the world. They can also assist with the following: Registered office facilities Ship registration Arranging full nominee service Accountancy and audit services Letter of Credit services Bank introductions Offshore trusts Value added tax registration Management and administrative services for trade and investment Banks and insurance companies Immigration and residency visas Another thing to remember is it's not necessary to have all your eggs in one basket - you can have your bank account in one country, company in another. In my opinion, this is always a wise move if you are going to have a structure with multiple accounts and possibly multiple companies. Be aware though, the company and banking jurisdictions need to be compatible.

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Financial Freedom & Privacy Chapter 4 Tax Haven Strategies Introduction The use of tax havens in day-to-day corporate life has grown to be almost mainstream these days. To the small businessman and the private investor, the use of tax havens still probably seems a little shady. This shouldn’t be the case any more as the use of tax havens to reduce tax or just defer it for a while is now accepted practice all over the world with many of the largest accounting and audit firms having departments advising major corporations how to structure their operations offshore. Tax havens have a strong appeal for many multi-national companies established in foreign countries because of the advantages they offer for the legitimate avoidance or deferment of taxation on certain profits earned offshore. Profits harboured in a tax haven enable working capital to be used in the cheapest way possible. Traditionally, the tax haven has been used as a central point for handling paperwork and preparing and processing international trade documents. Many companies utilise tax havens for the passage of title of goods, so these transfers can proceed without the need for mountains of regulations and fees. Tax havens are also popular as places to administer patent, trademark and royalty agreements. Because of the intangible nature of patents, trademarks and royalty agreements, they are easily moved from one jurisdiction to the other and the cost of doing this is very low in tax haven jurisdictions. For instance, if a company with branches and subsidiaries overseas is a resident of a country with strict foreign exchange regulations, it may not want to repatriate the profits simply because if it did, it may have problems being able to transfer the funds back out if it wanted to reinvest them offshore. To solve this problem, it establishes a foreign intermediate holding company in a tax haven, not for tax reasons, but to avoid the foreign exchange control problems that its own country has imposed.

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The Invisible World By simply interposing a tax haven company in a corporate structure does not result in the reduction of onshore taxes in most cases, but it may allow tax deferral. Eventually, the parent company will receive the income and when it does it will be taxable and possibly without the benefit of foreign tax credits that may have been available had the profits been repatriated from a tax treaty country. Most tax havens don’t have tax treaties with major countries such as Australia, which prevents the favourable use of lower withholding taxes that would have been available had the country been a signatory to a tax treaty. To appreciate how using a tax haven can be beneficial to a normal business transaction, I have put together an example of a simple structure that is typical of the sort of problems that may arise between two countries. Company ABC which is located in Country A owns the patent to a product. Company ABC receives a substantial amount of income as patent royalties from Company XYZ which is a resident of Country B. There are no tax treaties between Country A and B. The royalty from Company XYZ must pay 30% withholding tax on the payments it makes to Company ABC. This is the withholding tax rate imposed by Country B in relation to payments to Country A. And when the payment is received in Country A, Company ABC must pay tax on it at a rate of 36% on the remainder. This means these royalties have been taxed 55.2% in total. To reduce this tax, Company ABC creates a patent holding company, Company TH in a tax haven, Country OS. Country OS and Country B have a tax treaty which allows royalties paid in Country B to Country OS to be taxed only in Country OS and not taxed in Country B at all. The tax rate in Country OS is only 5%. Country A and Country OS also have a tax treaty and this allows royalties paid in Country OS to companies in Country A to be able to claim a foreign tax credit for the tax paid and withholding tax paid in Country OS. Company TH in Country OS then forwards the balance to Company ABC in Country A after deducting a withholding tax of 10%. This means the total deducted by Country OS has been 15%. The royalty is then received by Company ABC in Country A and is taxed

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Financial Freedom & Privacy at 36% on the balance less the foreign tax credit of 15% on the total. The total tax percentage incurred on the whole transaction was less than 31%. Compare this to the 55% they would have paid had they not used the tax haven. Country A Company ABC Receives Patent Royalties

No Tax Treaties exist between these two countries

Flow of Royalties

Country B Company XYZ Pays Patent Royalties

Flow of Royalties Tax Haven Country OS Company TH Tax Treaties exist OS-B OS-A

It is often worthwhile for a company to establish a subsidiary in a tax haven and give it a large bank account. The subsidiary is then able to lend out money to another foreign subsidiary after opening a time-deposit account that acts as collateral for the loan. Interest earned on the deposit account in the tax haven accrues free of tax. But the borrowing of the loan by the onshore company may be tax deductible. This could be an opportunity available to those who wish to incorporate their own offshore banks.

Real Estate Strategy Real estate investors could benefit by holding his or her properties in an offshore company. This is permitted in all tax havens except Luxembourg. For example, not only do you achieve ownership anonymity, but you gain the possibility of limiting capital gains tax liability by the owner of the company selling the shares in the company which is a foreign asset,

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The Invisible World instead of the property itself. This means if you want to sell a property, you simply sell the company to the buyer. As far as anybody is concerned, the property is still owned by exactly the same offshore company. It’s only the ownership of the company that has changed. Keep in mind this company does not have to register in Australia because it is exempt from registration if all the company does is hold property. Just ensure if you wish to do this, keep one property per company otherwise it makes it difficult to sell the company if you only want to sell one property. The buyer would also be able to achieve the same situation in the future and would benefit by not having to pay stamp duty in the first instance as in reality, the property has not changed hands. It could be argued that, if you owned or controlled the offshore company, any capital gains made on the sale of the offshore company’s shares could be assessable for tax purposes in your home country.

Offshore Licensing and Patent Holding Companies Royalties or licence fees can be, in certain circumstances, can be feed of tax obligations by using an offshore licensing company. For instance, the owner of a patent can incorporate an offshore licensing company and assign the rights to that offshore company. In turn the offshore company then has the right to licence the patent to a foreign subsidiary. By having the royalties paid to the licensing company in a tax haven, profits are effectively shifted from the foreign subsidiary to the offshore patent owning company, which pays little or no tax on the royalties that it receives. Income from other intangible rights, such as trade marks, copyrights, know how and franchising rights, can be earned without incurring withholding or income tax if a tax haven company is established to sublicence other companies in various countries. Tax savings can be made also on patent royalties by combining tax havens. Australia only deducts 10% withholding tax on Dutch companies. Therefore, if a tax haven company was established in the Netherlands Antilles with a Dutch subsidiary, and licences its Dutch patents to the Dutch company, the Dutch company, in turn, can licence to the Australian manufacturer. The Australian company can then pay the Dutch subsidiary patent royalties incurring only 10% tax. The Dutch company can then pay

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Financial Freedom & Privacy the royalty to the tax haven company (which is the patent owner), thereby avoiding Dutch withholding taxes on dividends. The Dutch company is not taxed in the Netherlands, and the tax haven company avoids any further taxation. Total tax is 10%. It’s possible to use a whole network of tax treaties and havens to good effect. Another example of what we’ve been discussing would be if a German patent owner assigned its patent to a Liechtenstein holding company. It then grants a licence to a Swiss company, which in turn licenced an Australian company. The Australian company would pay royalties to the Swiss company, which would only incur a 10% withholding tax. The Swiss company then pays a back-to-back royalty to the Liechtenstein company without any tax liability being incurred. The Liechtenstein company pays no profit or any other type of tax on the royalties received. The royalties can remain in the Liechtenstein company for as long as required until the German company requires the royalties to be forwarded. As a further incentive, the Australian company could be owned by the German company and therefore a lot more of the Australian profit before tax could be absorbed this way and thus reducing Australian taxation.

Offshore Financing A group of companies can use an offshore finance company to channel loans to an onshore subsidiary. By paying interest to the offshore finance company, the profits can be effectively transferred from the onshore company to the offshore one. The onshore company would receive a tax deduction for the interest paid, and the offshore company would be exempt from tax because the income was earned offshore. It may be necessary to channel the interest through a variety of companies to reduce withholding tax imposed on the interest, which can be tricky. The offshore finance company is often used to raise funds for the whole group of companies. When arranging these loans, the group must be careful not to breach any anti-avoidance legislation that may affect the deductibility of the interest on the loans. Often this has been achieved by placing the offshore finance company beneath the subsidiaries to be financed and lending to each one of them on an individual basis.

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The Invisible World Holding Company

Subsidiary A

Loan

Subsidiary B

Subsidiary C

Loan

Loan

Offshore Subsidiary Finance Company – A Tax Treaty Jurisdiction to reduce withholding tax

Conduit Finance Companies are used to good effect by corporations to take advantage of Double Tax Treaties. The finance company would be established in a country with a tax treaty with Australia and then would forward the balance of interest onto a tax haven by way of back to back loans. The interest payment represents a tax deductible expense in Australia, but there also remains a small margin that will be subject to full taxation in the jurisdiction where the Conduit Finance Company was established. A suitable location for a Conduit Finance Company will require: Network of double taxation treaties Low withholding taxes on interest payments Corporate tax rules that allow the full deductibility of interest expense paid to non-residents. The ideal location is the Netherlands. It has an extensive network of double taxation treaties. The Netherlands also another major advantage, it imposes no withholding taxes at all on interest payments by a Netherlands company, regardless of where the recipient is located. This means that a Dutch finance company can pay interest to a tax haven company without withholding tax being deducted.

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Financial Freedom & Privacy Interest payments to a Dutch company are fully deductible for corporate income tax purposes, provided that are on commercial terms. Generally, 0.25% (quarter of one percent) is regarded as acceptable. Australian Company Requiring Loan Loan to Aust. Coy at say, 12.25%

Finance Borrowed by Tax Haven Coy. At say 6%

Tax Haven Finance Company

Loan to Conduit Finance Coy at say 12%

Conduit Finance Company The Netherlands

On the above example, based on $100,000 loan, the Australian company would pay $12,250 in interest each year, which would be tax deductible. Withholding tax would deduct 10% on its way through to the Netherlands. This would leave $11,025 as income to the Netherlands Company. This would then be offset by the loan with the Tax Haven Company at 12%. This would leave a taxable income in the Netherlands of $225. The balance of $10,800 would be transferred withholding tax free to the tax haven Company and the tax haven company would pay $6,000 interest on the original 6% loan. The amount of $4,800 would remain tax free in the tax haven jurisdiction. In instances like this the lender may adjust the payment of interest to account for the Australian withholding tax, and this would also be tax deductible in Australia.

Double Interest Deduction Companies In certain circumstances, offshore finance companies may effectively achieve a double interest deduction for a group by using sometimes

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The Invisible World complex structures. As an example, a group of companies borrows funds that are then injected into a finance company resident in a tax haven. The tax haven company then lends the money at a commercial rate to subsidiary companies within the group that are in different countries. This lending is often put through a Conduit Finance Company located in the Netherlands to take advantage of its double tax treaties. This can achieve a double tax deduction because the parent company has borrowed the funds and must pay interest and also the subsidiaries have also borrowed the same funds and must also make interest payments. One lot of money lent out twice creates two tax deductions and because the parent company and the subsidiaries are in different countries the relationship of the funds is hard to link. In effect interest is paid twice to the tax haven company and repaid once on the external borrowings with the profit of one lot of interest remaining offshore and tax free. Anti-avoidance legislation issues can be dealt with by ensuring that the companies involved have a commercial presence in each of the countries involved rather than a presence simply to facilitate tax minimisation. This can be done by having ‘employees and a permanent office’ involved in ‘legitimate’ activities. External Borrowings

Tax Haven Finance Company

Australian Parent Company

Equity Capital

Loans

Netherlands Finance Company Loan

Foreign Trading Subsidiaries

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Financial Freedom & Privacy Captive Insurance Companies A captive insurance company is a partly or possibly fully owned foreign insurance subsidiary incorporated in a tax haven in which there is no tax or a minimum of tax on income from the premiums paid to it. Premiums paid to captive insurance companies are often tax deductible. There are a variety of good reasons for a larger sized business to consider an offshore insurance subsidiary, they include: Lower insurance costs because things like commissions, marketing and costs and other overheads are eliminated. Increased liquidity due to the premiums being available to invest offshore and this in itself creates profits available to the group. Ability to insure risks not normally insurable onshore (Self Insurance). Better coverage terms by writing a policy to suit the needs of the group. A captive insurance company is paid premiums to insure risks around an international group and then reinsures those risks around an international group and then reinsures those risks in the market. Reinsurance is also cheaper than insurance. Over time the captive insurance company accrues substantial profits from its investment of the premium until such time as reinsurance is no longer necessary.

Shipping Companies Most of us have noticed that it seems most of the world’s freight and container ships seem to come from either Liberia or Panama. This isn’t because these countries have huge merchant fleets, but because ship owners can register their ships and shipping companies in these places and virtually avoid all taxes and at the same time reduce the cost of registering their ships. Other tax havens that offer favourable terms and benefits to shipping companies are the Bahamas, Bermuda, the Caymans, Cyprus and the Isle of Man.

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The Invisible World Import/Export Business Export One of the best businesses to have in an offshore structure is an Export business. This way you can minimise taxation legally and at the same time build up funds offshore just like the multinationals do. You first must appoint an Export Marketing Agent in the form of an offshore company who sells on your behalf worldwide. This is perfectly normal in business circles. You simply sell your goods to your agent at a net price that excludes commissions etc. The commission allowed would be a 'commercial' rate that would normally be offered to a domestic sales person or organisation. You can also, if orders exceed domestic levels, offer the Agent greater discounts due to a higher level of sales and other offshore competitors. The net effects here would be the Agent offshore gains profits in the form of sales commissions that otherwise would have been earned offshore. As an example let's look at a simple scenario: Self Export Export via Agent Cost of goods $100 $100 Price to Agent $105 Price to foreign buyer $125 Onshore profit - taxable at Australian rates $25 $5 Price to foreign buyer Offshore profit - taxable at offshore rates

$125 $20

This is a very simple scenario but many multinationals around the world employ this type of setup. Now, a few things to remember before you rush and start exporting your goods in this way. The 'Australian Tax Considerations' chapter talked about CFCs and FIFs, Active Income exemptions, Double Tax Agreements etc, look at your situation and the offshore company structure you're going to employ and discuss it with your accountant. The Tax Office will only accept this type of structure if it falls within their guidelines, so do your research carefully.

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Financial Freedom & Privacy Import Importing is the opposite of exporting, in more ways than one. Whereas the Australian Government loves exporters, it considers Importers a little differently. There are duties etc to be considered. But, there is a way. You appoint the offshore company as your Import Buying Agent. The Import Buying Agent acquires the goods to be imported and then sells them to your onshore operation at cost plus margin. Of course, at all times you must consider the landed price in your calculations.

Offshore Consulting If exporting and importing are not for you, then possibly establishing an offshore business in consulting may be an option you could consider. You could consult not only to companies in Australia, but also to companies offshore. Forget consulting in Investment, Finance and Insurance, they are all caught under the Foreign Investment Fund measures introduced by the Federal Government as Ineligible Active Business Activities back in 1993. As such these activities are subject to taxation under the FIF legislation. This company, and it's 'employees' could provide services in say marketing, testing, analysis, foreign business opportunities, Australian business opportunities etc to companies offshore, within Australia, and possibly your own business here in Australia.

Internet Trading One of the fastest growing areas of international trade is the Internet. The international nature of the trade and the potential tax complications of dealing internationally can be solved by the creation of a specialist internet trading company offshore. To obtain favourable tax treatment it is necessary to locate the server physically offshore and to have a separate domain name. Though the opinion is often expressed that such operations are 'all in cyberspace' and therefore location is not important, in fact regulation is increasing and planning should anticipate likely future controls.

Asset Protection A Trust can be established whereby the Settlor, having handed over his assets to the Trustees, no longer owns these assets so they cannot be seized in cases of insolvency, marital proceedings or professional

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The Invisible World negligence. If however, the Trust was set up intentionally to avoid a known current or future liability it may be set aside by the courts. Trusts are excellent asset protection vehicles, not withstanding the limitations as explained in this book, and are thus valuable devices in times of political and economic instability.

Family Wealth Protection Trusts are often used to protect the continuity of family wealth by imposing conditions on the use and distribution of the moneys on present and future generations. Such an arrangement may also replace a will in certain circumstances. Trusts can be used legitimately to avoid 'forced heirship' provisions affecting inheritance.

Confidentiality There are often sound commercial and security reasons for using the confidentiality that an offshore structure can provide. Confidentiality is a cornerstone of the functioning of offshore centres. Without confidentiality laws and codes of practice there would be no faith in the finance centres and their economies would fail. Banks, fiduciaries, trust companies and corporate service providers all adhere to the strictest standards, whether these are enforced by law or not. Subject to the requirements of the money laundering and financial regulation laws, only a properly authorised criminal investigation will cause such a firm to divulge the ownership of an offshore structure or bank account.

Other Possible Uses of Tax Havens The number of uses of Offshore Companies in tax havens is unlimited. It usually involves moving profits from a high taxing jurisdiction to a low taxing jurisdiction. This is commonly known as 'transfer pricing'. Transfer pricing is not illegal if correctly structured and undertaken on a strictly commercial basis. All that is done is, a low tax jurisdiction company is interposed between a transaction involving two or more high taxed jurisdictions. Example 1 - Clothing Industry A company in Scandinavia sets up an offshore company in Hong Kong.

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Financial Freedom & Privacy The Hong Kong company purchases clothes made in China. The clothes are then onsold by the Hong Kong company to distributors in North America. The profits on the Hong Kong company are tax free to the company in Scandinavia. Example 2 - Electronics Industry An electronics exporter establishes a company on the Isle of Man. The exporter then sells the electronics to the company in the Isle of Man at a low price and the Isle of Man company then onsells the goods to customers in Australia, Japan and the USA at a much higher price. The profits remain tax free in the Isle of Man. Example 3 - Franchises and Licenses A local company wishes to license other companies to use their expertise or know how. This can be done by setting up an offshore company and directing the one off license or franchise fee to the offshore company, which may be owned by an offshore discretionary trust. The offshore company enters into the agreements with the licensees. The payments then accumulate tax free in the offshore jurisdiction. Example 4 - Services Actors, sportsmen and rock stars and others often establish their own employment companies in tax havens. These companies then act as agents or 'resellers' of the persons services. The payments received by these offshore companies would be tax free as the income would be derived from sources outside the company's jurisdiction and outside the persons own country of residence. Example 5 - Factoring The factoring of trading debts of a company in a high tax jurisdiction through a factoring company set up in a low tax jurisdiction can result in the transfer of funds from a high tax jurisdiction to a low one. It could be possible to claim the factoring charge as a tax deduction in the high tax jurisdiction.

A few things to remember when setting these structures up Keep bank accounts invisible. Consider invisible Bearer Share Companies with possibly nominee directors. Consider the Tax rules on CFCs and FIFs. Look for a jurisdiction with a low or zero tax rate and good Bank Secrecy

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The Invisible World laws. Do everything on a strictly 'commercial' basis.

A few Safeguards to protect your assets Many people utilise Nominee Directors and Bearer or Nominee Shares in order to maximise both their privacy and safeguard their assets, but there are a few things you should put in place, if for no other reason than to give you peace of mind. A lot of people ask me about the safety of either nominee directors or nominee held Bearer Shares, and the simple answer to anyone’s doubts is that you should only use intermediaries (or company formation agents) whom you really trust. Whoever you use as nominees there are certain safeguards that must be put in place to ensure they do not disappear with your company and its assets. I am in no way suggesting that any firms who form offshore companies do not provide those essential safeguards but it's important to know what they are so you at least understand the extent and limitations of them. When using nominee directors it is advisable for the beneficial owner of the company to receive: 1. A signed declaration from the nominee director(s) In a form similar to the text below in capitals:DECLARATION I, (NAME OF NOMINEE DIRECTOR) OF (ADDRESS) HEREBY DECLARE THAT I HOLD THE POSITION AS DIRECTOR OF (ABC LTD) ("THE COMPANY") AS NOMINEE FOR (NAME OF BENEFICIAL OWNER) THE BENEFICIARY, AND I AGREE TO ACT IN SUCH MANNER AS THE BENEFICIARY SHALL FROM TIME TO TIME DIRECT SUBJECT TO THE ARTICLES OF ASSOCIATION OF THE COMPANY AND I HEREBY UNDERTAKE TO EXERCISE THE VOTING POWER CONFERRED BY THE SAID OFFICE ONLY IN ACCORDANCE WITH THE DIRECTIONS OF THE BENEFICIARY AND I FURTHER UNDERTAKE TO RESIGN FROM THE OFFICE OF DIRECTOR OF THE COMPANY AND FROM ALL OTHER APPOINTMENTS WHICH I MAY HOLD WITH THE COMPANY AND FOR SUCH PURPOSE A LETTER OF RESIGNATION DULY EXECUTED BY ME IS ATTACHED HERETO. WHERE THE CONTEXT SO ADMITS THE EXPRESSION "I" SHALL INCLUDE MY EXECUTORS AND ADMINISTRATORS. DATED: SIGNED:

2. A letter of resignation from the nominee director(s).

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Financial Freedom & Privacy Signed but undated. 3. A power of attorney from a nominee director and company secretary In a form similar to the example shown below. It would be usual for it to be made in favour of the beneficial owner but it could be in favour of any other third party such as a trusted friend or associate. The activities to be covered by such a power of attorney may be more or less than those shown in the example. It may be prudent to only have the inclusion of item 3 in such a document if it is made in favour of the beneficial owner. This would allow them to open and be a signatory to the offshore company’s bank account, but it would not effectively give them any other powers. This might be significant if it ever got to the stage of needing to prove that the beneficial owner did not have the all important 'management and control' of the company. Given the existence of the declaration and the other shareholder safeguards we will review next, such an apparently limited power of attorney still provides adequate security for the beneficial owner. POWER OF ATTORNEY THIS POWER OF ATTORNEY IS MADE THIS (DATE) FOR A PERIOD OF ONE YEAR BY (COMPANY NAME) (HEREINAFTER CALLED "THE COMPANY") A COMPANY INCORPORATED UNDER THE LAWS OF (JURISDICTION) AND HAVING ITS REGISTERED OFFICE AT: WHEREAS THE COMPANY IS DESIROUS OF APPOINTING AN ATTORNEY TO TRANSACT THE COMPANY'S BUSINESS. NOW THEREFORE THE COMPANY CONFIRMS THAT: NAME (PASSPORT NUMBER) OF: TO BE ITS ATTORNEY ON ITS BEHALF TO TRANSACT THE BUSINESS OF THE COMPANY. AND THE COMPANY HEREBY DECLARES THAT THE ABOVEMENTIONED PERSON IS EMPOWERED: (1) TO TRANSACT ANY BUSINESS WHICH THE COMPANY CAN LAWFULLY DO; (2) TO OPEN AND TO OPERATE BANK ACCOUNTS FOR THE COMPANY; (3) TO MAKE ALL NECESSARY ARRANGEMENTS FOR THE OPENING OF BRANCH OR SUBSIDIARY OFFICES ON BEHALF OF THE COMPANY; (4) FROM TIME TO TIME IN WRITING TO APPOINT ANY AGENT OR SUBSTITUTE TO EXERCISE ON BEHALF OF THE COMPANY ANY OF THE POWERS HEREBY GIVEN AND TO REVOKE ANY SUCH APPOINTMENTS. THIS POWER OF ATTORNEY SHALL IN ALL RESPECTS BE INTERPRETED IN ACCORDANCE WITH ENGLISH LAW. IN WITNESS WHEREOF THE COMPANY HAS CAUSED THIS POWER OF ATTORNEY TO BE EXECUTED BY ITS PROPER DULY AUTHORISED OFFICERS THE DAY AND YEAR FIRST ABOVE WRITTEN. SIGNED SIGNED PRINT NAME PRINT NAME DIRECTOR COMPANY SECRETARY

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The Invisible World When it comes to the Shares themselves, the following arrangements are normal when using nominee shareholders: 1. Although the share certificates are issued in the name of the nominee(s), you should retain possession of them. 2. The nominee should sign and give you a declaration of trust. A typical example follows although it could contain other specific provisions to deal with a particular situation. 3. As will be seen from the wording of the declaration of trust below, it is usual for the nominee to also sign a blank undated stock/share transfer form in respect the stock or shares held so that the beneficial owner can at any time effectively repossess the shares, should he have the need. DECLARATION OF TRUST I, (NAME AND ADDRESS OF NOMINEE) HEREBY DECLARE THAT I HOLD XX ORDINARY SHARES ("THE SHARES") IN THE CAPITAL OF (COMPANY NAME) OF REGISTERED OFFICE ADDRESS INCORPORATED AS A LIMITED COMPANY IN (JURISDICTION) ("THE COMPANY") AND ALL DIVIDENDS AND INTEREST ACCRUED TO OR TO ACCRUE UPON THE SHARES AND ANY RIGHTS, CAPITALISATION OR BONUS ISSUES MADE IN RESPECT OF THE SHARES UPON TRUST AS NOMINEE FOR NAME AND ADDRESS OF BENEFICIAL OWNER (THE BENEFICIARY), AND I AGREE TO TRANSFER, PAY AND DEAL WITH THE SHARES AND THE DIVIDENDS OR INTEREST PAYABLE IN RESPECT OF THE SAME IN SUCH MANNER AS THE BENEFICIARY SHALL FROM TIME TO TIME DIRECT SUBJECT TO THE ARTICLES OF ASSOCIATION OF THE COMPANY AND I HEREBY UNDERTAKE TO EXERCISE THE VOTING POWER CONFERRED BY THE SAID SHARES ONLY IN ACCORDANCE WITH THE DIRECTIONS OF THE BENEFICIARY AND TO EXECUTE IN FAVOUR OF THE BENEFICIARY OR OF ANY PERSON OR PERSONS NOMINATED BY THE BENEFICIARY SUCH PROXY OR PROXIES OR POWERS OF ATTORNEY AS THE BENEFICIARY MAY REQUIRE TO ENABLE THE BENEFICIARY OR THE SAID PERSON OR PERSONS TO EXERCISE SUCH VOTING POWER AND I FURTHER UNDERTAKE WHEN CALLED UPON SO TO DO BY THE BENEFICIAL OWNER TO TRANSFER FORTHWITH THE SHARES SUBJECT TO THE ARTICLES OF ASSOCIATION OF THE COMPANY TO THE BENEFICIARY OR AS THE BENEFICIARY MAY DIRECT AND FOR SUCH PURPOSES A SIGNED TRANSFER OF SHARES DULY EXECUTED BY ME IS ATTACHED HERETO AND I HEREBY IRREVOCABLY APPOINT THE BENEFICIARY OR HIS/HER DULY APPOINTED AGENT OUR ATTORNEY TO INSERT HIS OR HER OR ITS NAME OR THE NAME OR NAMES OF SUCH PERSON OR PERSONS OR COMPANY AS MAY BE NOMINATED BY THE BENEFICIARY. DATED: SIGNED

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Financial Freedom & Privacy If you have never used nominees before, the prospect of having substantial assets potentially under the control of complete strangers can be a concern but it is no different than putting your assets into a trust where you will be at the mercy of the Trustee. However, when using a trust, the trustee, will know the full details and value of the assets of a trust, nominee directors and shareholders of companies rarely know or have to the need to know such details. In any case, holding blank signed stock or share transfer forms (as well as signed but undated director’s resignations) effectively allows you to take back total ownership and control of the company and thus your assets at any time, something that is not as easy with a trust. Nominees rarely advertise their services and are dependent on company formation firms and other professionals referring work to them. Quite often the company formation firms themselves provide this service. There would be little point in them abusing their positions as they would never be given work again. Equally, while nominees have obligations towards you, it should be remembered that they stand in for you and are effectively responsible for the fiduciary duties of their positions. It would be careless and stupid for you to put nominees in untenable positions by any unreasonable or illegal actions. Although all nominees act with the utmost degree of confidentiality and integrity, keep in mind that if they were to be compromised, they will almost certainly hold the potential balance of 'information' power about you.

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The Invisible World Late Breaking News! October 2003 Bearer Shares…… Finished or “Immobilised”? Bearer shares are an integral part of owning an offshore company or an IBC (International Business Company. The bearer share is different from the usual shares in that it is issued to the bearer rather than a registered owner. This made the identity of the owner difficult to determine to an outsider as the owner was whoever had possession of the share at that point in time. In this way, privacy was assured. However, the last few years have seen considerable debate between Offshore Financial Centres and a number of overseas authorities and Governments, the OECD and its Financial Action Task Force regarding bearer shares. Most International Business Companies (IBCs) have included in their memoranda of association power to issue bearer shares. The reality seems to be that only a minority of IBCs actually issue bearer shares. However, the possibility that a large number of IBCs in OFC’s around the world may have actually issued bearer shares has placed many of them under intense international scrutiny. It was no surprise when in June 2000 the Chief Minister of the British Virgin Islands (one of the largest issuers of IBCs) made a commitment on behalf of the government to immobilise bearer shares. It seems many OFC’s are doing a similar thing and it won’t be long before bearer shares, in the old form, no longer exist except in a handful of jurisdictions. Bearer shares will be required to be held in custody by either an authorised custodian or a recognised custodian. Authorised custodians will consist of persons who hold a valid license issued by the government. Recognized custodians will consist of two classes. Category I will consist of a select list of readily-identified investment or securities clearing organisations or settlement systems that specialize in the custody business and who are specifically designated by the government as recognised custodians. Category II will be regulated financial institutions anywhere in the world who are subject to Financial Action Task Force, the Basel Committee on Banking Supervision or International Organisation of Securities Commissions customer due diligence obligations and principles, and who satisfy the government that certain safeguards are in place for the secure custody of bearer shares. The person depositing the bearer shares must provide the custodian with the name of the beneficial owner of the shares, the name of any other person having an interest in the shares and any other information that may be prescribed. For IBCs that don’t comply with the new rules, many governments will have the right to wind up the company after two years of non-compliance. In a nutshell what this means is that bearer shares of an IBC will have to be held by either a custodian recognised by the government or must be registered and held by the beneficial owner. For those who believe this is an infringement on financial privacy, there are some solutions to this problem. The first is to have the shares held by a custodian on behalf of a trust whose beneficiaries are not directors or owners. Secondly, they could be held by another IBC in a jurisdiction, which doesn’t have bearer shares necessarily but also doesn’t hold particularly complete IBC registers.

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Financial Freedom & Privacy Nominee Structures The information below, explains perfectly the use of nominees in an offshore structure and has been reproduced from information supplied by International Law Systems in the Isle of Man. The concept A major difficulty with many international tax planning arrangements is the fact that invoices from offshore companies appear in the accounts of the owner. The nominee structure provides a solution to this in that all transactions are with an onshore company. A 'nominee company' is formed in the UK or Ireland, which acts as in a similar way to an agent for an offshore company. The offshore company is the principal in all transactions and the nominee company contracts for business and acts on its behalf rather like an agent. All the advertising, marketing and promotion is done by the onshore nominee company. Transactions are invoiced by the nominee company in its own name and the moneys received by the nominee company pass straight to the offshore company. The nominee company is not collecting the money in its own right - it is collecting it on behalf of the offshore company. The customer is only aware of dealing with a normal company in a mainstream onshore jurisdiction. There is no necessity to declare the relationship. The only income the nominee company has is a fee for providing its services. The audit of the nominee company shows only its fee income and its expenses. The trading income does not form part of the accounts as this is only handled on behalf of the principal. The level of the fee paid by the offshore company to the nominee company needs to be chosen carefully. A rough guide would be 5% to 10% of the gross turnover. Expenses of the nominee company are set against this and tax will be paid in the UK or Ireland on the resulting profit. The tax authorities then see a resident company with a resident bank account which is paying tax. This is much less likely to attract their interest than a zero-tax company.

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The Invisible World If questions are asked by the tax authorities about the structure, the nominee agreement between the nominee company and the offshore company provides sufficient protection. The company may not trade in its country of incorporation. The onshore nominee company can register for VAT in Ireland or the UK, facilitating trade within the EU.

Practical considerations Any assets should be in the ownership of the offshore company If physical goods are sold, these are owned by the offshore company and sold for it by the nominee company. Title remains with the offshore company. Money is received into an offshore bank account in the name of the onshore company and controlled by the directors of the offshore company. An onshore bank account is opened to receive the fee income of the nominee company and to handle the payment of its expenses.

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Financial Freedom & Privacy We recommend that the two companies have different directors and shareholders Contracts with the nominee company must be signed outside its country of incorporation If the company is trading in Europe, it will need to register for VAT It is preferable that the directors of the UK company live outside those countries, though this will soon not be possible in Ireland. The directors of the offshore company should also be non-resident. ILS can provide suitable directors subject to certain safeguards. Ongoing administration - ILS can provide the ongoing administration of the companies at a statutory level only or at a fully comprehensive level to include the operation of the nominee company and its invoicing, banking and VAT arrangements. Audit - the onshore nominee company will need to have audited accounts prepared annually by an independent auditor. These are submitted to the tax authorities and provide the basis for computation of tax. Trading The nominee structure is well suited to physical trading with invoicing being done by the onshore nominee company and title in the goods being with the offshore company. The offshore company buys the goods and they are sold by the offshore company with gross income being received back to the offshore company so that profits are made there. Asset holding The nominee solution works just as well for property and share holding. The offshore company owns the asset and the nominee company acts like a property letting agent or a broker. Rental income is invoiced by the onshore company and received by it on behalf of the offshore principal. A fee is paid to the nominee company periodically, usually a percentage of the rent collected. Other uses The structure can also be used for the supply of services, consultancy, etc where the client does not wish to receive invoices from an offshore company.

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The Invisible World The Irish nominee company The Irish nominee company works in exactly the same way as the UK nominee company but has two significant advantages 1. The company can trade within the UK, which a UK nominee company cannot. The UK nominee structure prevents its owner from accessing one of Europe's most valuable markets 2. The corporate tax rate, the rate of tax, which will be paid by the nominee company on its fee income, is reducing in stages from 28% in 1999 to 12.5% in 2003. ILS's nominee package • • • • • • • • • • • •

ILS will provide Incorporation and administration of a UK or Irish company to act as nominee. Incorporation and administration of an offshore company - usually in BVI or Bahamas - to act as principal. Preparation of a suitable nominee agreement between the parties. Registered offices for both companies. Directors and secretary for both companies if required (subject to conditions) Nominee shareholders Opening of bank accounts onshore and offshore for the structure together with provision of signatories if required. VAT registration for the onshore company Full invoicing and bookkeeping facilities if required Introduction to suitable auditors Full corporate documentation - corporate kit, completed minutes and registers, printed share certificates, seal etc DHL delivery of documents

Fees ILS are happy to quote fees for all or part of our nominee package following discussion about your particular needs. Tax considerations Non-resident individuals or corporations only pay UK tax on their UK source income. The same applies in Ireland. The use of a nominee company does

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Financial Freedom & Privacy not cause a liability to UK tax. Profits made by the resident nominee company are taxed at the UK or Irish corporate tax rate. The extraction of residual profits from the nominee company's activities may result in a liability to withholding tax. The client still has, of course, a responsibility to pay tax in his own country. Examples 1. Mr A in Greece is buying construction products from various international suppliers. He wishes to centralise his international purchases through an offshore structure in order to access stable interest rates offered by international banks and in order to access all available international discounts; there may also be reasons of confidentiality involved. However, if his Greek company purchases these goods directly from a BVI or Bahamas company a tax investigation is likely to follow. Mr A therefore utilises a nominee company to sell the goods on behalf of the offshore company into Greece. 2. Mr B is selling electrical equipment from the Far East into North America. Mr B is based in Europe and does his trading through a European offshore company. Some of Mr B's clients in North America tell him that they would rather not receive invoices from an offshore company, so Mr B uses a nominee company to keep his clients satisfied. 3. Mr C wants to own some real estate in his favourite European holiday destination, but using an offshore company might give him tax problems. He therefore uses a nominee structure to avoid tax problems in the holiday resort and in his own jurisdiction. Why use ILS? ILS is one of the world's most experienced offshore corporate service providers, with 10 offices worldwide and over 26 years in business offshore. We are known for our integrity and a high level of personal attention to clients. Unlike most of our competitors we have our own offices in Dublin and London so control the structures we establish there. The next step Call ILS to discuss your plans and to ask for a fee estimate. ILS will send to you an incorporation questionnaire to set out your precise needs and will then proceed with the incorporation of the companies, the execution of the

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The Invisible World nominee agreement, opening bank accounts, appointing directors, etc, keeping you constantly advised of progress. Contact details ILS London ILS Dublin ILS Isle of Man 3rd Floor 27/30 Merchant's Quay 2nd Floor 45/47 Cornhill Dublin 8 Merchant's House LONDON EC3V 3PD REPUBLIC OF Atlantic House IRELAND Circular Road Douglas ISLE OF MAN IM1 1SQ Tel +44 1624 624 400 Tel +44 207 623 2288 Tel +353 1 679 4159 Fax +44 1624 628 488 Fax +44 207 623 2299 Fax +353 1 679 4835 E-mail E-mail E-mail [email protected] [email protected] [email protected] Before proceeding, we recommend that you consult a professional tax adviser in your own country. Courtesy of ILS

The Story so far......... We've looked at some of the more relevant Australian Tax issues like the Controlled Foreign Companies regulations and the Accruals System that was also introduced. We know that if income does not pass the Active Income Tax it will be attributable to you and consequently taxed in Australia. So the rule is, make sure your income qualifies as Active. We also know that in 1993 the Foreign Investment Fund legislation was introduced to stop foreign nationals owning or appearing to own, companies or trusts for Australian beneficiaries. Again, the exemption is the Active Income test. You also now know that any transactions you have between your business onshore and any business you have offshore, must be transacted on a legitimate and commercial basis to ensure you don’t fall foul of the Tax Avoidance rules.

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Financial Freedom & Privacy Please Note: The tax laws in most western countries are very similar to the Australian Laws, and in some cases, are exactly the same, so, if you are not Australian, the chances are your laws are pretty much the same as Australia’s. We've discovered how to establish a banking system offshore and which countries provide adequate secrecy in relation to your affairs. The advantages of using Cash Cards issued by foreign banks have been highlighted. As well as the fabulous benefits of Travellers cheques for use both here and offshore. Several other methods of withdrawing and depositing to your nesteggs have been examined using a variety of businesses such as exporting, importing and consultancy. We’ve also examined some tax haven strategies that have been used successfully for many years and will be for many years to come. While some may seem complex, they are, and they are meant to be a little ‘murky’. If everything was simple and easy to understand, everybody would be doing it. At this point you have enough information to setup your own offshore nestegg if you wish and still comply with Australian Tax Laws. We now move on to our next subject - Tax Havens. The actual places your banking and company structures can be established. Since the last edition of The Invisible World there have been major changes in the offshore world particularly related to money laundering and tax practices. This has had an impact on many jurisdictions, but at the end of the day has given the offshore world far more legitimacy and has cleaned up a lot of the “suspect” operations of some companies. Long term this will be a good thing for the offshore industry.

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The Invisible World Chapter 5 Tax Havens Introduction to Tax Havens There are far more tax havens in the world than I've detailed here but the ones I have, are either relevant to Australia, politically and geographically, or they are the ones that you have probably heard of over the years. Tax Havens are not necessarily countries with no taxation that snub their nose at the rest of the world. They can simply be countries or even municipalities, cantons, provinces or regions with low tax for certain businesses or foreign investment. Many are simply 'opportunities' to pay lower tax rates than are payable in Australia. They can be utilised by either moving there or simply investing there. An interesting thing to keep in mind is that people from certain other countries view Australia as a Tax Haven due to our 'tax breaks' in certain areas such as gold mining and the lack of an inheritance tax. You see people in the UK could put all their assets into an Australian trust or company to avoid paying inheritance tax in the UK when they die. Are Tax Havens illegal? It depends how you use them. If your activities comply with Australian tax regulations in relation to CFCs and FIFs (see the first chapter) you won't have too many problems, but I wouldn't start advertising what you're doing, laws can change. Two or three hundred years ago a traveller often had to pay a toll to cross a bridge. If for instance he slipped past the toll collectors in the dead of the night in order to avoid paying the toll, he did so illegally. But if he had decided to travel to reach a far off toll-free bridge, he would have been acting in accordance with the law. You would be acting just like the Dead-of-Night-Defrauder or law breaker if you were to: Reduce the profits of your legal onshore business through questionable payments - in the guise of licensing fees, consultant's remuneration or donations to allegedly foreign associations in the Channel Islands, which are actually puppet companies belonging to you.

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Financial Freedom & Privacy Mislead the Tax office into thinking that you made some very expensive imports from Monaco (where your paper company would issue you very high fictitious invoices), which would reduce your tax liability when in reality you purchased the goods at a much cheaper price from Taiwan. Pretend to deliver goods at very low prices, or without much profit, to one country by having your offshore company issue you a receipt for a ridiculously low invoice for the benefit of the Tax office, when in reality you collected a much larger sum from your real buyer in another country. Act as if you have moved to say, the Belize, where you rent a flat or office for appearance's sake and engage an acquaintance to forward your mail, when you actually secretly live tax free in Australia and conduct your business in Belize from Australia. On the other hand, you could be like the traveller who goes out of his way to the toll free bridge if you move your entire factory, office or practice to a country with low or zero tax and operate from there in the future and maintain a foreign business office. If you decide to operate a legitimate business in the Belize, the Isle of Man, the Channel Islands, Liechtenstein, or in any other place, the Tax office can hardly take you to task.

The ATO Opinion on the Use of Offshore Entities “The claim in today's media that $5 billion is lost to foreign tax rorts is factually incorrect. The $5 billion figure refers to the flow of funds from Australia to tax havens. It says nothing about the profit derived from those funds, the tax payable on those profits, tax that is payable in Australia or tax that has actually been paid in Australia. Not all tax haven use is offensive. For example, Bermuda provides special regimes for shipping and insurance. The Tax Office uses information on the flow of funds to target its compliance activities and this has contributed to the Tax Office's record audit results in the 2001-02 financial year. “ CANBERRA 6 January 2003

This is what I believe to be a reasonable and positive approach by the ATO, when you consider the flak the government has been subjected to, to

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The Invisible World join the bandwagon of “offshore is evil” protests. The only thing wrong with offshore investment and the use of offshore companies is if you use them to conceal “illegal” funds, to make illegal money (such as drugs trafficking etc) or if you break the law by not fulfilling your obligations to pay tax when the law states that you must. If you blatantly break the law in these situations you deserve to be punished. However, as Kerry Packer once said, “if you arrange your affairs in such a way that you minimise your tax obligations legally and still pay more tax than you have to, you’re a bloody idiot!” Never a truer word has been said.

Changes to the Offshore World The Financial Action Task Force In recent times there has been much written about the FATF and its future impact on tax havens and how they operate. First, I should explain what it’s all about. The Financial Action Task Force on Money Laundering (FATF) is an inter-governmental body, which develops and promotes policies, both nationally and internationally, to combat money laundering. The FATF makes recommendations to member nations in order that they can legislate against money laundering and the crimes associated with it. In the context of this book it has little effect in the way the average business person or investor would use offshore financial centres because money laundering is something organised crime and drug dealers get involved in and I trust you aren’t involved in any of these activities. However, there are some privacy issues that the efforts of the FATF has raised, specifically, the right of access to banking records that exist in certain jurisdictions. If this was to occur, and it hasn’t yet, the banking records of clients in offshore banks would be exposed to foreign governments and if these people weren’t exactly being honest with their government when it came to matters of taxation, it could cause some concern. Of course, this would only apply to people that foolishly did their banking in their own name and not paid tax on any income earned. If of course you incorporated a company and set up it up correctly, their would be very little to concern yourself with, as the banking records would be of little interest due to the fact that the company was in fact simply a local corporation run by locals, simple as that. In addition, you wouldn’t be

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Financial Freedom & Privacy breaking anybody’s laws, and that’s the most important thing. Understand the law and use it to your advantage, that is every citizen’s right. What is of more concern is the OECD’s Report on Harmful Tax Competition.

The OECD Report of Harmful Tax Competition This is the report that has many so-called tax havens worried. I could go on for pages about this, but it would bore you to tears, but what it means in a nutshell is, the 30 OECD nations which includes Australia, NZ, UK and US all have similar levels of corporate and personal taxations, and they recognise the existence of tax havens means they don’t get all the tax they feel they are entitled to, so what they have done is use their economic might to pressure these generally smaller and less powerful countries to give up their “harmful tax practices”. This is international bullying of monumental proportions and many critics and even supporters believe it may be in contravention of God knows how many international laws. But they persist anyway. Now, keep in mind the only thing keeping many of these tax haven countries afloat is their status as a tax haven, so this isn’t something these governments will part with easily and many have already told the OECD to “get stuffed” and cited international law and their right as sovereign nations to make laws as they see fit. This is something that will continue for ages and will result in many years of court battles and diplomatic rifts. Already, we have seen the UK weaken as they are brought to task about the Channel Islands, the Isle of Man and others. These jurisdictions have already threatened they will undertake total independence from the UK if needs be. New Zealand has the issue of the Cook Islands and Niue. And dear old Australia has its own problem with Norfolk Island where no taxes are paid by Australians living there, you didn’t know that did you? See even Australia has skeletons in the closet! The OECD has named virtually every country in this book as a target but very few have capitulated in the two years this has been going on. Even Australia was named on an early list! The jurisdictions that have sided (to a certain degree, anyway) with the OECD are: Cayman Islands Mauritius Malta San Marino Bahamas

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The Invisible World Cyprus While many more have made concessions, allowances or have implemented their own legislation that has appeased the OECD to a certain extent. So, what do you do? Well, for a start you avoid doing any business in these places if you can, that’s if you value your privacy that is. But, all is not lost, these jurisdictions will only co-operate when they are asked to. That means the information on you must be requested in the first place. Again, it comes back to the situation, you first must be breaking the law and be of interest to your government in the first place, secondly they need to know where to find your records if they indeed even exist, and lastly you need to be doing business in this jurisdiction in your own name. If this doesn’t apply to you, what are you worried about? This whole thing is about corporate tax evasion as well as “big fish”. Sure, if they happen to stumble upon you that’s ok too. Ultimately, the OECD would also like all countries on earth to have the same tax rates, but this will never happen and most feel they have already given up on this utopian goal. However, any changes to how the average person or corporation can legally use “Offshore Financial Centres” will take years, maybe it will never happen, which is what I’m hearing and reading, so you may as well get on with your life and stop worrying about what may never happen, but as I said earlier, if you set up any type of offshore banking or investing “vehicle” correctly and legally, it won’t impact upon you anyway.

Banking Changes Every offshore corporation or structure needs a bank account. The ability to open that account depends upon the bank's acceptance of the corporate documentation. Already major banks offshore are refusing to open accounts for corporations in jurisdictions of which they do not approve, and this can be expected to develop so that ultimately it will be impossible to operate an offshore bank account for a corporation other than one in an FATF jurisdiction which is doing business in approved jurisdictions Most offshore centres have already introduced legislation to prevent

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Financial Freedom & Privacy money laundering. Those that haven’t, have licensing already are now licensing trust companies and corporate service providers. The requirements of such licences are stringent. The owners or directors of the corporate service provider have to prove that they are ‘fit and proper’ persons to run such an undertaking. This means police checks, solvency checks, references, CVs, etc., etc. Typically, a regulated corporate service provider is required by law to •

report suspicious transactions

•

maintain certain defined standards in record-keeping

•

keep basic non-audited accounts for each company

The underlying principle offshore now is ‘KYC’ – “know your client”.

“Know Your Client” Requirements Offshore banks and service providers are often asked "why do you ask so many questions?" by clients forming companies with us. For example, most rules seek to eliminate any criminal activity, and in particular money laundering. They will always ask for a bank and professional reference on the ultimate beneficial owner together with a suitably certified copy of their passport. This procedure is known as ‘due diligence’. Legislation controlling corporate service providers also places a great legally-enforced responsibility on them to ensure maintenance of correct records and compliance with regulatory orders and stringent anti-money laundering laws. It is now also a requirement that either the corporate service provider or the client prepare basic accounts for companies under administration. Normal requirements are now • • • • • •

A professional and/or a bank reference Certified copy passport or driver’s licence to verify the beneficial owner’s identity Utility bill Anticipated annual turnover Source of funds An understanding of the client's activities and type of business

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The Invisible World Suspicious Activity – Money Laundering This is a list of what constitutes a reportable “activity” in many tax havens since the regulatory changes that have come about in the last year or so. It is by no means a complete list but it does cover most situations. All banks and most service providers are employing these rules. Transactions will be reported when: (a) clients who produce large amounts of cash and ask for it to be credited to the intermediary's client money account; (b) clients who seek to use the intermediary's client money account as a bank account; (c) clients who settle transactions in cash or bearer instruments, such as travellers cheques; (d) clients who frequently settle significant transactions by transfers from banks, bureaux de change or money remittance providers located in centres known to be associated with drug trafficking; (e) clients who use (deal through or hold securities) companies located in poorly regulated or uncooperative jurisdictions with undisclosed ownership; (f) clients whose transactions are in their size, type or nature not in accordance with their apparent standing or wealth; (g) clients whose source of funds is not clear and who decline to provide satisfactory explanations; (h) clients whose approach to investment risk or reward is unusual. (They may, for example, be unconcerned about return or risk when a normal investor would be); (i) clients whose behaviour is significantly different from that of the normal investor. (They may, for example, "churn" their investments or indulge in early surrender of life or investment products despite the penalties); (j) clients who request bearer and other securities transferable by delivery and do not wish to have them held in safe custody or within a recognised custodial system; (k) clients who request the intermediary to obtain in his own name for them facilities from banks such as travellers cheques, wire transfers, safe deposit facilities for which the client would normally have to produce satisfactory identification to the bank; (l) accounts which are said to be "trust" or fiduciary accounts for which there is no trust deed or supplemental documentation.

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Financial Freedom & Privacy Other reportable Transactions where regarded as suspicious: Where:(a) settlement of purchases or sales involves (or appears to involve) third parties other than the investor; (b) bearer shares (if available) are requested; (c) bearer or unregistered securities/near-cash instruments are offered in settlement of purchases; (d) there is excessive switching; (e) there is early termination despite front-end loading or exit charges; (f) they become aware that the customer's holding has been pledged to secure a borrowing in order to gear up his investment activities; (g) they are managing or administering an unregulated collective investment scheme or pooled funds arrangement.

Legislation Changes Legislation has been or is being enacted in most of the OFCs, and falls into three categories Anti-Money Laundering The minimum standard, dealing with the proceeds of drug trafficking and terrorist activity, exist in almost every Offshore Finance Centre. All Crimes All Crimes laws exist in many jurisdictions and go beyond the previous anti-money laundering laws to encompass all forms of criminal activity. Suspicious transactions have to be reported to the authorities, including suspicion that a client may be breaking the law of his own country. Some laws, though, have been drafted to omit most tax offences. Corporate Service Providers Tight controls are being introduced on the activities of corporate service providers so that they maintain certain standards and that their activities are subject to scrutiny. The practical consequences of these laws are that regulation will increase and the questions asked will become more searching. Honest and serious clients will have no difficulty answering these questions or

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The Invisible World complying with regulatory requirements.

The Future – 2003 Going Forward The use of Offshore Finance Centres for tax planning and asset protection will continue to flourish, however………… many of the offshore centres or tax havens as they are known, who do not comply with the new standards will probably discontinue their operations. The pressure from the OECD and the refusal of banks to operate accounts will make it impossible to use such facilities. It is likely that by 2008 there will probably be only a handful of jurisdictions offshore, maybe 10 or 15 at the most. These will be serious, well regulated countries which have accepted their commitment to the prevention of criminal activity. This of course being money laundering, financial dealings with terrorists, involved with drugs and major crimes. You may find that companies and other structures may have to be migrated to better regulated jurisdictions in order to meet the new standards. Money laundering through the use of offshore facilities will cease to exist, if, indeed, it does now. It is everyone's right legally to minimise his or her tax or to protect assets and there will always be benefits from the use of international corporate structures. The opportunities, though, are becoming more limited and more complex and professional help will often be needed. A serious and honest offshore investor will have nothing to fear from the “new order” and will still be able to maintain confidentiality and take advantage of tax minimisation or deferral as well as take advantage of what the offshore financial world offers.

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Financial Freedom & Privacy OFFSHORE INVESTING MYTHS EXPOSED! 'Many offshore investments are illegal.' Fact: No Australian laws prohibit any offshore investments, although most are taxable and must be reported to the ATO. 'I'm not rich, so I can't benefit from offshore investments.' Fact: You can open an offshore bank account for as little as US$500, with easy access to vast investment opportunities, including foreign stocks, bonds and CDs. 'I'll be audited by the ATO if I invest offshore.' Fact: The great majority of ATO investigations of offshore investors are aimed at those who fail to report offshore income, not those that do. 'Australian investments are safer than offshore investments’. Fact: Many international markets are safer than Australia, in fact most of them! Example: The Swiss insurance industry has never experienced a business failure in its 140 year history. Just look what happened to HIH and nearly happened to GIO. 'It's more expensive to invest offshore.' Fact: Many offshore investments are much better cost deals than their Australian counterparts. Example: Purchase foreign currency CDs outside Australia, and you receive higher interest rates and pay lower fees. 'All investments I want are in Australia.' Fact: Over 98% of global financial activity takes place outside Australia. Offshore markets are essential to diversify investments internationally. 'There are no longer any privacy advantages to offshore investing.' Fact: You must report and pay taxes on most offshore investments, but assets outside Australia disappear from the domestic 'radar screen and from business competitors, sue happy lawyers and identity thieves etc The fact is, international investing is safer and more profitable than ever, and it's perfectly legal for you to 'go offshore.'

Considerations for the establishment of an Offshore Company If you are thinking of migrating or perhaps just setting up a business offshore, you should go through the following checklist thoroughly. Is the price of food and housing reasonable after considering the Australian dollar exchange rate? Do you speak the language or do they use English as a second or common language? Are you permitted to open a business or practice your profession? Is there guaranteed bank secrecy?

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The Invisible World Are there any recognised international banks in this country? As a foreigner, do you have the same rights as a local and are the locals well treated? Does the country have free democratic elections with at least two major parties? Is the currency used, stable and easily exchanged? Does the country have first world infrastructure ie. good roads, communications, medical care, schools (private and public), electricity, pure water, non-government radio and television etc? Is it easy to get in and out of the country from Australia? Can you take money out of the country when you want to? Finally, are the tax rates favourable and does the country have a history of major tax changes or retrospective legislation?

Offshore Trusts - Are they worthwhile? Trusts have been used since the Crusades to protect assets. The trust concept and case law are deeply embedded in those jurisdictions that are English common law based. Trusts are the traditional way for people to invest offshore but with the advent of the FIF legislation which treats companies and trusts the same way, their advantage over a company is not all that clear. A trust is an entity that can open bank accounts in its own name, make investments etc. A trust is managed by a Trustee, which is usually appointed by the beneficiaries. This trustee then charges the trust, fees to act as trustee. When you pass your assets into the trust you provide the trustee with a letter of wishes, which provides the trustee with the instructions of what to do with your 'ex-assets'. You then hope that they follow your instructions. Just in case they don't, it's not a bad idea when dealing offshore to appoint a 'protector' that can fire them if you're not happy. Also, another good idea is a signed letter of resignation of the trustee, undated of course. An offshore trust is inherently more protective than a domestic trust for several reasons. As an example consider the thought processes of the creditor's solicitor contemplating an action to recover assets from a trust in

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Financial Freedom & Privacy a foreign country. He knows nothing of the laws, customs, procedures etc. These factors become immediate problems and tend to slow the process down and increase the creditor's costs. The very fact that the trust is an offshore trust will be a great deterrent in the first place. Also, offshore trust laws are quite often far more protective and specific than our own and this will also slow the process down or even stop it in its tracks. Very often the offshore jurisdiction will not recognise an Australian judgement or legal action and the creditor will need to appoint a solicitor in the trust's jurisdiction. More costs. By this time the statute of limitations will probably have expired due to the short statutes in place in many jurisdictions and the creditor's race will be over having come second! Most professionals will advise you to set up a company structure as well as a trust. The company will own the assets and the trust will own the company. This way you can then manage the company and its assets without having to go through the trustee all the time. A good idea when setting up this type of structure would be to arrange an option to purchase the company if you get fed up with annual fees or if your fortunes change. The basic requirements of an offshore trust are: You must have a Settlor You must have a Trustee You must have a Beneficiary The settlor, is the person or company that establishes the trust agreement. The settlor owns the assets that will be transferred to the trustee, who then takes title to the assets from the settlor and acts in a fiduciary capacity over the underlying trust assets for the benefit of the beneficiary. Offshore trusts either designate trust beneficiaries, which are shown in the trust deed, or if they aren't specified, the trust would be classified as 'discretionary'. It may be beneficial to name a beneficiary in your certain set of circumstances, but you don't want the beneficiary to be yourself and at the same time control the assets. The way to do this is to name your unborn children or unborn grandchildren as beneficiaries. In the case of a discretionary trust the trustee is vested with the right to decide on payments of income or capital from the trust. Again, if you have a discretionary trust make sure the trustee (unless of course you are the trustee) has given you an undated resignation and they can't actually take possession of the assets or you could have a problem. (This applies to

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The Invisible World nominee directors of companies as well!) The offshore trust is an effective vehicle for distributing wealth during and after the settlors lifetime and the trustee can manage the trust without interruption during and after the life of the settlor. It is also effective as a tax planning tool for people living in high tax countries like Australia. The advantages of offshore trusts are many and varied as everybody's needs are different. I've listed some of the most common uses: Estate planning Tax planning Asset protection Spendthrift provisions Preservation of family wealth Continuity of family business Confidentiality of financial affairs Anonymity Flexibility Reduce overall tax liability when leaving one country or taking up residence in another Avoid probate administration following death Avoidance of any future wealth tax or death duties When establishing a trust you should be careful in which jurisdiction it is established. You should consider things like: Trust legislation Your existing tax situation Risk of future tax changes Forced heirship Confidentiality Creditor protection Mobility of trust Offshore reporting requirements Government interference Trustee to be appointed Cost of establishment The disadvantages of trusts are the costs involved in administration the need to trust the trustees and also having two investment vehicles in the same jurisdiction. Other disadvantages are difficulty in removing

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Financial Freedom & Privacy trustees, directors of companies are comparatively easy, changing beneficiaries is more cumbersome than transferring shares. Many people with trusts should also the consider that a trust that has one or more of its trustees in Australia will be deemed a resident trust as well as running into Fringe Benefits Tax if the Manager of the trust who may be a local were to use the trust’s assets as part of his or her remuneration as manager of that trust. Most of the incorporation agents listed in this book can assist you in the establishment of an offshore trust. Overseas Company Registration Agents, mentioned earlier, are very experienced, worldwide and reasonable when it comes to costs.

Problems with Offshore Trusts from an Australian Perspective While Trusts may be a suitable offshore vehicle for Americans, Canadians and Europeans, this is not the case for Australians and New Zealanders – Our tax laws are just too difficult to get around! “The major disadvantage in using offshore trusts is that you must give a great deal of control over your assets to other people. If you insist on having too much of a say in how your money is spent or invested, it will in all likelihood not provide any protection. In the event of a lawsuit, your home government is likely to ignore your offshore trust and demand that all funds involved be repatriated. Many advisers claim that you can set up an offshore trust and transfer everything you own, right down to the family home to its safekeeping. This strategy is risky at best. Courts will not believe that you no longer own your own home if you continue to live in it without paying for the privilege. The transaction will be reversed on the basis it is a sham.” – W G Hill, is regarded worldwide as a leading expert in the world on tax and banking havens. From his book Banking in Silence 1997. He is absolutely right. A scheme such as the one described whereby you transfer your home to an offshore trust for asset protection is a waste of time and money. Reasons? The property is now owned by a foreign entity, you will pay Capital Gains Tax when it is sold. Currently there is no requirement to CGT on your own home. For the same reason you will be now paying Land Tax.

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The Invisible World You live in the house as part of your “Employment Arrangement” with the trustee, looking after the assets right? You will now be paying Fringe Benefits Tax on the grossed up amount of the market value of the rent you are not paying. The result, you will be paying FBT on your own home! Lack of control of your assets. Who are your trustees? They have more power than company directors (you have signed resignations from your directors if you set up the company correctly). If your protector is a resident (a friend or possibly you), then you may be paying tax due to the fact that you are required to answer the following question in your tax return: “Have you EVER, either directly or indirectly caused the transfer of property – including money - or services to a non-resident trust estate?” The ATO will deem this trust to be a resident trust It’s entirely up to you whether you lie or not. Your answer should be NO. If you answer “No” and the real is answer is yes, you could end up with quite a few problems courtesy of the ATO. Who are the beneficiaries? If they are residents of Australia, the trust’s worldwide income will be attributable to Australian taxation under the FIF laws. If the beneficiaries are offshore nominees, is this wise with all the assets you own. Are you in the habit of giving away total control of your hard earned assets to a person you’ve just met or possibly someone you’ve never met? What of collusion between the Trustee and Beneficiaries, they could legally take everything you own. Did you realise that? Can you trust an offshore protector to do the right thing? If you use a Non-resident beneficiary and the ATO deem the trust to be a resident trust, you will pay between 29% and 47% tax on all income. If you don’t nominate a beneficiary at all (this was an old trust trick back in the 80’s), the Trustee will be taxed under section 99 at a flat rate of 47% on all income. If you nominate children as the beneficiaries, after they have earned $416, each dollar after that will incur 66% tax! It’s not getting any better is it?

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Financial Freedom & Privacy Domestically, the ATO is clamping down on trusts and will endeavour to cut out income splitting between the beneficiaries. An IBC, wherever it is domiciled, is a more flexible vehicle, in my opinion.

For the benefit of UK Citizens, Expatriates and Resident…… Something you should know……The UK Finance Act In accordance with the Finance Act 2000 (UK), all UK banks are required to report details of interest paid to customers living in particular countries. Are you affected? If you have an account with a UK bank, which pays interest, and you’re living in one of the following countries, you are affected: Austria Greece Netherlands Australia Guernsey New Zealand Belgium Ireland Norway Bermuda Isle of Man Portugal British Virgin Is. Italy San Marino Canada Japan South Korea Cayman Islands Jersey Spain Denmark Liechtenstein Sweden Finland Luxembourg United Kingdom France Monaco United States Germany Montserrat This means that any interest you earned on your UK account/s from 6 April 2001 will be reported to the Inland Revenue on 6 April 2002. This information may then be released to your current country of residence. Offshore accounts held in Jersey, Guernsey and the Isle of Man are not currently subject to the UK Finance Act’s reporting procedures. (Should this alter in the future, we will inform our Offshore customers of the change in legislation.) You may open an offshore account if you are: - A UK national living/working overseas - A non UK resident for UK tax purposes - Not a UK national but temporarily resident/working in the UK An offshore bank account may be better than a UK bank account because; - You may be able to reduce your UK tax bill. - Your savings and investment returns will be paid without the deduction of tax. - You can retain existing services such as paying UK bills and using UK cash machines.

We can now move on and look at the countries or jurisdictions that qualify to varying extents as 'Tax Havens'. You may notice I have been reluctant to quote current tax rates in some jurisdictions due to the fact that they change quite often and in this regard you should make your own enquiries with the embassy or consulate or by writing to the country's tax office. As a rule you can assume that some of the tax rates are substantially lower than ours otherwise they wouldn't appear in this book.

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The Invisible World I have applied a simple rating system that gives you a rough idea how they stack up in the following four crucial areas: Security, Bank Secrecy, Potential Tax Savings and Residency Possibilities. Excellent Good Reasonable Fair Poor or questionable

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Also, another point, I have written this chapter from a 'general' viewpoint without getting bogged down with a variety of scenarios that may or may not apply to your individual situation. Having read the chapters on Tax Considerations and Offshore Nesteggs you probably have a rough idea of what may be advantageous to you. Read through each individual Tax Haven in this chapter, make enquiries and then decide whether there is a viable option suitable to your particular set of circumstances.

Albania In earlier editions I wrote in glowing terms about the investment opportunities in this former communist country. Well, unless you live on Mars you must have heard of the violence bordering on civil war that has virtually crippled the country in recent years. It was all happening just before the Balkans Wars. Despite what I wrote in the earlier editions, I suggest you wait until the country calms down which may still take a few years. I think the only thing that can solve the problem that stemmed from government endorsed and supported pyramid investments that failed, will probably be an election with the current government being tossed out. I have included what I wrote in the first two editions for your information, but I suggest you wait for things to settle down. I wrote: “Up until recently, Albania was a tax free haven, but unfortunately it was also restrictive communist country that viewed foreigners with a great deal of suspicion. Things in Albania are now starting to change. Democratic

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Financial Freedom & Privacy elections, restoration of religious freedom, a growing international tourist industry and the collection of moderate taxes are starting to transform Albania into a viable investment option. Although there has been startling change not only in Albania but in all former communist counties, there are still problems. The Albanian banks are not up to our standards in handling foreign exchange and the country still suffers a degree of social unrest as the citizens flee to the West. When looking at Albania, you must think anticyclical. Consider this, where in Europe can you purchase a two storey building on 2000sq. metres in a major city for about US$4,000? In Albania! Whilst there is a problem with owning it as a foreign investor, there are ways around it. You can establish a local company using locals as the directors otherwise you are only allowed a leasehold title for 49 years. Even the lease could be OK when you consider the growing international tourism opportunities ie. Hotels and restaurants etc. In 49 years you can make a lot of money”. Let's now look at several good reasons to consider Albania as a viable tax haven option (when the place settles down of course): Tax concessions are available to foreign investors and when you consider the tax rates are low anyway, taxation is not something that will create a major problem. Profit taxes are yet to be levied. Buying formerly state owned businesses at incredibly cheap prices is a very lucrative way to make money. Not all these businesses are socialist rubbish, some of them are in mainstream areas such as transport, services and retailing. As I already mentioned, real estate is a real bargain, particularly when you consider the future tourism opportunities. The country is blessed with magnificent scenery with great potential for Mediterranean coastal resorts. Reasonable labour costs still exist and the people are generally well skilled and undemanding. Taking up of permanent residence is relatively simple and inexpensive. Gaining an Albanian passport is a little more expensive but you should have change from US$12,000 and as a bonus you can get 2 acres of land for free. You can make a fortune by importing 'Western' goods such as cosmetics, the latest fashions and street wear, electronic entertainment like gameboys etc. A fortune can be made by exporting Bohemian Crystal from Albania.

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The Invisible World Profits of 100% are not unusual. Albania in a Nut Shell Language : Albanian Location : Eastern Europe Population : 3,500,000 Democracy : Yes, but only recently Currency : Leks Religion: Muslim and atheist Security 0 Bank Secrecy 1 Potential Tax Savings 4 Residency Possibilities 3

Andorra Andorra is a small country (sovereign state in 1993) in the Pyrenes mountains that run between Spain and France. From the time of Andorra's first historical record under Charlemagne up to the present, private individuals, professionals and trading companies were fully exempted from income tax. Only institutions such as banks, insurance companies and hotels had to pay tax to the Andorran Government. Bankers and insurance companies paid less than one percent of their deposits and premiums, and the hotel industry just a few pesetas per room, per night. The only real money the tiny state made was from the 2% to 4% customs duties levied on the various imported goods brought in for sale to tourists. In 1993, the country's new constitution was ratified and it provided for the introduction of income taxation. As yet it hasn't been introduced, and the indications are that it will only be levied on companies and capital gains on individuals. Taxation of salaries and wages seem to be out of the question. But still the tax advantages outweigh the likely new taxation rules, as the rates will be far below most of the western world.

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Financial Freedom & Privacy To obtain an Andorran passport is not easy, you must have either resided there since 1961 or have been born there and have resided there for ten years. Residency is nowhere near as difficult if you invest in the type of industry that employs locals. Other options for residency are marrying a local or purchasing real estate. If you use the “purchase real estate” option, you will also need to invest at least US$30,000 in a non-interest bearing government deposit and reside there at 6 months of the year. There are much worse things in life than living in Andorra. The big industry is of course, tourism, which is fairly labour intensive. There are over 1,000 hotels, restaurants and lodges in this tiny place with only 60,000 residents. A casino is still, I believe, in the planning stages. The currency employed is French francs or Spanish pesetas, your choice. As with many other things in Andorra, the country is half French and half Spanish. The joint heads of state are the French President and the Spanish Bishop of Urgel. These two technically can overthrow any decision Andorran politicians make, but this would be very unusual if it ever happened. The official language is Catalan, but French and Spanish are widely spoken. Bank secrecy is maintained strictly by the ten Andorran banks not so much by their Swiss approach to efficiency but more because of the laid back approach to detail, both the customers' and the banks'. Numbered and coded bank accounts are permitted. All accounts must be opened in person, unfortunately. Registering a company is fairly easy and inexpensive costing about the same as a shelf company in Australia (about

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The Invisible World $1,500). There is one snag though, the company must be two-thirds owned by Andorrans which means you must have some nominee shareholders which will cost you a small yearly fee. Agent Gestoria La Vall Calle Drive, Vilanova 13, Edificio Davi 40, Andorra La Vella, Principality of Andorra. Gabinet de Consulting International Phone: 0011 376 843 809 Fax: 0015 376 843 811 Bank Banc Agrícol i Comercial d'Andorra, SA P.O. Box 49 C/ Mossén Cinto Verdaguer, 6, Andorra la Vella Phone: 0011 376 821333 Fax: 0015 376 861361 Email: [email protected] Andorra in a Nut Shell Language : Spanish, French and Catalan Location: South Western Europe Population : 60,000 Democracy : Yes Currency : French Franc and Spanish Peseta used equally Religion : Catholic Security 4 Bank Secrecy 4 Potential Tax Savings 3 Residency Possibilities 2

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Financial Freedom & Privacy Anjouan Anjouan is one of the Comoros Islands which lie in between Madagascar and Mozambique. Anjouan itself is 424 sq km, with a population of 230,000, and its airport is accessible internationally via Madagascar or Mayotte. It has a deepwater port at Mutsamudu, the capital. The climate is tropical marine, and the scenery is picturesque. Anjouan exports vanilla, ylang-ylang, orange flowers, perfume oil and cloves. Anjouan is the world’s primary producer of ylang-ylang oil, basis of all perfumes. Historically, Anjouan was in the French sphere of influence, and was effectively a colony from 1886 until 1975 when it elected for independence and joined the Federal Islamic Republic of the Comoros. This union was not stable, and after a period of total independence in the late '90s, Anjouan now has economic and legislative independence within the Union of the Comoros under a settlement brokered by international bodies. Anjouan has constructed an offshore regime. Anjouan has limited natural resources, and is reliant on agricultural exports and tourism for external revenue. In 1999 the independent government decided to build an offshore sector in order to encourage foreign investment and economic development. Laws were passed which offer International Companies and Trusts which are tax-exempt. The laws include provision for banking, mutual funds, insurance companies, Internet on-line gaming, shipping and air transport.

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The Invisible World The government is very supportive of business. Telecommunications are provided by international microwave links, and the Internet has been available since 1999. A GSM mobile network is under development. The legal system is a mixture of French and Islamic (shari'a) law, in a recently consolidated code. There is a Union Supreme Court. The government hopes that after successfully adopting Anjouan as a virtual home, many foreign businesses may be encouraged to maintain a physical presence on the island in a new free trade zone, which is seen as "phase two" of the Offshore Centre. Anjouan has one of the best deep water harbours in the region, able to accommodate cargo liners and container ships, and is strategically located on international shipping routes, allowing substantial development potential for investors. The Offshore Centre is also intended to stimulate international commerce and exports generally, and foreign investment in major projects such as the new GSM network or rebuilding of power plants. Its laws are carefully crafted to be modern and flexible, based on study of the experiences of other offshore centres over the past forty years. Combining high due diligence standards with utmost confidentiality allows for a business-friendly, liberal and stress free regulatory environment.

Antigua Antigua is a small country in the Leeward Islands in the Caribbean. It is a predominantly British influenced country. Antigua gained full independence from Britain in 1981 and since that time has maintained relative political and economic stability. The communications on the island are up to western standards so using the island as a business base shouldn’t cause any problems. Many of the world’s largest banks have branches here such as Bank of Nova Scotia, Barclays and Royal Bank of Canada.

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Financial Freedom & Privacy The IBC Act was passed in 1982. The company must maintain a registered office on the island and have at least one resident director. The benefits are full tax exemption, no minimum capital requirement, bearer shares allowed, no audits and automatic 50 year tax-free guarantees. Costs are approximately US$1,000 for incorporation plus running costs such as registered office, directors etc. A filing fee of $250 per year is also charged. Banks can also be incorporated in Antigua. The cost of US$5,000 is reasonable but the problem is the capital requirements, US$1million minimum. Bank secrecy is very good and is legislated involving fines and prison holidays for those who wish to disclose the finances of others. However, Antigua is “dodgy bank paradise” and there are many banks that are privately owned that may appear ok, but aren’t. These private banks have a habit of falling over with monotonous regularity. The FBI also sets up sham banks here to catch drug runners. Antigua has Double tax treaties with Australia and New Zealand. During 1999, Antigua, plagued by a poor reputation for criminal activity and money laundering made amendments to the IBC Act. These amendments allow the government to inspect all banking records or account holders if they want to. The banks are compelled to keep very detailed records of customers and no false records will be accepted. This should improve the county’s reputation somewhat. Agent Antigua Corporate Management Services PO Box W1900 St Johns Antigua Phone: 0011 1 268 460 6872 Fax: 0015 1 268 6873

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The Invisible World http://www.acmsantigua.com Banks Barclays PO Box 225 High and St. Mary Sts St Johns, Antigua Phone : 0011 1 268 480 5000 Fax : 0015 1 268 462 4624 RBC Royal Bank of Canada Market and High Streets Branch P.O. Box 252 St. John's, Antigua Transit: 09725 Tel: 0011 1 268 480-1150 Fax: 0015 1 268 480-1190 PKB PRIVATBANK Limited 10, Redcliffe Quay St.John's Antigua (West Indies) Phone 0011 1-268-462.91.62 Fax 0015 1-268-462.93.25 This is a very good Swiss Bank www.pkb.ch Antigua in a Nut Shell Language : English Location: Caribbean Population : 100,000 Democracy : Yes Currency : East Caribbean Dollar Religion : Anglican - Catholic Security 3 Bank Secrecy 4 Potential Tax Savings 3 Residency Possibilities 3

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Financial Freedom & Privacy Austria It was written some time ago in Vienna's trade magazine Trend, that people who secretly bring their money to Switzerland should be pitied since "they deposit money in a way that is dangerous at interest rates that are lousy, in an account that is forbidden in many places, just to hide it from tax investigators who would never find it in Austria". When Austria implemented a comparatively modest withholding tax (currently 22%) it caused a great deal of concern among foreign depositors. But you must keep in mind the benefits and opportunities available with an Austrian 'anonymous bank account' or 'bearer account'. These anonymous accounts (Sparbuchs) are still available (but not for a whole lot longer though and hard to get) from banks in the Riezlern region. The towns of Riezlern, Hirschegg and Mittelberg constitute this small region. Riezlern is the leading municipality in Vorarlberg's Upper Valley where very unusual geographical conditions exist. The region clearly belongs to Austria and has done so since 1453, with a few short interruptions. But the unusual thing is that it is separated from the rest of Austria by the 2,500 metre high mountains of the Bregenz Forest and the Allgau Alps. By car, you can reach Riezlern, covering four municipalities and 97 square kilometres, only via the B205 highway from the German town of Oberstdorf. Each time the people of the Riezlern region wanted to go elsewhere in Austria they were faced with climbing mountains or passing through Germany every time. So the Austrian Emperor Franz Joseph I signed a customs treaty with the German Reich in 1891 which declared the valley a German customs zone

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The Invisible World "keeping the sovereign rights of his Imperial and Royal Apostolic Majesty intact." The consequences today are that while Austrian laws apply in this area, German Deutschmarks are used as currency. Taxes paid to the federal government in Vienna are paid in Deutschmarks. In the Riezlern region of Austria it's also easier to purchase real estate, as foreign ownership regulations are a little more relaxed. This has contributed to a mini boom in the price of land, which is particularly popular with ex-pat Germans. Above all else the Riezlern region is known for its 'anonymous bank accounts'. If you wish you can even use a different name or use no name at all. No questions asked, and as mentioned before, the banks accept Deutschmarks instead of Austrian Schillings. Incidentally, whereas Riezlern banks would never turn a client wanting to open an anonymous savings account away, regardless of how suspicious the banker may think he or she is, they are a little reticent when it comes to current accounts. Clients who want to open one are often forced to go to several banks before finding one that agrees to your wishes. The regional bank, Hypobank, is fairly reasonable when it comes to opening a current account, the client need not present any proof, just credibly declare that he intends to do business in the region. Hypobank's telephone number is 0011 43 5517 5001. When you open your Sparbuch, you must remember that you will pay 22% withholding tax on all interest earned on any “anonymous” accounts where it’s still possible to get one. Also, you must open the account in person or use an agent, otherwise no anonymity can be granted. There is one way to get out of paying the withholding tax, and it is to sign a Residence Declaration with the bank to prove you are a foreigner, but to do this you must present your passport. Austrian banks emphasise that this will not affect he confidentiality of the business transaction in the slightest. The declaration is kept under lock and key and the passbooks concerned can still be issued without any account holder name - but false names must not be used. There are no objections against the use of passwords as an additional safety measure against unauthorised withdrawals. In fact this is even recommended since the anonymous passbook of a client who has declared his residence still remains a purely bearer document, which means that the identity of the bearer is not

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Financial Freedom & Privacy checked when withdrawing. Naturally, whoever goes so far as to sign a residence declaration is of course no longer limited to the Riezlern region. As an officially recognised foreigner, you can just as easily open a Euro account in Salzburg or Vienna and be exempt from the withholding tax. You may be curious to know that it is possible to open an account in the Riezlern region by mail. The Raiffeisenbank allows you to open an account by mail, if necessary, but warns that secrecy can then no longer be guaranteed 100%. Which is true only if you use your own letterhead with your true name and have the newly issued passbook sent to your true residential address. You can still maintain anonymity by having your lawyer, who is bound to secrecy, a Swiss acquaintance or your Liechtenstein shelf company make the initial contact with the bank, with your appointee writing something like this: "To the Raiffeisenbank, PO. Box 64, A-6992, Hirschegg, Austria. On behalf of my client (business partner, customer) we would like to open a private account without giving any particulars about the account holder. A bank draft for the initial deposit is enclosed. Please send the savings passbook to the following address ..." Ensure the address given is correct, otherwise the passbook may be delivered to the wrong address and it will probably be sent by registered mail. While we're on the subject of the Riezlern region and it's unusual financial situation, there is one other town in Austria that has similar banking regulations. The town is Jungholz, it nestles itself in mountains and beautiful scenery on the Austrian border near the German town of Fussen. It's worth considering if you are interested in the Riezlern region's benefits. Austrian bank secrecy is not protected by legislation, but by the initiative of the Austrian banking industry. Another thing that is unusual to Austrian banking procedures is that they sometimes take photographs of clients with foreign accents to keep on file. So it's best to use different branches and different bearers if you plan to do your Austrian banking in person.

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The Invisible World Austrian legislation introduced recently requires banks to report all foreign currency transactions amounting to more than 200,000 Schillings, so keep transactions reasonably small and us possibly a number of accounts. Another thing to keep in mind when opening a 'bearer account' is that they are limited to 10 million schillings, but there is no restriction on how many you can have. They also will not accept foreign currency, they must be in Schillings or Euros. For those of us that would like to retire in an overseas destination, consider Austria. The tax breaks are significant for foreigners wishing to retire in this beautiful country. All you have to do is promise the government that you will bring into the country a minimum of 300,000 Schillings per year in the form of income from annuities, superannuation, interest or dividends. If you do, you will obtain a tax rebate equivalent to half the normal rate of taxation. This benefit will last 10 years. If you are fortunate enough to be able to bring in 700,000 Schillings per year, the benefit will last for life. Certainly something to think about. The corporate tax rate in Austria is 34%, but in the region known as Upper Styria, investment companies are exempted of all tax for 7 years. The Austrian government has almost 100 business incentive and aid programs available for local and foreign companies wishing to establish business in Austria. If you would like help with matters relating to Austria, or anywhere else for that matter, contact Swiss Overseas Consultants SA. They are most helpful, and the proprietor, Dr Reinhard Stern is an expert on Austria and Liechtenstein having written an excellent report on these two countries. It is well worth reading and can be purchased from Scope International. Their details can be found in the International Resources Directory. Agent Use a Swiss agent – See Switzerland

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Financial Freedom & Privacy Bank Anglo Irish Bank Established in 1890, the Bank in Vienna Austria became part of the Anglo Irish Bankcorp Group in 1995 as a full-service private international bank conducting business in English. The Bank operates exclusively under the supervision of the Austrian Department of Finance and the Austrian Central Bank and adheres to Austrian banking laws, stringent liquidity requirements, deposit protection and banking secrecy provisions. Contact: Peter A. Zipper, Senior Vice President of Anglo Irish Bank. Rathausstrasse 20, P.O. Box 306, Vienna A-1011, Austria. Telephone 0011 43 1 406-61-61. Fax Number: 0015 43 1 405-81-42. Austria in a Nut Shell Language : German Location: Central Europe Population : 8,000,000 Democracy : Yes Currency : Schilling Religion : Roman Catholic Security 4 Bank Secrecy 4 Potential Tax Savings 3 Residency Possibilities 3

Bahamas In a survey a few years ago, of a dozen tax and financial havens, the Bahamas came out on top with the maximum number of points, but alas I don’t think they would do so well know since caving into the OECD completely and giving a commitment to co-operate with foreign tax authorities, which may or may not happen in reality. But I must say this group of Caribbean islands has certainly attracted a lot of attention from international investors with an estimated US$300 billion dollars in the 400 banks. Several years ago, Gulf Oil used the Bahamas to transfer money to Korean and Bolivian politicians in the hope it would go unnoticed, but

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The Invisible World politicians being the way they are, it didn't. The US Government in its International Narcotics Control Strategy Report named the Bahamas as a major link in the drug chain and condemned it for becoming a major money laundering centre. However, in 1996 laws were introduced to try and stem these illegal activities. Banking is the second largest industry after tourism. As mentioned earlier in this book, bank secrecy is enshrined in law, so operating your finances here is as secure as any other tax haven. With all these advantages you would think it would be a hard place to gain residency in, right? Wrong. It is still relatively easy to enter the country and 'buy' a residence permit there. Permanent and temporary residency requires the payment of approximately B$1,000 for the head of the family plus B$20 for each family member. Other requirements are 2 passport photos with a signature on the back, 2 character references from home, a health certificate and a bank reference. These conditions apply to permanent and temporary residency. To gain permanent residency, you are required to invest B$250,000 as an investor in a 'registered group investment’ or B$500,000 otherwise. The temporary residency permits are valid for one year or you can stay up to eight months of the year with a tourist visa. If you wish, contact the Director of Immigration, PO Box N 831, Nassau, Bahamas for more information. If you really are serious about immigration, consider a local solicitor, they can also assist with incorporation. I've provided a list below, but I can't vouch for their quality. Rachel Miller, PO Box N 8680 Nassau P.L. Adderley and Co PO Box N 4 Nassau David Bethell PO Box N 5873 Nassau Hall Carroll and Co PO Box F 2569 Freeport

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Financial Freedom & Privacy Higgs and Kelly PO Box N 1113 Nassau Bostwick and Bostwick PO Box N1605 Nassau The Bahamanian income tax for persons and companies is nonexistent. There isn't even any capital gains or inheritance taxes levied. They are content with a fairly low real estate acquisition tax as well as customs duties which can be quite high. Sales tax is a reasonably recent addition. One exception is the Freeport area, which is free of real estate taxes and duties. Freeport was established by an American back in 1955 who promised the Bahamanian government that he would develop the area. Develop it has, the area is full of hotels, casinos, bars and numerous other businesses. If you wish to establish a business here you must apply to the Grand Bahama Port Authority Limited for a trading licence and the Authority will charge you a fee. If granted a licence in Freeport you will be exempt from customs duty until 2054 for anything you import. Another thing to keep in mind, you can export anything from the Bahamas free of duty to the US, EC countries, Japan and Canada. To establish a tax exempt company in the Bahamas will cost US$700 but this will depend on the structure you require. It takes about 24 hours and it is called a 'International Business Company'. This type of company is not allowed to engage in trade with locals and it can't own property within the Bahamas. It is also not permitted to engage in any insurance or banking activities which both require special licences. The International Business Companies Act legislated in 1989, was set up to "identify and encourage all types of investment and financial service opportunities". The government charges IBC's a flat fee of US$100 per year to operate, payable on the 1st of January. Another good thing about the Bahamas is that they allow bearer shares, shares that don't have the name of the shareholder registered. This provides you with total corporate anonymity. IBC’s can purchase or acquire it’s own shares. Ever thought of buying a tropical island? Well you can in the Bahamas. If you have no police record, then you qualify. Contact H.G.Christie Real Estate, PO Box N 8164 Nassau or Thev's Real Estate Co. Ltd, PO Box N 8429, Nassau and they should be able to let you know what's still available.

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The Invisible World Problems with the Bahamas from an Australian Perspective Here are the reasons I don’t recommend the Bahamas as an Incorporation & Banking Jurisdiction too readily. These points aren’t so much a condemnation of the Bahamas, but I simply believe there are other jurisdictions that don’t carry the following negative points. In a landmark case the US Government subpoenaed the records of the Bank of Nova Scotia (US v’s Bank of Nova Scotia) demanding it release the records of its Bahamas branch. The bank lost the appeal against this order. The result, the bank faced with a fine of US$1.8m, handed over all the records. Source Banking in Silence, WG Hill & US Federal Court archives The Canadian Federal Court (Trial Division) has held that a Bahamian IBC qualified as a US resident corporation under the USA-Canada Treaty. It deemed that because the Bahamas company ran it’s operation predominantly from the US it was US resident company, even though the beneficial ownership remained with a Canadian. The case wasn’t the problem, the Bahamian government’s disclosure was. Source National Law Services 1992 The IRS demanded the records of Mr Dennis Levine from the Bahamas branch of Bank Leu, a Swiss bank. They accused Levine of Insider Trading, the bank facing pressure from the US as regards their US assets, relented and made full disclosure. Devine was charged with Tax Evasion and Insider Trading. Source Banking in Silence, WG Hill & Tax Havens by Hoyt L Barber In 1987, the Mutual Legal Assistance Treaty came into being between the US and the Bahamas. This allows for the arrest and conviction of criminals that have committed a crime in both jurisdictions. But, “still not pleased the US have managed to include provisions in the treaty that allow information to be released in cases involving a number of offences that are not considered to be crimes under Bahamian Law. How long before Tax Evasion is caught in this ever widening net” Source Banking in Silence, WG Hill Named by the United States Government in 1989 in their International Narcotics Control Strategy Report as a major link in the international drug chain and has also condemned it as a major money laundering centre. Source US State Department The location and economic dependence on the US is of concern and aid

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Financial Freedom & Privacy could be withheld in the future if the Bahamas doesn’t “toe the line”. In 1984 and 1985 the Government was disrupted with widespread drug trafficking. The Deputy Prime Minister and two other ministers resigned in disgrace. The Prime Minister L Pindling was accused in a Royal Commission of accepting drug related money from foreign business men. Source Encyclopaedia Britannica 1985 In 1987, former Prime Minister L Pindling was returned to power with both parties accusing each other of drug trafficking. Source Encyclopaedia Britannica 1988 Later in 1987, due to pressure brought to bear by the US, the Bahamas signed a Mutual Legal Assistance treaty providing the US with the ability to request financial records of suspected criminal elements. Source Encyclopaedia Brittanica 1988 In July 1986, the Bahamas government announced it would allow drug and laundered money to be traced by the local banks with the results of those traces being passed on to US authorities. In May 1986 the Bahamas Government commenced discussions with the US government on a tax information exchange agreement and tax treaty. Negotiations still continue. Source Encyclopaedia Britannica 1987 & 1996 Where to Avoid doing Business! In 1994 the US Drug Enforcement Agency prepared a memo on how to uncover money laundering practices. These countries were to be specifically targeted for thorough investigation. The Bahamas was on that list, the Isle of Man, Caymans and the BVI were not. Source Banking in Silence, WG Hill “Like Switzerland, the Bahamas reputation for privacy has diminished as a direct result of the erosion of bank secrecy” Source Hoyt L Barber, Author of Tax Havens “Australia and New Zealand have full Tax Information Exchange Agreements with the US. Could these be used back to back? There is already evidence to show that they are alive and kicking! …… There are better jurisdictions”. WG Hill is regarded worldwide as the Leading Expert in the world on tax and banking havens Banks Lloyds Bank International Private Banking P.O. Box N4843 Nassau, N.P., The Bahamas Tel: 0011 1242-322-8711

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The Invisible World Fax: 0015 1242-322-8719 Mees Pierson (Bahamas) Ltd P.O. Box SS5539 Nassau, N.P., The Bahamas Tel: 0011 1242-393-8777 Fax: 0015 1242-393-0582 ROYAL BANK OF SCOTLAND (NASSAU), LTD Box N-3045, 50 Shirley Street Nassau, Bahamas Telephone: 0011 1242 322 4643 Fax: 0015 1242 326 7558 Sand Ander Investment Bank Ltd P.O. Box N1682 Nassau, N.P., The Bahamas Tel: 0011 1242-322-3588 Fax: 0015 1242-322-3585 Sentinel Bank & Trust Ltd Norfolk House Frederick St P.O.Box CB-12407 Nassau , New Providence Tel: 0011 1242 356-4320 Fax: 0015 1242 356-7466 Agent: Bahamas Incorporation Services PO Box N3230 Nassau, Bahamas Phone : 0011 1242 322 2965 Fax : 0015 1242 322 2874 Email: [email protected] Bahamas in a Nut Shell Language : English Location: Caribbean Population : 340,000

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Financial Freedom & Privacy Democracy : Yes Currency : Bahamanian Dollar Religion : Protestant Security 3 Bank Secrecy 1 Potential Tax Savings 2 Residency Possibilities 3

Barbados Political and social stability give Barbados an edge over many tax havens. This stability, a product of British rule (who else?) makes this small country a very attractive site to operate worldwide business operations. Unfortunately, stability doesn't come cheap. Incorporation of a company can cost as much as B$5000 plus maintenance. Disclosure is minimal with a single director/shareholder acceptable. Many management companies will provide nominee directors if required which provides the shareholder/owner with total anonymity. Anonymity can be achieved by the shareholder appointing nominees to hold shares, using share warrants or by establishing a trust to hold shares in another jurisdiction. Tax on International Business Companies is a maximum 2.5% on net income as long as all your income was generated outside of Barbados. No double tax agreement currently exists with Australia.

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The Invisible World Another option is the Exempt Insurance Company. They pay no tax at all but have an annual license fee of US$2,500, which is a little expensive. They are permitted to acquire real estate, expatriate employees earnings are one third tax free but it must generate its income offshore. They will cost a similar amount to a normal company to incorporate. If you're thinking of establishing a business in Barbados, here are a few facts that will get you interested: Exemption from company tax for ten years After ten years a maximum rate of 22.5% will apply Exemption from customs duty for machinery and raw materials imported Subsidies for employee training Subsidised factory rent Full and unrestricted funds repatriation guarantee The Barbados Industrial Development Corporation (PO Box 250, Pelican Industrial Park, Bridgetown, Barbados) can send you out an investment brochure detailing all these benefits if you're interested in starting business in this tropical paradise. Another good thing about manufacturing in Barbados is that all goods can enter the EU countries duty free due to the Lome Agreement that was set up to assist developing nations. By 2002 over 5,000 International Business Companies, Foreign Sales Corporations, Exempt Insurance Companies and Offshore Banks had established their headquarters in Barbados. Now the minor snag, if you wish to reside in this country for more than 182 days per year you will be liable to pay local personal income tax of up to 50% of your worldwide income. So whatever you do, don't stay too long it could cost you a fortune. Bank Barclays Bank Plc (Now First Caribbean International Bank) Broad Street, P.O. Box 301 Bridgetown, Barbados Telephone: 0011 1246 429 5151

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Financial Freedom & Privacy Fax: 0011 1 246436 7957 Bank Of Montreal Limited Francis Godson Drive, C'more Rd, Barbados Telephone: 0011 1246 437-6995 Fax: 0011 1246-426-7106 Agents Cottle Catford & Co 17 High Street, P O Box 63, Bridgetown, Barbados, West Indies Tel: 1 246 426-3269 Fax: 1 246 426 3726 e-mail:[email protected] . Citco Corporate Management (Barbados) Limited Whitepark House, White Park Road P.O. Box 806E Bridgetown Barbados Tel: 0011 1 246 427 0186 [email protected] Barbados in a Nut shell Language : English Location: Caribbean Population : 255,000 Democracy : Yes Currency : Barbados Dollar Religion : Protestant Security 3 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 2

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The Invisible World Belize This small Central American country is developing into an offshore financial centre as well as a tourist destination. Prior to independence it was a British colony, which leaves the legacy and advantages of the English language. Based on information I have read, it is quite easy to obtain residency and citizenship in Belize if you have the money. I'm told US$50,000 is usually enough. You should keep in mind that Belize is still a third world country and it is still a long way behind other countries in the region, but like most countries in this category you can live like a king if you move there regardless of how well off you are in Australia or New Zealand. You can buy a block of land which includes private beach front (30 metres) for less than A$40,000. Away from the beach, you can purchase 20 acres with a small house for A$15,000. Building a house can be a little expensive due to the cost of imported materials. A four bedroom home would cost about $150,000 to build but a cheaper option would be to buy a house on the beach already constructed. In 1990 the country introduced the International Business Companies Act in order to start fostering some of the offshore cash that Belize's neighbours in the Caribbean have been enjoying for so long. Incorporation costs about A$800 and will require a minimum capitalisation of US$50,000, but of course this is just a paper entry. The government charges you US$100 to renew the company each year, but of course if you need an agent for such things as nominee directors etc the price could be around US$1,000 pa. “One person” companies are possible and there is very little (if any) government control on what you do, as long as it’s legal of course. No tax returns or annual returns – nothing! You will be able to trade tax free but only on income derived outside of Belize. In recent times the government has revised the incorporation and

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Financial Freedom & Privacy trust laws to the point where Belize has some of the best and workable laws in this regard in the world. The bank secrecy is legislated and works extremely well. I have upgraded the ranking since past editions to a maximum 4. The government system is based on the Westminster system and works well with a high degree of stability and unrest is unheard of. Belize has a growing tourism industry and Cancun (in Mexico) attracts a lot of tourists to the region with its international resorts and hotels. This regional interest is bringing a level of western sophistication with it allowing the country to be seriously considered as a place to live. One other little piece of information that may be of interest to some of you is the Belize Government grants immediate immunity in the case of offshore fraudulent transfer claims by foreign authorities. Most jurisdictions range from 3 to 6 years on a statute of limitations for this type of thing. Banks ATLANTIC INTERNATIONAL BANK, LTD. P. O. Box 481 Corner Cleghorn St. & Corner Freetown Rd. Belize City, Belize Central America Tel.: 0011 501 22-30681 & 0011 501 22-33152 Fax: 0011 501 22-33528 Belize Bank Ltd. Cor. Constitution and Melhado Drive Belmopan , Cayo Belize, Central America Tel: 0011 501 08 22341/22303 Fax: 0011 501 08 23230 E-mail: [email protected] www.belizebank.com Agents Deloitte & Touche

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The Invisible World 40A Central American Blvd P. O. Box 1235 Belize City, Belize Central America Tel: 0011 501 227-3020 Fax: 0015 501 227 5792 Email: [email protected] Belize Offshore Professionals Inc. 3181 Constitution Drive, P.O. Box 90, Belmopan, Belize, Central America Tel: 0011 501-8-20078/23182 Fax: 0015 501-8-22458 E-Mail: [email protected] Belize in a Nut Shell Language : English Location: Central America Population : 200,000 Democracy : Yes Currency : Belize Dollar Religion : Roman Catholic Security 3 Bank Secrecy 4 Potential Tax Savings 4 Residency Possibilities 4

Bermuda Bermuda is a self governing British colony in the Atlantic Ocean not far from the east coast of the US. Some years ago to have a company registered in Bermuda was a real status symbol and not all that easy to obtain because approval had to be granted individually by an act of Bermuda's legislature. These days, while the status of these companies may not have waned, it's certainly easier to establish a company. These

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Financial Freedom & Privacy days all that is required is to have an impeccable financial and personal record. You will require references from your bank and also a few personal references wouldn't go astray. Bank secrecy is not legislated but the banks claim they won’t give out details in the case of claims of tax evasion but they have a treaty with the US to provide details of people involved in serious crime. This was ratified in 1986. To incorporate a tax exempt company in Bermuda will cost about US$4,300 and it must have a minimum capitalisation of B$12,000 (Bermuda $ are at par with US$). Annual costs will cost you about B$1,700 per year for your average company. In addition, there's the official flat fee of B$800 annually for regular companies, except for insurance companies, shipping lines, airlines, banks or trust companies which cost more per year. A company must have two directors and they must be both shareholders. In addition, the company must have two Bermudian directors so that annual general meetings can be held in Bermuda. Incorporations can take up to six weeks to complete. A foreign company (eg. an Australian Pty Ltd.) can also operate as a paper company in Bermuda subject to government approval. For this you have to present proof that a direct Bermuda incorporation is impossible or unsuitable. Such companies also have to pay B$800 per year in fees. Like the Bahamas, Bermuda has a free zone about 14 km away from the capital city of Hamilton, this town is also called Freeport. This is where light industries will find the usual services and facilities on 40 hectares. When you trade from the free zone you gain complete exemption from customs duties (except for food, alcoholic beverages and tobacco goods).

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The Invisible World Bermuda is also a great place to live if you're interested. When applying for immigration, it often helps to say you already own local property, so this may be something you should look into on your next holiday. Aside from that, the entry requirements are similar to those of the Bahamas. Tennis star, Pat Rafter has a home in Bermuda so he can take advantage of the tax savings available. Residents don't pay any income tax, not a cent as long as you live. The catch is when you die your family will be hit with a 3% inheritance tax, but only for personal assets within the country. People that know what they're doing never register valuables in your own name but use a company or trust's name instead. Also, no double tax treaties exist. Companies operating locally are also exempted from company tax, only a 5% payroll tax is levied. Banks Bank of Bermuda 6 Front St Hamilton HM11, Bermuda Phone : 0011 1 441 295 4000 Fax: 0015 1 441 295 7093

Bermuda Commercial Bank PO Box HM 1748, Hamilton HM GX Bermuda Phone : 0011 1441 295 5678 Fax : 0015 1441 295 8091

Agent: Bermuda Offshore Investment Services Ltd. Office: 2nd Floor, 73 Front Street, Hamilton HM 12, Bermuda Mailing Address: Suite 481, 48 Par La Ville Road Hamilton HM 11, Bermuda Tel: 0011 1441-296-7247 Fax: 0011 1441-296-7248 email.. [email protected] Coutts & Co PO Box HM1436 Hamilton, Bermuda Phone: 0011 1 441 295 4700 Fax: 0015 1 441 295 4706

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Financial Freedom & Privacy Internet Trading Agents OeBusiness Corner House 12 Parliament Street Hamilton, HM12 Bermuda P.O. Box HM 459 Hamilton, HMBX Bermuda Tel: 0011 1 441 296-1166 Fax: 0015 1441 296-9297 E-Mail: [email protected] oeBusiness.com is a global leader in e-business technology and service solutions. Headquartered in Hamilton Bermuda with offices in the United States and Canada, oeBusiness.com provides integrated and comprehensive e-business solutions for company's around the globe wishing to establish and operate e-business activities from three of the world's premier international business centers; Bermuda, Cayman and Isle of Man. The oeBusiness.com portfolio of services, includes: virtual hosting, physical hosting, facilities management, multiple payment gateway solutions, website design and development, e-commerce risk management and insurance solutions, operations management, eSuiteTM and/or company formation, corporate administration, and accounting. oeBusiness.com is owned by TransWorld Network International, Ltd, a leading telecommunications service provider. If you require more information concerning oeBusiness.com, please contact Jennifer Flood, Client Services Manager, at 0011 1(441) 2961166. Bermuda in a Nut shell Language : English Location : Atlantic Ocean Population : 59,000 Democracy : Colony of the UK

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The Invisible World Currency : Bermudian Dollar Religion : Protestant Security 4 Bank Secrecy 2 Potential Tax Savings 4 Residency Possibilities 3

British Virgin Islands Like Bermuda, the BVI is a self-governing British Colony. Situated in the Caribbean, it is made up of 50 islands just east of Puerto Rico. At last count there were more than 300,000 offshore companies operating there. Why so popular? Zero tax, politically stable, simple corporate regulations and inexpensive. A large number of the companies in the BVI transferred here from Panama when the Noriega government collapsed. The BVI is now probably the most popular incorporation haven in the world. One of the big pluses for incorporation and banking in the BVI is that it doesn’t have any exchange of information agreement or treaties with the US, unlike many of its Caribbean neighbours. I like the BVI as a place to incorporate due mainly to this ‘distancing’ from the US. But, there is one minor dark cloud on the BVI horizon, a new Code of Conduct for the finance has been introduced and this will be specifically aimed and at criminals hiding behind secrecy laws. While it is an internal amendment (not brought on by the US), it could still impact on you if you were suspected of criminal activity. For most of us, the Code of Conduct won’t

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Financial Freedom & Privacy make any difference. Incorporation costs from US$500 to incorporate an International Business Company with share capital up to US$50,000. In addition, a fee of US$300 is paid annually. IBC's are not allowed to do business with the locals and must have at least two directors. Bearer shares are permitted, as are different classes of shares. Incorporation of trusts and banks is also permitted but in the case of banks, there are better and cheaper places to incorporate. Bank confidentiality is excellent. Numbered accounts unfortunately don't exist. No tax treaties exist. In my opinion, currently, one of the best places in the world to incorporate if all you want is a simple structure that won’t cost a kings ransom. This is an excellent tax haven in anyone’s language and if you are serious about doing something it will cost around US$1,800 to set up an IBC and have it managed for a year. Subsequent years will cost around US$1,100 per annum. For many investors, this is a drop in the ocean when compared to the benefits of tax minimisation, tax deferment and privacy as well as ease of use. To receive the above prices and excellent service form a well established company, contact: International Law Systems Atlantic House, Circular House, Douglas Isle of Man, IM1 1SQ Phone: 0011 44 1624 624 400 Fax: 0011 44 1624 628488 Mention you were reading my book and you will receive the special rates. My contact there is Chris Meinke, Chairman of ILS. Alternatively, speak to Pauline Johnson, she looks after new companies. They are both helpful and friendly. Fax a request and they will send an easy to complete package to you. And by the way, if you were wondering what tax haven a well known media tycoon used to reduce his tax from many millions down to $30, well, the BVI is it. It was reported that the tax advisers of the media tycoon did a tour of all the tax havens and chose this one as the one that suited them best. Take note! Banks Bank of Nova Scotia PO Box 434, Road Town, Tortola, BVI Tel: 0011 1 284 494 2526

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The Invisible World Fax: 0011 1 284 494 4657 Barclays Bank Plc (Offshore Banking Centre) PO Box 70, Road Town, Tortola, BVI Tel: 0011 1 284 494 7404 Fax: 0011 1 284 494 7405 Agents Trident Trust BVI Ltd PO Box 146 Road Town, Tortola, BVI Phone : 0011 1 284 494 2434 Fax: 0015 1 284 494 3754

Orbis Services PO Box 650 Road Town, Tortola, BVI Fax : 0015 1 284 494 6565 Phone: 0015 1 284 494 5800

Crescent Corporate Services P.O. Box 875 Road Town, Tortola British Virgin Islands

6, Third Floor Qwomar Trading Bldg Road Town, Tortola British Virgin Is Tel: 0011 1 (284) 494-9165 or (284) 494-9391 Fax: 0015 1 (284) 494-5924 Email: [email protected]

Offshore Electronic Commerce Solutions: Elan Corporate Services Ltd. Corporate Address: Palm Chambers / P.O. Box 119 / Road Town, Tortola, B.V.I. Tel: 0011 1 284 494.4590 Fax: 0015 1 284 494.2838 E-mail: [email protected] Elan Corporate Services Ltd. is able to provide a comprehensive offshore e-commerce turnkey solution for cross-border businesses. Depending on the nature of your international operations, Elan can offer custom service packages that include: • Hosting and maintaining web sites running on a server in Tortola (BVI).

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Financial Freedom & Privacy • Providing facilities for secure transactions and online catalogs. • Opening offshore bank accounts with merchant facilities. • Providing online sales and marketing support, including web site development. • Providing domain name registration for the BVI's toplevel domain (.vg) • Providing complete corporate services, including company formation. Elan Corporate Services Ltd. and its affiliated BVI law firm, Hewlett Beck & Arad, have been engaged in discussions with Cable & Wireless and the British Virgin Islands Government to position the Territory as a Global Center for Electronic Commerce. Although many initiatives are currently under development, the following services are currently provided at the following rates: COMPLETE WEB SITE HOSTING (ANNUAL FEE): US$1,180 (Additional services, such as custom programming, graphic design, special software configuration, general web development and consulting, search engine placement and secure site configuration are provided at hourly rates of US$45-$150. Please contact us with your plans to receive a more accurate pricing quotation). The above fee includes: • Registration of your domain name of choice (.vg or other). • 5MB (MegaBytes) of BVI web server or database server space. • Up to five e-mail addresses under your chosen domain name. • Web tracking software services to monitor your site traffic. • General maintenance services including troubleshooting. • All normal disbursements, including fax and phone charges. COMPLETE INCORPORATION AND 1998 ANNUAL FEE: US$1,360 (Assumes standard authorized share capital on incorporation of US$50,000 or less; any amount beyond this attracts a higher BVI capital duty. Share capital is not necessarily a representation of company value, although the issued share capital cannot exceed company value.

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The Invisible World International Business Companies in the BVI are tax-free, while Domestic Companies pay a 15% income tax). The US$1,360 fee includes: • Government incorporation and first year's fee of US$300. • Provision of 1998 registered office and registered agent. • Company name availability confirmation and reservation. • Occasional telephone answering, mail and fax forwarding. • Printing and delivery of up to twelve share certificates. • Printing of up to five copies of all corporate documents. • Minting of the company seal (each additional seal is US$50). • Preparation and filing of the first board minutes. • International rush/priority document delivery (FedEx or DHL). • All incidental telecopier, telephone and clerical service charges. Currently, Elan and Hewlett Beck & Arad (www.interleges.com)are developing a separate web site, tentatively titled Offshore & Online, highlighting the practical, legal and tax rationale for companies utilising the Territory. In addition, Year 2000 issues may come into play soon, given that both the electricity and phone companies in the British Virgin Islands expect to be compliant this year. British Virgin Islands in a Nut shell Language : English Location : Caribbean Population : 13,000 Democracy : Colony of the UK Currency : US Dollar Religion : Protestant Security 4 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 2

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Financial Freedom & Privacy Campione Up until 1993 I had never heard of the Italian enclave in Switzerland known as Campione. On a recent trip to Switzerland I passed through this unusual tiny place (1 sq. km) that is situated on the shores of Lake Lugano. It is surrounded on three sides by Switzerland, the other side is the lake. As you travel north into Switzerland from Italy, you cross the border at the Italian town of Chiasso and continue for 20 kilometres into Switzerland along the E35. At that point you see a sign for a turn to the right to enter Campione. It is small Italian town inside Switzerland without borders or customs etc. Economically, it's in Switzerland and politically in the EU and Italy. Even the telephone network is Swiss and as a resident of Campione you get a Swiss license plate for your car. One of the most enthusiastic promoters for residence in Campione states in his brochures: "No matter how the political and economic conditions change in Italy, you don't feel any effect in Campione. Campione is in Switzerland and enjoys all the advantages of this traditionally neutral country. The residents survived the difficult times of the two world wars just as unaffected." Campione belongs to the administrative district of Como, Italy, and dates back to the 8th century. At that time, Swiss Campione came under the sovereignty of Italy since its feudal lord deeded everything he owned to the Ambrosius Church in Milan. The treaty between Italy and Switzerland regarding the enclave currently in force dates back to 1861. In 1958 a new clause was added in order to regulate the access of Swiss citizens, who are unused to gambling, to the casinos of Campione. What tax or investment advantages does Campione have to offer? Apart from the casino, the only thing worth mentioning is that genuine residents are entitled to a specially favourable rate of exchange between Swiss francs and Italian Lira in their tax calculation which then results in a 66 percent discount compared to the tax charged elsewhere in Italy. As far as the rest of the 3,000 Campione residents are concerned, who live in the enclave on an unofficial basis, many of them benefit from a

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The Invisible World unique phenomenon, income tax collection isn't seriously pursued, especially for non-Italians keeping a low profile. Italian tax collectors, regardless if based in Rome, Milan or Campione, already expect from the start, that the taxpayers honesty shouldn't be taken too seriously. And rightfully so, whoever pays his taxes according to the letter of the law in Italy is in danger of ending up paying 115% tax. It isn't uncommon then that the parties concerned meet halfway, agreeing on half of what the revenue office demands and what the citizen is prepared to pay. It appears that many Campioners have a particular preference for Liechtenstein, which is only two hours drive away. Not only are many properties in the enclave registered in the name of expensive Liechtenstein “paper” companies, many Campione businesses are conducted via Vaduz in Liechtenstein. I once read a story about a Campione policeman who once questioned a resident regarding some ads that had been put in the local paper. The resident tried to explain to the policeman that it was a Liechtenstein company, not him, that was responsible for the suspect newspaper ads published on his behalf: “Funny, everyone here says the same thing!” replied the policeman. Incorporation and banking facilities are limited. If you are interested in setting up in Campione contact an agent closer to home to find out how to go about it. Campione in a Nut shell Language : Italian Location : Southern Switzerland Population : 3,000 Democracy : Yes, part of Italy Currency : Lire Religion : Catholic Security 3 Bank Secrecy 1 Potential Tax Savings 1 Residency Possibilities 2

The Cayman Islands The 259 sq.km. Cayman Islands, consisting of Grand Cayman (190

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Financial Freedom & Privacy sq.km.), Cayman Brac and Little Cayman have no income, capital gains or inheritance taxes. Whoever establishes an "exempted company" here also doesn't have to worry about company tax either. Tax holidays of 20 years are guaranteed in writing. The only tax that you will encounter is in the form of stamp duty on property transfers at a rate of 7.5%. Unfortunately, since 2000, the Caymans have caved into pressure from the OECD and agreed to assist foreign tax authorities with their enquiries if requested. This is very disappointing and will effect the Caymans economy quite badly one would think. However, whether the agreed “assistance” actually results in people getting dropped in it, who knows. We’ll all be watching closely. Sometimes called the 'Geneva of the Caribbean', the Caymans can boast about 600 banks managing US$400 billion. Most of the banks are of course 'private', just brass plaques, but they do look after a rather large amount of money. In 1976 the Cayman Government passed the Confidential Relationships Preservation Law (which must be under question now), which is very similar to the Swiss banking code. It makes it a criminal act in the Caymans for anyone to reveal someone's financial or banking information. The US Government has an agreement with the Caymans that in cases of fraud and the drugs trade, the Caymans Government will cooperate to expose the affairs of these people. The trouble is in the interpretation, the US Government regards tax fraud as criminal, the Caymans Government does not. US tax evaders appear to be totally safe in the Caymans. Which is why there are over 25,000, mostly US owned companies, in the Caymans. Oliver North was so confident of not being detected during the Iran-Contra deals, he used the Caymans to transfer millions of dollars. The only concessions the Americans were able obtain

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The Invisible World from the Cayman Government was the reporting of all suspicious deposits of over CI$10,000. Again the two governments differ on what is suspicious. And what about suspicious amounts under CI$10,000, well they don't have to report those do they? Incorporation costs for an exempted Cayman Co. will be about US$1,000 through a Cayman incorporation agent or through Overseas Company Registration Agents. The annual maintenance charges for providing the domicile, acting as fiduciary, supplying the directors and secretary as required by law as well as dealing with the authorities will cost you about US$1,500 per year. You can also issue bearer shares for extra secrecy. Details of shareholders are not disclosed. The exempt company will need at least one director and shareholder who can be the same person. This is also a great place to incorporate your own bank if you always wanted to 'own the bank'. The Banks and Trust Companies Regulations Law stipulates the requirements for Bank and Trust licenses. The Class A license allows you to operate within the Caymans and the Class B only allows offshore transactions. The usual (and cheaper) Class B restricted license only allows the bank to deal with specified persons as detailed in the license. This type of banking license will cost about CI$6,000 per year while the unrestricted one will cost about CI$9,000. Capitalisation can create a few problems as you will need about CI$28,000 for a restricted license and CI$400,000 for an unrestricted one. This is a zero-tax haven and has no double tax agreements in place. It does have an agreement to exchange information with the USA, but this shouldn't worry Australians in the least as we said before.

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Financial Freedom & Privacy The Cayman Islands are a favoured and suitable immigration destination. The local authorities carefully check out all those who want to stay. Only those applicants with a lot of capital (US$150,000) and spotless reputations will generally be accepted. You will also need to be financially independent without requiring the local economy to provide an income. The Cayman Islands have a high standard of living, flexible foreign exchange and capital transfer practices, good communications system and infrastructure. The cost of a very nice 2 bedroom condominium or house would be about US$300,000 which would include pool, air conditioning and 2 baths. The facilities are excellent. You can rent a good property for about US$1,000 per month. If you are interested in escaping permanently to the Caymans contact: Chief Immigration Officer, Dept. of Immigration, PO Box 1098, George Town, Grand Cayman, Phone : 0011 1345 949 8344. Banks British American Bank PO Box 914GT American Centre Dr Roys Drive Grand Cayman, BWI Phone: 0011 1345 949 7822 Fax: 0015 1345 949 6064

Bank of Bermuda PO Box 513 Jennett St Grand Cayman, BWI Phone: 0011 1345 949 9898 Fax: 0015 1345 949 7959 Can also assist with IBCs

Barclays Bank PO Box 68 Grand Cayman, BWI Phone: 0011 1345 949 7300 Fax: 0015 1345 949 7179

Royal Bank of Canada PO Box 245 Grand Cayman, BWI Phone: 0011 1345 949 4600

Agents Swiss Bank and Trust Corp. PO Box 852 Grand Cayman, BWI Phone : 0011 1345 949 7344 Fax : 0015 1345 949 7308

OCRA PO Box 613 Grand Cayman, BWI Phone : 0011 1345 949 2711 Fax: 0011 1345 949 8635

Bodden Corporate Services

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The Invisible World P.O. Box 10335 APO Grand Cayman Cayman Islands Tel: 0011 1 345-945-0400 Fax: 0015 1 345-945-0345 E-mail: [email protected] Offshore Share Trading Facilities and Broker SEGOES Securities Ltd. PO Box 10553 APO George Town Grand Cayman Cayman Islands Sales Phone: 0011 1 345.949.5900 Trading Desk: 0011 1 345.949.5900 Fax: 0015 1 345.945.7046 Info Email: [email protected] www.segoes.com.ky Caymans in a Nut shell Language : English Location : Caribbean Population : 30,000 Democracy : Yes, British Crown Colony Currency : Cayman Dollar (pegged to the US$) Religion : Protestant Security 4 Bank Secrecy 1 Potential Tax Savings 4 Residency Possibilities 3

Channel Islands The Channel Islands are made up of principally 5 islands, the well known Jersey and Guernsey and the less well known Alderney, Herm and Sark. The island group lies off the coast of France in the English Channel (hence the name) and are under the control of the British Government even

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Financial Freedom & Privacy though they are much closer to France than England. If you were to ask a local if the Channel Islands are really counted among the British Isles, you would receive the following reply. "That it is not the Channel Islands in the English Channel which belong to the British Isles, but rather the big main island of Great Britain which belongs to the Channel Islands". What's more they would in fact be technically correct if you were to use history as your basis, since the Channel Islands were part of victorious Normandy when the Norman duke, William the Conqueror, defeated the Anglo-Saxons, led by King Alfred, in the Battle of Hastings in 1066. Normandy then annexed England when William the Conqueror was crowned King William I, in Westminster. William's great-greatgrandchild, King John "The Landless", in turn, lost Normandy to France, only the Channel Islands remained loyal to the English Crown. In gratitude, the Crown granted them the right to an autonomous existence in accordance with Norman laws and traditions from that point on and according to each island's own wishes. The five major islands and the various secondary islands have been grouped into two groups, ie. Guernsey with Alderney, Brecqhou, Herm, Jethou, Lihou and Sark in one group, and Jersey with Ecrehou Rocks and Les Minquiers on the other. It was as late as the 1970's that France tried to claim sovereignty over some of the minor islands. Each island is still an independent political unit. Therefore, each of the five major islands has its own parliament and laws, and Jersey and Guernsey even have their own currency, postage stamps, passports and television station. The minor islands are more or less ruled by autocrats

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The Invisible World who won't stand for any interference from outsiders. Since the laws of ancient Normandy are honoured, it was never the practice then to impose high income, property, inheritance or value added taxes. The Channel Islands today are content with fairly low taxes on profits. What's more, the locals are happy to share their good fortune with foreigners attracted by the favourable tax conditions, shopping opportunities and to use the Channel Islands as corporate bases. The dynamic development of the European Community has also made many an investor from the neighbouring European countries consider the non-EC member islands, particularly the financial centres of Guernsey and Jersey, as alternatives to the established tax and financial havens of Austria, Luxembourg and Switzerland where their money is threatened by EC withholding taxes. Each island has it's own features and individual advantages. The best way to examine the Channel Islands is individually. We'll start with the well known ones first. Jersey There are more than 60 banks in Jersey, most of them major British, French and American banks. These banks administer over 50 billion pounds (that's over 100 billion Australian dollars) and nearly all of it comes from somewhere other than Jersey. The whole place is wall to wall accountants, solicitors, brokers, investment managers and trust fund managers. The reason for all this financial activity on an island with 83,000 people is simple, tax savings. Individuals and companies pay a flat 20% tax each year and offshore companies can get away with only paying a fixed 500 pounds each year if they comply with the offshore company requirement, regardless of how much profit they make. The offshore company requirement is that the majority of the company's management should not be residents of Jersey. Unfortunately, bearer shares are not permitted in Jersey or anywhere else in the Channel Islands. The Financial Services Department who administer company affairs, will not disclose information to any foreign governments. This brings us to the possibilities of residency, forget it! Due to the introduction of the Jersey Housing Law of

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Financial Freedom & Privacy 1949, they allow only a handful of people to take up residency in Jersey each year and you won't even get a look in if you can't produce proof of wealth exceeding several million pounds. A word of warning, Westpac Bank is a big player in Jersey, don't be tempted to use an Australian Bank as they can easily link you to other accounts in Australia and this could be detrimental to your confidentiality. An added benefit when banking in Jersey is that the Jersey Government guarantees 100% of bank deposits up to 30,000 pounds, 90% of the next 20,000 pounds. This allows you to invest 50,000 pounds and be guaranteed 48,000 'if the sky falls in'. Don't discount Jersey just because you can't live there, it's a great place for a holiday and the tax benefits are worth looking into. If you are after general information you can obtain a colour brochure from Jersey Tourism, Liberation Square, St Helier, Jersey JE1 1BB, Channel Islands. Incorporation will take about two weeks and will cost about 650 pounds and you will need at least three members (although you can use nominees).The capital of the company can be any value you like. A register of shareholders must be allowed public access at the registered office but nominee shareholders are not identified as nominees. Tax for offshore companies is 500 pounds regardless of how much money you make. Banks Bank of Bermuda Private Client Services Bermuda Trust (Jersey) Limited Bermuda House Green Street St. Helier, Jersey JE4 8TG Channel Islands John H. Ruddy, Managing Director Telephone: 0011 44 1534 814400 Fax: 0015 441534 814474 Investment Management and Stockbroking Services Le Masurier, James & Chinn Limited Bermuda House Green Street

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The Invisible World St. Helier, Jersey JE4 8TG Channel Islands Darren Zaman, Managing Director Telephone: 0011 44 1534 616400 Fax: 0015 44 1534 727821 Agent Ernst and Young PO Box 621 St Helier, Jersey CI Phone : 0011 44 1534 501000 Fax : 0015 44 1534 23265 Jersey in a Nutshell Security 4 Bank Secrecy 3 Potential Tax Savings 3 Residency Possibilities 0 Guernsey The second largest of the Channel Islands accommodates about 80 banks that administer nearly 30 billion pounds. There are about 15,000 limited companies registered in Guernsey. If the authorities were to make enquiries about any companies registered there, they would be told the name of the directors and the shareholders and nothing else. The companies do not lodge accounts and the beneficial owners are also not reported. The Guernsey authorities, as with any other tax haven authorities, only have to betray one company's trust or even hint about tightening regulations, and the whole place will close down overnight as money goes to greener and less regulated pastures. Like Jersey they have a bank deposit guarantee scheme. The government guarantees all bank deposits at the rate of 90% for the first 50,000 pounds and 30% for the next 50,000 pounds. This is a government policy put in place to give you a warm and cosy feeling inside. I hardly think that with the amount of money invested in these places, a bank will ever have a problem dealing with your withdrawal. Of course if Nick Leeson (of the Singapore Barings Bank collapse fame) ever appeared as an employee at your bank, I would consider closing all accounts immediately. Guernsey is in many ways

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Financial Freedom & Privacy similar to Jersey. The tax situation is much the same as Jersey with local companies and individuals paying 20% and foreign non-resident companies paying a flat fee of 500 pounds. Incorporation on the Channel Island of your choice will cost about 500 pounds and can be arranged by Overseas Company Registration Agents on the Isle of Man or any of the agents below. However, on Guernsey you will need to capitalise the company to at least 10,000 pounds and the incorporation must have Royal Court approval. To gain residency in Guernsey is a little easier than in Jersey, the authorities take the attitude that if you can afford real estate there you can be a resident. A small cottage will cost you about 250,000 pounds (over half a million dollars!). The name of a local real estate agent is Martel Maides, Le Pelley, 50 Highcrest St, St Peter Port, Guernsey. Guernsey is less overrun by tourists than Jersey and affords a quieter lifestyle and Guernsey appears more up market and expensive than Jersey. Bank Bank of Bermuda (Guernsey) Limited Bermuda House St. Julian's Avenue St. Peter Port Guernsey, GY1 3NF Channel Islands Telephone: 0011 44 1481 707000 Fax: 0015 44 1481 726987 Guiness Mahon PO Box 188 La Vieille Cour St Peter Port, Guernsey CI Phone : 0011 44 1481 723506 Fax : 0015 44 1481 720844 Agent Channel Trust Ltd PO Box 203 St Johns House Union St, St Peter Port Guernsey CI

Coutts Guernsey PO Box 16 St Peter Port, Guernsey CI Phone: 0011 44 1481 708457 Fax: 0015 44 1481 728272

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The Invisible World Phone : 0011 44 1481 721896 Fax : 0015 44 1481 724800 Guernsey in a Nutshell Security 4 Bank Secrecy 3 Potential Tax Savings 3 Residency Possibilities 1 Alderney Alderney is the third largest island with a population of 2,100. The tax situation on Alderney is exactly the same as Guernsey and Jersey. Incorporation is a relatively simple procedure and can be arranged through a local solicitor. Incorporation will cost about 700 pounds, pricey but you will have a genuine Alderney Co. Ltd. Alderney is also reasonably pleasant place to live. It has a growing tourist industry and all the things that go with it such as hotels, restaurants etc. The authorities in Alderney are far more amenable to foreigners taking up residence and you shouldn't have too many problems. All in all, not a bad place to establish a corporate base. Agent Mr John Kay-Mouat, 11 Victoria St, St Anne, Alderney CI Fax : 0015 44 1481 822065. Alderney in a Nutshell Security 4 Bank Secrecy 3 Potential Tax Savings 3 Residency Possibilities 3 Sark During the 100 years war between England and France, Sir Helier de Carteret, tenant of Jersey, requested Queen Elizabeth I to grant him the island of Sark. He told Her Majesty that he would repopulate the island after war had all but destroyed it. The Queen agreed on the basis that the island should never be sold without the consent of the Crown and that at least 40 men should be stationed on the island to defend it against French

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Financial Freedom & Privacy invaders. Sir Helier agreed and set off with 39 armed followers, later known as the 'tenants'. The island was divided up into 40 parts and each man granted a tenement. To this day, this feudal system is still in place. The descendants of Sir Helier still 'rule' over the island. The Seigneur, as he is known must give his consent before a tenant can sell his tenement. If the Seigneur does agree, one thirteenth of the sale price must be paid to him. In addition each tenant must give him one chicken each year for each chimney they own or pay him the current market price of a chicken. The Seigneur must pay the Crown 2 pounds each year as a tribute. If you were ever offered, or saw a tenement for sale - don't hesitate, buy it if you can afford 300,000 pounds. Unfortunately, they only come up every 10 or 20 years. The benefits of owning a tenement are enormous. Sark is absolutely tax free. You can pass on the tenement to your heirs for hundreds of years. You are then entitled to a seat in Sark's parliament. Also, you can rent out guestrooms to tourists and make a tax free living. Sark currently attracts nearly 100,000 tourists per year. What if you can't afford 300,000 pounds? You can still obtain residency by renting a cottage or room and staying on Sark for 210 days per year. This would allow you the tax free status the other 600 residents enjoy. There are also some smaller freehold properties that come up for sale from time to time. This may be a less expensive option. The downside or upside, depending on your point of view, is there are no cars, solicitors, police, government departments, theatres, local newspapers, television stations, AIDS, drugs, crime, servants, unions. There are of course pubs, restaurants, telephones, banks, electricity, bicycles, shops, ferry services and sheep. I'm told if you actually go to Sark and meet with one of the 'tenants', you can join what is called the Sark Club. This semi-official club was established by an influential local so foreigners can enjoy the benefits of Sark without having to actually live there. After acceptance into the club (and clearance of your cheque) you will be furnished with a postal and residential address, a lease document which allows you to open a local bank account, your own telephone number with answering machine, listing in the local telephone book and drivers license for driving the tractors on the island.

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The Invisible World Near the island of Sark, there is the smaller islet of Brecqhou. The two islands are separated by 75 metres of water. Brecqhou, was one of the original 40 tenements, and was until recently in the possession of the 78year-old Leonard Matchan. Now deceased, he was one of the most well known figures of Sark. He worked his way up from an office boy to become head of a group of industrial companies with sales worth several millions pounds. The self made man used to preside over his companies from Brecqhou, which he reached by helicopter, with the help of a phone and a handful of employees. During a session of the Sark Island parliament, which he seldom missed, one of the other members of parliament wanted to forbid him his helicopter. “Okay!”, he said. He then reminded them of his right to collect the stipulated 6 pence per annum from the parliament for every rabbit caught on Brecqhou. The islet of Brecquou is plagued with rabbits. The helicopter stayed. These days the island of Brecquou is occupied by British multimillionaires, the Barclay brothers, who have built a huge Gothic castle on the island to use as their business base. Sark in a Nutshell Security 4 Bank Secrecy 3 Potential Tax Savings 3 Residency Possibilities 0 Herm The smallest of the main islands, Herm has about 40 permanent residents and about 200 more during the summer. The island is popular with tourists and hosts 60,000 annually. The locals are subject to the same tax regulations as Guernsey and Jersey, 20% flat per annum. The island unfortunately doesn't really cater to foreign investors or tax exiles, ie there are no solicitors, accountants etc. The chance of residency is virtually zero unless you marry one of the residents. One interesting thing to note about Herm is the fact there are more kangaroos on the island than people. At the turn of the century a German Prince became the islands leaseholder. This caused rumours to circulate that the Germans were going to establish a naval base there, but instead the eccentric prince imported two kangaroos.

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Financial Freedom & Privacy Since then their numbers have continued to multiply. Herm in a Nutshell Security 4 Bank Secrecy 3 Potential Tax Savings 2 Residency Possibilities 0 Channel Islands in a Nut shell Language : English Location : Off the coast of France in the English Channel Population : 149,000 Democracy : Yes, possession of English Crown Currency : British Pounds Religion : Protestant and Catholic

Cook Islands The Offshore Finance Institute in Los Angeles described the Cook Islands as the "Switzerland of the Pacific" and to use them for "profit, confidentiality and savings on taxes". A totally tax exempt 'International Company' will cost NZ$2,500 to cover incorporation and NZ$1,000 per year to cover the cost of renewal. Bearer shares are permitted. Only one director is required for International Companies and there is no need for that director to be a resident. However, the secretary must be a resident but there are many solicitors and accountants that are willing

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The Invisible World to act in this capacity for you. The principals of International Companies can remain anonymous, as there is no obligation to disclose these details. Each year an annual return must be lodged. Trust companies are a little more expensive to establish and maintain. All incorporations can be done in a couple of days if you need a company fast. Incorporating Banks and Insurance companies is also possible. To operate an 'offshore only' bank, it will cost you NZ$3,000 to NZ$10,000 per annum depending how many different currencies you want to deal with. Insurance companies will cost you about NZ$7,000 to incorporate and NZ$4,000 to maintain. Both Banks and Insurance companies are protected by strict secrecy laws. No taxes are imposed on offshore companies, the only cost being renewal fees. The Cook Islands are politically stable and are a self governing protectorate of New Zealand. Australians and New Zealanders have been using the islands as an offshore financial centre for years. I personally think it is a little too close to home politically speaking and I feel if push came to shove your details and confidentiality could be compromised. The two major banks in the Cook Islands are the ANZ and Westpac, need I say more? Having said that, the islands have strict bank secrecy laws and only impose exchange regulation on NZ dollars. The Cook Islands are rated among the world's top tax havens when it comes to 'Asset Protection'. In November 1996 they amended their International Trusts Act 1984 with the most comprehensive laws in existence. In these amendments they have now allowed for trusts to continue literally forever. The changes also allow for the trustee to vary the date of termination if he wishes and has the consent of the interested parties. The trust is now regarded as an entity and can for instance purchase property in it's own name. A custodian trustee holds title to and has possession of the assets, while a managing trustee will make all decisions regarding the management and administration of the Trust. If a claimant were to seek redress from the trust's assets, they would normally bring this action by naming the managing trustee as the defendant on behalf of the trust. The trust instrument now provides for the managing trustee to be automatically removed and the custodian trustee in another country would take over as the managing trustee and the trusts defendant. What would this mean to the claimant? They would have to start the whole

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Financial Freedom & Privacy process again starting from scratch. By this time the statute of limitations would probably be starting to come into effect and the whole process of litigation would collapse. You can contact the Cook Islands Monetary Board, PO Box 594, Raratonga, Cook Islands. If you wish to take up residence in the Cook Islands, the individual tax rate will be between 5% and 35% and companies will be charged 20%. If you establish an approved development industry company, you will be taxed only 5% of profits. To gain residency you must either take out a government approved investment or get a job a local can't do. Another option is to invest from a distance, Cook Islands Government Bonds are tax free investments, contact Cook Islands Inland Revenue Dept., PO Box 120, Raratonga. Banks Bermuda Trust (Cook Islands) Limited Bermuda House P.O. Box 25 Tutakimoa Road Rarotonga, Cook Islands Telephone: 0011 682 22680 Fax: 0011 682 20566 Agents Asiaciti Trust Pacific Limited Level 2, BCI House, P O Box 822, Rarotonga, Cook Islands Tel: 0011 (682) 23387/23090 Fax: 0015 (682) 23385 For further information, please send email to [email protected] European Pacific Trust Company European Pacific Centre Tutakimoa Rd PO Box 25 Raratonga Cook Islands Phone : 0011 682 22680 Fax : 0015 682 20566

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The Invisible World Cook Islands in a Nut shell Language : English Location : In the Pacific, North of New Zealand Population : 19,000 Democracy : Yes Currency : New Zealand Dollars Religion : Protestant Security 4 Bank Secrecy 3 Potential Tax Savings 3 Residency Possibilities 3

Costa Rica This central American republic suffers all the usual ailments associated with 'banana republics', a huge bureaucracy, inefficient government services, high inflation, corrupt police and dishonest locals, however things are rapidly improving with many positive reports being made and there are a couple of things that make up for all the bad things. Tax savings and ease of obtaining residency. All income earned outside of Costa Rica is exempt from tax and income earned locally is taxed at a maximum of 50%. Taxation on dividends from Costa Rican companies is only 5% if you happen to be a local and 15% if you are a nonresident. So theoretically, you can gain residency there, live somewhere else (as long as you spend four months of the year in the country), receive income from somewhere else, pay no tax and live happily ever after.

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Financial Freedom & Privacy To gain residency you must be a person of good standing (no criminal record) you must be able to prove an income of not less than US$1,000 per month. But if you were considering moving to Costa Rica or at least appearing as though you are, you would obviously pass this test quite easily. Each month you will have to have your minimum income exchanged for local currency at a local bank and the receipts presented to the Costa Rica Tourism Institute every two years to have your residency permit re-validated. To organise this initially, you will need the help of the Association of Resident Pensionados, Calle 5 y Avendia 4, Edificio ICT , San Jose, Costa Rica. This service will cost US$600 plus US$35 per year membership fee. The incorporation of a Costa Rican company will cost about US$1,000 minimum and takes about a month. You must submit a tax return each year and declare all income regardless of whether or not it's taxable. Bearer Shares were eliminated in 1988 but you can endorse shares in 'blank', which in effect will give a degree of anonymity. One shareholder and three directors are required. There is no stipulation on residency or nationality, which makes it easier and cheaper as you don't have to employ local nominee directors. As mentioned earlier in this book, Costa Rican bank secrecy is protected by law. If, by chance you were seriously thinking of moving to Costa Rica, not only would you be welcomed with open arms, they will toss a tax holiday of up to twelve years in for free if you export anything. Non-traditional exports get the longest tax breaks. All in all, an Australian could live like a king in Costa Rica if you could tolerate the tropical weather and lack of culture and relative order as we know it. Bank Citicorp (Costa Rica) Edificio Plaza de la Artilleria Avenidas Central y Primera Calle 4, San Jose, Costa Rica Fax: 0015 506 296 2458

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The Invisible World Agent Executive Offices P.O. Box 199-1260 Plaza Colonial, Escazú, San José, Costa Rica. Tel. 0011 506 388-8679 Fax.0011 506288-3465 www.executiveoffices.ws Costa Rica in a Nut shell Language : Spanish, English widely understood Location : Central America Population : 2,950,000 Democracy : Yes Currency : Costa Rican Colon Religion : Roman Catholic Security 3 Bank Secrecy 4 Potential Tax Savings 4 Residency Possibilities 4

Delaware, USA When the first edition came out, I had several people writing to me asking why I didn't include Delaware in my list of tax havens as they had been using the small state in the US for years. The reason is, I don't really see it as a tax haven, it's more of a cheap place to incorporate an offshore company. To satisfy those people and also the curiosity of others whom I'm sure have heard of cheap companies being available in Delaware, here it is. Delaware is a small state on the east coast of the US with a population of 650,000. The myth of being able to purchase a Delaware company for $50 is just that. If you were a Delaware resident and did all the form completion yourself and did the running around lodging forms it would cost you about US$80. Unfortunately, you must employ an agent to do it for

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Financial Freedom & Privacy you and this will cost you about US$300 to US$2,000 depending on what you want. According to Delaware's records almost one third of all companies listed on the New York Stock Exchange are incorporated in Delaware. As well as being reasonably cheap there are other advantages, only one person is needed to incorporate and run the company, no identification is required and there is no minimum capitalisation required. The small downside is that you must maintain an office there and that will cost a few hundred dollars per year. There is no requirement to lodge tax returns in the USA as long as your income is not derived or passed through the US. My concern comes from the fact that the US and Australia cooperate on the exchange of information and if push came to shove the authorities would be able to track down companies in your name quite easily as could anybody else seeking to find out financial information on you. The only way to avoid this little problem is to ensure the company is not in your name and no funds of any description pass through the US or any other country that has exchange of information agreements with the US. Agent CorpAmerica, Inc 30 Old Rudnick Lane, Dover, Delaware 19901 USA Phone : 0011 1 302 736 5510 Fax : 0015 1 302 736 5620 e-mail : [email protected] Net Address : http://www.corpamerica.com This company can incorporate a company in any state of America at between US$300 and US$400 and it can be done on the internet from Australia instantly. They will ship everything to via airmail. Delaware in a Nut shell Language : English Location : US east coast Population : 650,000 Democracy : Yes, part of the US Currency : US dollar Religion : Various Security 4 Bank Secrecy 0 Potential Tax Savings 2

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The Invisible World Residency Possibilities 1

Commonwealth of Dominica The Commonwealth of Dominica is an English speaking country that is often confused with the Dominican Republic, which is the Spanish speaking country that shares the island of Hispaniola, with French speaking Haiti. The Commonwealth of Dominica, is approximately 300 sq. miles in area and is situated in the Caribbean. Dominica is the member of the British Commonwealth and has been stable politically and economically since independence was granted in 1978. The Offshore Banking Act 1996 provides for the granting of licences in the areas of onshore and offshore banking, general trusts, and restricted trusts. The International Business Companies Act was also passed in 1996 an it seeks to develop Dominica as a tax-free domicile for international companies by offering a twenty-year exemption from all taxes and duties to all IBCs incorporated in Dominica. Bearer shares are permitted and companies can be set up within twenty four hours. The Dominican Offshore Banking Act Section 57 to 59 of the Offshore Banking Act No. 8 of 1996 contains tax exemption provisions for non-resident owners and non-resident customers/depositors of an offshore bank. There are also no income tax, capital gains tax or other direct tax levied in Dominica upon the profits or gains of a licencee in respect of offshore banking business which it carries on from within Dominica. In addition, there is no asset transfer tax or withholding taxes. Bank secrecy works well although under the Caribbean Basin Initiative there is an exchange of information with the US government. Under the Tax Information Exchange Agreement signed with the US in 1998, Dominica cannot "supply particular items of information which are not obtained under the laws or in the normal course of the administration of [the

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Financial Freedom & Privacy laws of Dominica]" or "carry out administrative measures at variance with laws and administrative practice of [Dominica]." Therefore, Dominica doesn’t have an obligation to provide any tax information to any foreign country in respect of banks, trusts or IBCs. Dominica also operates a second citizenship program that will allow a family or four to immigrate or just have another passport for US$50,000. Alternatively, you can buy a government bond for US$75,000. It pays 2% over 15 years. I wonder which option Christopher Skase took? Agent Caribbean Investments Ltd PO Box 320 10 Old St, Roseau, Dominica Phone: 0011 1 767 448 4771

Fax: 0015 1 767 448 7376

Bank Griffon Bank 17 Great Marlborough Street, Roseau Commonwealth of Dominica, West Indies. Postal address P.O. Box 1324, Roseau, Commonwealth of Dominica, West Indies Telephones: 0011 1 767 449 9254 or 0011 1 767 449 2518 Fax: 0011 1 767 449 9257 General inquiries: [email protected] New accounts: [email protected] Payment cards: [email protected] Technical support: [email protected] http://www.griffonbank.com/ This is a very good Internet Bank Dominica in a Nut shell Language : English Location : Caribbean Population : 83,000 Democracy : Yes Currency : East Caribbean Dollar Religion : Catholic

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The Invisible World Security 3 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 3

Dominican Republic All foreign earned income is tax free, simple as that. You can retire to the Caribbean republic and collect your Austrian (or whatever) bank account income tax free. Bank secrecy is guaranteed by law with possible imprisonment for the offender. The Dominican Republic also offers a range of tax free and customs duty exempt schemes to encourage people to set up businesses here. The greatest benefits arise from export related enterprises. The government also favours tourism and agriculture when it comes to tax concessions. In all cases these benefits are only available for set periods, which range from 8 to 20 years. Over the last 20 years the country has enjoyed relatively stable democratic conditions. Although there tends to be a little social unrest from time to time due to the high unemployment rate of 20%. Infrastructure and living standards are quite reasonable. Generally, prices are cheap by Australian standards. The country is unusual for this part of the world with almost one third of the people being of European or American origin. The rest of the population is of mixed race with about 15% being black. Residency and immigration for Europeans, Americans, British, Canadians and Australians is almost guaranteed if you have external income or plan to set up a business and employ locals. In two years you can be naturalised and possibly even earlier. Bank Banco Mercantil SA Av. Roberto Pastoriza 303 Santo Domingo Republica Dominica Phone: 0011 1809 567 4444

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Financial Freedom & Privacy Fax: 0015 1809 567 5985 Dominican Republic in a Nut shell Language : Spanish Location : Caribbean Population : 8,000,000 Democracy : Yes Currency : Dominican Peso Religion : Roman Catholic Security 2 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 4

Dubai The Emirate of Dubai extends along the Arabian Gulf coast of the UAE for approximately 72 kilometres. Dubai has an area of c. 3,885 square kilometres, which is equivalent to 5 per cent of the country's total area, excluding the islands. The major part of the Dubai emirate consists of rolling sand dunes lapping the foothills of the arid Hajar mountains in the east. Dubai city is built along the edge of a narrow 10-kilometre long, winding creek which divides the southern section of Bur Dubai, the city's traditional heart, from the northern area of Deira. It had grown gradually from a fishing village inhabited in the 18th century by members of the Bani Yas tribe. Its origins, however, go back into the far more distant past. The town’s museum displays a rich collection of objects found in graves of the first

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The Invisible World millenium BC at nearby Al-Qusais, while a caravan station of the sixth century AD was excavated in the expatriate suburb of Jumairah. Beginning in 1820, Great Britain entered into treaties with various leaders in the area out of a desire to protect its ships in the Gulf and the Indian Ocean. In addition, Britain was allowed to handle foreign relations for the area known as "Trucial Oman" or "the Trucial States" because of the Perpetual Maritime Truce which the Arab rulers signed with the British in 1853. The United Arab Emirates became fully independent on 2 December 1971, although Ras al-Khaimah did not join until 1972. By the turn of the 20th century Dubai was a sufficiently prosperous port to attract settlers from Iran, India and Baluchistan, while the souk on Deira side was thought to be the largest on the coast, with some 350 shops. The facilities for trade and free enterprise were enough to make Dubai a natural haven for merchants who left Lingah, on the Persian coast, after the introduction of high customs’ dues there in 1902. These people were mostly of distant Arab origin and Sunni, unlike most Persians, and naturally looked across to the Arab shore of the Gulf finally making their homes in Dubai. There are no taxes to speak of. Apart from the oil industry and domestic banking, there are no income or capital taxes in Dubai, and no withholding tax. Dubai has a number of double tax treaties with high-tax countries and is often used in international tax planning by major corporations. Dubai belongs to the unified customs area of the Gulf Cooperation Council which came into effect on 1st January 2003 and covers Kuwait, Qatar, Oman, Saudi Arabia, Bahrain, and the United Arab Emirates (including Dubai). There are no elections or legal political parties in the UAE. Power rests with the seven hereditary sheikhs -- also known as emirs, and hence the area ruled by an emir is known as an emirate -- who control the seven traditional sheikhdoms (Abu Dhabi, Dubai, Sharjah, Ajman, Umm alQaiwain, Ras al-Khaimah and Fujairah -- each emirate is named after its principal town) and choose a president from among themselves. Since 1971, the ruler of Abu Dhabi, Sheikh Zaid bin Sultan al-Nahayan, has been president. In 2000, the Government began to construct Dubai Investment Park, also known as Dubai Internet City (DIC), which has a highly developed

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Financial Freedom & Privacy technical infrastructure. The first phase of the project was completed in 2002. Hundreds of international companies have already taken out licenses to locate in DIC and e-commerce is rapidly developing in Dubai. The DIC occupies 3,200 hectares in the South of Dubai, near the Jebel Ali Free Zone. When completed, the DIP will offer state of the art facilities and sites for manufacturing, offices, housing, and academic, research, distributions and logistics institutions. According to the project's Managing Director, 35% of the space has been earmarked for industries, 20% for residential housing, 40% for infrastructure, landscaping, and recreational facilities, with the remainder to be allocated to regional offices, headquarters, showrooms, and business centres. During 2002, Dubai developed plans for the Dubai International Financial Centre (DIFC), intended to be a major financial entrepot; a proposed regulatory structure for the DIFC was published in June, 2003. It is hoped that the DIFC, when it is up and running, will double - to 20% - the financial sector's contribution to the GDP of the United Arab Emirates by 2010 The basic requirement for all business activity in Dubai is one of the following three categories of licence: •

Commercial licences covering all kinds of trading activity;

•

Professional licences covering professions, services, craftsmen and artisans;

•

Industrial licences for establishing industrial or manufacturing activity.

These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health. Fifty-one per cent participation by UAE nationals is the general requirement for all Dubai-established companies except: •

Where the law requires 100% local ownership;

•

In the Jebel Ali Free Zone;

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The Invisible World •

In activities open to 100% AGCC (Gulf Cooperation Council) ownership;

•

Where wholly owned AGCC companies enter into partnership with UAE nationals;

•

In respect of foreign companies registering branches or a representative office in Dubai;

•

In professional or artisan companies where 100% foreign ownership is permitted.

The Jebel Ali Free Zone The Jebel Ali Free Zone (JAFZ) was established in 1985 with the specific purpose of facilitating investment. Accordingly, the procedures for setting up in the zone are relatively simple. Its legal status is quite distinct: companies operating there are treated as being "offshore", or outside the UAE for legal purposes. The option of setting up in Jebel Ali is therefore most suitable for companies intending to use Dubai as a regional manufacturing or distribution base and where most or all of their turnover is going to be outside the UAE. 100% foreign ownership is permitted in the JAFZ. There is exemption from all import duties and 100% repatriation of capital and profits is guaranteed. There is freedom from corporate taxation, as applied throughout Dubai, with the added bonus of a renewable 15 year guarantee in the Free Zone. There is a high level of administrative support from the Free Zone Authority. Companies approved for operation in Jebel Ali Free Zone will be granted one of the following types of licences, renewable annually for as long as the company holds a valid lease from the Free Zone Authority: •

Trading licences will be granted to companies holding a valid licence issued by the Dubai Economic Department or an equivalent authority in the UAE, and to companies incorporated outside the UAE. In each case, the permitted activities on the Free Zone licence must conform to those on the existing licence. Trading licences are also issued to Free Zone Establishments (FZE).

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Financial Freedom & Privacy •

Industrial licences are issued to companies incorporated outside the UAE and to Free Zone Establishments. Service licences are only granted to companies holding a valid UAE licence.

•

National Industrial licences are issued to industrial companies registered within or outside the UAE, provided they meet the conditions of having at least 51% AGCC (Gulf Cooperation Council) equity and their local production accounting for at least 40% value added. Such companies must obtain the provisional approval of the UAE Ministry of Finance and Industry. A National Industrial licence grants its holder the same rights as those of national and AGCC companies, and products exported to AGCC states will be exempted from customs duties.

If a company wishes to practice more than one of the above mentioned activities, it must obtain a separate licence for each category of activity. Companies holding a Free Zone licence are permitted to operate in the Jebel Ali Free Zone and outside the UAE. Operation within the UAE can be undertaken either by a commercial agent, representative, distributor, or the mother company licensed by the relevant UAE authority. Any company holding a Free Zone licence can itself purchase goods or services within the UAE. Any company wishing to set up a project in Jebel Ali Free Zone must first complete a simple questionnaire. The license application process then takes place and will include a meeting to discuss and finalise the project details. If everything is satisfactory, the Authority will issue conditional approval for the project. Thereafter, a lease agreement and, if required, a personnel secondment agreement will be prepared by the Authority for signature by the company. At the time of signing, the applicant will be required to provide the insurance policies called for in the agreements and should pay the agreed rental and licence fee prior to collection of the licence. If the company wishes the Free Zone Authority to sponsor employees on its behalf, applications for entry permits may be submitted once the licence has been issued. The bank guarantee called for in the personnel secondment agreement will be required at this stage together with visa charges. If the company's project involves the erection of a structure, detailed plans must be submitted after the lease has been signed. When the plans have been

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The Invisible World agreed, a building permit will be issued. Administrative work, such as importing equipment or engaging labour for installation of equipment, may proceed in parallel with construction work. But application for entry permits for operatives to be sponsored by the Free Zone Authority will not normally be accepted until a completion certificate for the construction has been issued. A Free Zone Establishment - or FZE - is an establishment formed and registered in Jebel Ali and regulated solely by the Free Zone Authority. Such establishments must have a capital of at least Dh 1 million and liability will be limited to the amount of paid-up capital. A FZE need only have a single shareholder and is an independent legal entity. Any company, organisation or individual wishing to form a Free Zone Establishment must submit a completed application form to the FZE Department of the Free Zone Authority. A decision on whether permission has been granted will be given within 30 days of receipt of the application and any other information and documentation required. If permission is granted, the Authority will record all relevant details in the FZE Register and issue a Certificate of Formation. This will specify the date of registration after which the FZE will be free to conduct any such business as is permitted in its Special Licence. The free zone is already the base of more than 1,400 companies from more than 80 countries, including many Fortune global companies such as ABB, Acer, Black and Decker, BP Amoco, Cussons, CIBA-Geigy, ColgatePalmolive, Daewoo, Fuji, HJ Heinz, Honda, Itochu, JVC, Komatsu, Matsushita, Mitsubishi, Nestle, Nissan, Nokia, Philips, Samsung, Sanyo, Sharp, Shell, Sony, Toshiba, and Unilever. The Free Zone and Dubai Ports Authority (DPA) are inextricably linked, they are led by one chairman and share a strong, symbiotic relationship. The Free Zone is built around the DPA's Jebel Ali terminal, enabling customers to take full advantage of the port's ISO-certified container and general cargo operations. Specialized unloading facilities and purpose-built storage such as the cool and cold stores are also at the disposal of Free Zone companies. Jebel Ali terminal offers efficient cargo handling, and with rates among the lowest in the world, the prospect for exporting is good.

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Financial Freedom & Privacy In February 2000 Dubai ruler Sheikh Maktoum bin Rashid al-Maktoum issued a decree setting up a free-trade zone for electronic commerce and technology, to be known as Dubai Internet City. Legal and fiscal privileges in the DIC are similar to those applying in the Free Zone. The physical location of the Internet City is on Sheikh Zayed Road, next to the American University.This area overlooks the Emirates hills golf course development. The City opened for business in late 2000; highlights include: •

World class technical infrastructure: high bandwidth, low cost telecom infrastructure and secure, high speed support infrastructure;

•

State-of-the-art urban infrastructure: cost competitive, flexible office space and world class housing, medical and education facilities;

•

Access to talent pool: large pool of high skill, low cost knowledge workers;

•

Straight-forward laws and regulations: easy and fast company registration laws, hassle-free immigration process and straight forward legal procedures;

•

Supportive environment: Government backed e-business initiatives, business incubators, venture capital funds and e-education programs; Gateway to markets: access to regional markets in Middle East, North Africa, Indian Subcontinent and CIS.

In July 2000 Siemens Business Services (SBS) was awarded a major contract which will provide the City with a world-class technical infrastructure. The infrastructure will also utilize leading edge technology from Cisco Systems International and Sun Microsystems. Agent Advocate Jorg Seifert Al Sharif Advocates & Legal Consultants International Section, Marriott Hotel/Hamarain Centre, Gate 8, 1st Floor, PO Box 8867 Dubai, UAE Tel: 0011 9714 2628 222

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The Invisible World Fax: 0015 9714 2628 111 Banks ABN-AMRO Bank N.V. PO Box 2567 Dubai Telephone 0011 9714 3512 200 Fax 0015 9714 3511 555 Credit Suisse PO Box 33660 Dubai Telephone 0011 9714 2274 780 Fax 0015 9714 2274 745 Lloyds Bank PLC PO Box 3766 Dubai Telephone 00119714 3422 000 Fax 0015 9714 3422 660 Dubai in a Nut shell Language : Arabic, English Location : Middle East Population : 3,000,000 (UAE) Democracy : No Currency : UAE Dirham Religion : Islam Security 3 Bank Secrecy 2 Potential Tax Savings 3 Residency Possibilities 3

Gibraltar Gibraltar is a small peninsula on the southern tip of Spain. It is a British colony and is the home to 30,000 people. Gibraltar has developed or has been developed into a paper company and tax haven.

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Financial Freedom & Privacy There are basically five types of company available to investors in Gibraltar. They are : The non-resident controlled company can be formed with capital of 2 pounds and is not permitted to trade in Gibraltar except with other non-resident companies. It is not liable to tax on income earned outside Gibraltar. A yearly fee of 25 pounds is charged. Locals are not permitted to hold shares in this type of company but they can act as trustees. The tax exempt company must be formed with at least 100 pounds and is not permitted to trade in Gibraltar except with other tax exempt companies. It is not liable to tax on income earned outside Gibraltar. An application must be lodged to the Financial and Development Secretary to obtain the tax exempt status which is then guaranteed for 25 years. A yearly fee of 225 pounds is charged. Locals are not permitted to hold shares in this type of company. The qualifying company, which allows a mixture of overseas and local trading. It must be capitalised with at least 1,000 pounds. Total profits are taxed at between 2% and 18%. The holding company or the Gibraltar 1992 company, which has been setup to allow larger multinational companies establish branch offices in Gibraltar. Capitalisation is a minimum 1,000 pounds. The advantage of this structure is that dividends from other subsidiaries in EC countries can transfer to Gibraltar and only pay 1% withholding tax on all profits leaving the colony. The downside of this type of company is the requirement to employ at least two locals and to maintain an office of at least 450 sq. feet.

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The Invisible World Active local companies pay 35% company tax on profits. Incorporation costs start at about 300 pounds. In Gibraltar there are over 20,000 companies registered taking advantage of the tax savings. There are also 50 banks and credit institutions, 12 accounting firms and 50 law firms in a town the size of Tamworth in NSW. There is a wide range of services available to the international investor. The banks there accept deposits in all major world currencies as there are no restrictions on foreign exchange. Investment funds and gold bullion accounts will be available shortly, if not already. Even borrowing money that is exempt from withholding tax. Trusts can also be established. They have terms for a maximum 100 years and they don't have to be officially registered which gives you assured confidentiality. Gaining residency or immigrating, I'm told, is not overly difficult for EC or Commonwealth nation citizens but there are a few rules. Tax rates as a normal Gibraltarian can be as high as 50%, so first check out the possibility that you may be entitled to preferential tax treatment. Preferential treatment is only bestowed on people that pass the following conditions: • The individual must pay a minimum 10,000 pounds per year, maximum 20,000 pounds per year. • The individual must reside in Gibraltar for at least 30 days per calendar year. • The individual must maintain a permanent residence that is accredited by the government. Now, if you qualify for preferential treatment as detailed above, you could possibly save yourself a fortune if you were earning in excess of say, A$250,000 per year. The other way to obtain preferential tax treatment is to qualify as a transferred executive from a multinational company (a so called 1992 company) or it should be a qualified company incorporated after 1 January

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Financial Freedom & Privacy 1992. If you qualify on this basis then the maximum you will pay will be 10,000 pounds tax. This arrangement will only last for five years. The downside for Gibraltar residents is the inheritance tax that can be as high as 25%. So whatever you do, don't die there, your relatives will hate you. Other advantages of gaining residency in Gibraltar are substantial savings on cars due to their tax free status and being able live and travel in any EC country because Gibraltar is a member of the EC. Also there are subsidised flights to London. Banks Hambros Bank Hambros House 32 Line Wall Rd PO Box 375 Gibraltar Phone : 0011 350 74850 Fax : 0015 350 79037 Credit Suisse Ltd Neptune House, Marina Bay P.O. Box 556 Gibraltar Tel.: 0011 350 783 99 Fax: 0011 350 760 27 Agents Sovereign Trust (Gibraltar) Limited Suite 2B Mansion House 143 Main Street Gibraltar Tel: 0011 350 76173 Fax: 0015 350 70158 E-mail: [email protected] Fidelity Corporate Services Ltd. Suite 2, Portland House Glacis Road, Gibraltar

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The Invisible World Tel: + 350 42400 Fax: + 350 79600 Email: [email protected] International Company Services Manor House, Suite 2B, 143 Main St Gibraltar Phone : 0011 350 76173 Fax : 0015 350 70158 Gibraltar in a Nut shell Language : English Location : Southern tip of Spain Population : 30,000 Democracy : British colony Currency : British Pound Religion : Christian Security 4 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 3

Hong Kong There are 160 banks with nearly 1,000 branches managing deposits of 60 billion Hong Kong dollars. It would be crazy for the Chinese to do anything else but to allow Hong Kong remain as the third most important financial centre in the world. So far, the Chinese have agreed to allow the stock exchange, gold markets, freeport, financial system and judicial system to remain untouched. Also they have agreed to allow Hong Kong Chinese to travel in and out of the country freely, unlike other Chinese. This will all remain intact for at least 50 years, after that, who knows? Then again after 50 years, who cares? It's not known whether the local tax system will remain in exactly its present form, but if it does, these are the details: 15% individual tax on employees 16.5% individual tax on self employed persons

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Financial Freedom & Privacy 15% profits tax on personal real estate 16.5% profits on commercial real estate 0% on income earned offshore 10%-18% inheritance tax on estates over HK$2 million. Only domestic income is taxed, not income earned elsewhere. There are no sales taxes, GST's, or Capital Gains taxes (apart from property). Bank secrecy is reasonable and there are no Double Taxation Agreements in force. There are no restrictions on the transfer of foreign currency and capital. Forming a company is a very simple matter and can be arranged in Australia or by contacting incorporation agents in Hong Kong. Each year nearly 40,000 new companies are established in Hong Kong, which gives you some idea of the continuing popularity of this low tax financial centre. It takes about two months to incorporate and it will cost you about HK$1,500. A shelf company will cost about HK$2,500 but it is far more convenient. In addition, you will be charged US$1,000 per year registration fee for a tax-exempt overseas operating company. Full service management companies can offer a registered office, form lodgement, use of address and telephone and fax numbers for about HK$5,000 per year. If you need nominee directors, this will cost extra. Bearer shares are not available in Hong Kong. Banks Chase Manhattan Bank 1 Exchange Sq.,40th Floor Hong Kong Phone : 0011 852 5841 4321 Fax : 0015 852 5841 4396 Hang Seng Bank Level 21, Hang Seng Headquarters 83 Des Voeux Road Central Hong Kong Phone 0011 852 2198 3418 Fax 0011 852 2537 1310 Agents Sovereign Trust (Hong Kong) Limited

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The Invisible World Suites 1601-1603, Kinwick Centre 32 Hollywood Road, Central Hong Kong Telephone Number: 0011 852 2542 1177 Fax Number: 0015 852 2545 0550 E-mail: [email protected] Overseas Company Registration Agents Asia Ltd. 24th Floor, Bank of America Tower, 12 Harcourt Rd., Hong Kong, Phone :0011 852 2522 0172 Fax : 0015 852 2521 1190 Hong Kong in a Nut shell Language : English and Chinese Location : South coast of China Population : 5,800,000 Democracy : British colony until 1997 Currency : HK Dollar Religion : Buddist Security 3 Bank Secrecy 2 Potential Tax Savings 3 Residency Possibilities 2

Ireland (Eire) I've read that 40% of Australians have some Irish ancestry and there are far more Irish people living outside of Ireland than within. It's hard to believe anybody would want to leave the place if you saw it. Unfortunately, it isn't a wealthy country although it is politically stable and has been since their independence in 1922. It is only British controlled Northern Ireland that has a problem.

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Financial Freedom & Privacy Incorporation in Ireland is inexpensive with costs ranging from A$500 to A$1,000. The company will need two incorporators and each must hold a shareholding, which can be just a single share. Nominees can be used when you require anonymity. Nonresident companies don't pay any tax on income derived outside of Ireland. Ireland is particularly keen to entice people that wish to establish businesses there and offer some very attractive incentives. Some of the things they are willing to offer are; 10% tax rate, special loans, cash grants and special depreciation rates. If you are interested in doing business in Ireland contact the Ireland Industrial Development Authority on 0011 353 1686633 or fax them on 0015 353 1603703. If you wish to become a permanent resident all you need to do is prove financial independence. All you have to do is register with the local police and once a year have your residency renewed which is done as a matter of course. After five years of continuous residency you can apply for indefinite residency. Dual citizenship is acceptable if you can show that one of your parents or grandparents were Irish born. The cost of living is quite cheap with homes in Dublin costing around A$200,000 and houses in the country as low as A$30,000. You can purchase a country estate on a few acres with a 10 bedroom 18th century home for about A$800,000. All in all, not a bad place to live if you like the weather, which is cool and wet. Bank Allied Irish Banks PLC Bankcentre, Ballbridge, Dublin 4, Ireland Phone: 0011 353 1 660 0311 Fax: 0015 353 1 660 1474

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The Invisible World Agent International Law Systems (Ireland) Ltd Merchant's House, 27-30 Merchant's Quay, Dublin 8, Ireland Telephone 0011 353 1 679 4159 Fax 0015 353 1 679 4835 Ireland in a Nut shell Language : English and Gaelic Location : British Isles Population : 3,600,000 Democracy : Yes Currency : Irish Pound Religion : Catholic Security 4 Bank Secrecy 3 Potential Tax Savings 3 Residency Possibilities 3

Isle of Man The Isle of Man is situated midway between Ireland and Britain in the Irish Sea. It is an independent nation although its foreign affairs and certain other issues are controlled by the UK. It has its own laws and own parliament. The tax rates are fairly favourable with a maximum of 20% imposed on companies and individuals. There are no inheritance, capital gains, property or gift taxes, but there is the British VAT in place. There are a number of different types of corporate body available within the present legislative frame work in the Isle of Man. These include:

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Financial Freedom & Privacy • public and private companies limited by shares • companies limited by guarantee, and • unlimited liability companies. A company can be incorporated in the Isle of Man provided the necessary approval is received from the Registrar of Companies. Application must firstly be made to the Registrar for approval of the company name, which will normally be given provided there is no conflict with an existing company. It is a requirement that the registered office of the company must be in the Isle of Man. The following are the basic legal requirements relating to a Manx private limited company: • There can be one or more shareholders. • Two directors and a secretary are required. There are no restrictions on the residence or nationality of the directors or secretary except in the case of exempt companies and exempt insurance companies. A company incorporated in the Isle of Man can undertake a wide variety of activities including investment and property holding, general trading, shipping, film production, captive insurance, personnel and consultancy services and international invoicing operations. The issued share capital of the company may be held directly or in the names of bare nominees subject in all cases to due diligence procedures being satisfactorily completed. Evidence of ownership is given by declarations of trust signed by the legally registered shareholders in favour of the beneficial owners. The company is required to file an annual return with the Registrar of Companies disclosing details of the share capital and holders of the issued shares, together with the names of the directors and secretary of the company. In those cases where local directors and bare nominee shareholders are used, their names only will be provided, and the interest of the beneficial owners will not be disclosed. The cost of nominee directors and registered office will be approximately US$1,600 per year in addition to the flat tax each year.

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The Invisible World For taxation purposes private companies incorporated in the Isle of Man fall into the following categories: • Manx resident companies controlled by residents of the Isle of Man (or managed and controlled in the Isle of Man and not having applied for exempt company status). Trading companies, which fall into this category, which pay income tax at the rate of 10% on the first £100,000,000 of taxable profits and 15% thereafter. • Exempt companies owned by non-Manx residents but managed and controlled in the Isle of Man which are liable to an annual fee, currently set at £430, regardless of the profits of the company. No further charge to Manx taxation arises provided the company fulfils the relevant conditions for exemption which broadly require ownership to be outside the Island and income, other than from certain "approved "sources, to arise outside the Island. This form of limited company is the most widely used by offshore clients, including those of Caymanx Trust. • International companies (as defined by the International Business Act 1994) which, in broad terms, may negotiate a local income tax charge of between a minimum of £1,200 (minimum) and an amount equivalent to a rate of 35% of assessable profits. The minimum increases at different stages in the fiscal year. • The Limited Liability Companies Act 1996 permits the formation of limited liability companies ("LLC's") similar in concept to those permitted by the Wyoming Limited Liability Company Act. Accordingly, an LLC has no shareholders or directors and is owned and managed by its members, whose liability is limited to the extent of their contributions to capital. The concept can, therefore, be likened to a form of incorporated limited liability partnership. Manx income tax is levied on the individual members of the LLC and not on the company itself. An LLC can apply for international designated status and upon payment of an annual fee to the Manx government (and compliance with certain defined criteria), the members can be granted complete exemption from Manx taxation. • Since Isle of Man (Manx) legislation permits the formation of guarantee companies, it is also possible to form a hybrid company. Such a structure has a group of shareholders (in the traditional sense) alongside a group of members - who may or may not also be

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Financial Freedom & Privacy shareholders. A hybrid company can, therefore, act as a quasi trust allowing the shareholders (professional administrators) to manage the structure, as trustees would do, but the guarantee members to have all rights to income and capital, similar to beneficiaries. The most common of Isle of Man registered companies include insurance companies, trusts, shipping, patent and trademark holders and investment funds. No one was able to tell me how many companies are registered there but it would be well into the thousands. Bank secrecy is very good and is protected by law, unless you're British. The Isle of Man banks are required to disclose information on British subjects if they are suspected of crime or tax evasion. Australians and New Zealanders shouldn’t have a problem as we don’t pay tax to the UK. The island has quite a few good banks, some of which I've listed earlier in this book. All Isle of Man banks are required by law to report all cash transactions in excess of 25,000 Manx pounds. This is due to Haiti's former president Jean-Claude 'Baby Doc' Duvalier laundering millions through the banks there in the eighties. Banking on the Isle of Man is ideal as the financial system is well developed and equal to anything here or in Europe. Most of the major British banks are located there and most will allow you to open accounts by fax or mail. Deposits are guaranteed by the Deposit Protection Scheme, which ensures 75% of the first 20,000 pounds or double that on joint accounts is guaranteed. If you are banking with a major British bank on the island, it is extremely doubtful whether this scheme will ever be used. Immigration and resident options are only for the well off. It will cost you a minimum of 10,000 Manx pounds per year in tax. That is the minimum you will pay regardless of how much you earn, after which the normal tax rates apply. The other little snag to living on the island is if you want to buy a house or even to rent a house you must invest 50% of the sale price or 10 years rent into government bonds which means you will have to put aside possibly another $200,000 before you decide to move there.

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The Invisible World Banks AIB Bank PO Box 186 10 Finch Rd, Douglas, Isle of Man IM99 1QE Phone: 0011 44 1624 639639 Fax: 0015 44 1624 639636 Allied Dunbar 43-51 Athol Street Douglas Isle of Man IM99 1ET Telephone: 0011 1624 661551 Fax: 0011 1624 662183 Agents Sovereign Trust (Isle of Man) Limited Trafalgar House 25 Nelson Street Douglas, Isle of Man IM1 2AN Uk Tel: 0011 44 1624 699 800 Fax: 0015 44 1624 699 801 E-mail:[email protected] Aston Corporate Management Ltd 19 Peel Rd, Douglas, Isle of Man Phone : 0011 44 1624 626591 Fax : 0015 44 1624 625126 Overseas Company Registration Agents Ltd. Companies House, Tower St, Ramsey, Isle of Man IM99 4AN, UK Phone : 0011 44 1624 815544 Fax : 0015 44 1624 817 078 Isle of Man in a Nut shell Language : English Location : Irish Sea between Scotland and Ireland

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Financial Freedom & Privacy Population : 70,000 Democracy : Yes, self governing British territory Currency : British Pounds and Manx Pounds Religion : Christian Security 4 Bank Secrecy 4 Potential Tax Savings 3 Residency Possibilities 2

Labuan Labuan is now an independent offshore financial centre located within Malaysia. It is currently gaining a great deal of popularity, particularly as a banking destination. Labuan is a very modern jurisdiction with state of the art telecommunications and infrastructure. Labuan has implemented quite strong privacy laws to ensure that customer’s details are kept confidential from “snoops”. However, when opening an account, you must be able to identify yourself to the banks, as you must do almost everywhere now. Labuan is part of Malaysia and is well located in the centre of the ASEAN region. 92 sq km in size, with a population of 26,000, Labuan is mostly flat, with a good harbour and an airport served by MAS and other airlines. Labuan was used by the British as a coaling station during the 19th century, and was eventually incorporated into the Malaysian Federation. Ethnically, Labuan has a mixed Asian population; Bahasa Malaysian is the official language, but English is widely used. The climate is tropical and there are extended monsoon periods. The Government sees Labuan's future in terms of its financial sector, and in 1990 created the Labuan Offshore Financial Services Agency (LOFSA) alongside a batch of 'offshore' laws. Labuan offshore companies can make use of Malaysia's good double tax treaty network, and as a result the island has become the preferred conduit for FDI into a number of local countries including Korea and Malaysia itself. The 2,500 offshore companies established on Labuan include 60 banks, 50 insurance companies and a number of trust management companies. A stock exchange has been established in 2000.

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The Invisible World Malaysian taxes are moderately high, although on a territorial basis, but Labuan offshore companies pay either 3% if they trade or nil if they don't. There are many incentives and exemptions which make it possible for most mainland Malaysian profits to be repatriated through Labuan without tax. Many expatriate workers can take advantage of personal tax incentives. LOFSA is determined that Labuan should become a successful ecommerce hub, and has built e-commerce infrastructure which can be used by incoming e-commerce operations, as well as by the island's new financial markets. Labuan is part of Malaysia, and Malaysian company law applies there. Most foreign companies wanting offshore status in Labuan will use Offshore Company or Limited Partnership status, see below. These offshore forms are subject to Malaysian Company law except as described below. Regular Malaysian companies can be used in Labuan, but will not receive the tax and other privileges accorded to Offshore Companies. Generally, companies incorporated in Malaysia are regulated by the Malaysian Companies Act, 1965. The types of companies are: •

a company limited by shares, which can be private or public;

•

branch of a foreign company;

•

partnership or sole proprietorship.

Foreign investors normally conduct their businesses in Malaysia in the form of a private company limited by shares.

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Financial Freedom & Privacy Incorporation of a company requires an application to be made to the Registrar of Companies to approve the proposed name by submitting the following forms: • Memorandum and Articles of Association • Statutory declaration of compliance with the Companies Act • Certificate of identity • Consent to act as director • Statutory declaration by persons before appointments as directors Companies pay registration fees based on the amount of authorized capital, and both filing and stamping fees apply for submission of the above documents. Registration fees are on a scale from RM 1,000 for capital below RM 100,000 to RM 70,000 for capital above RM 100m. A company must have a minimum of two directors and one secretary, having their principal or only place of residence in Malaysia. A register of directors is kept at the registered office of the company and is available for public inspection. Audited profit and loss accounts and annual returns are required. Partnerships and sole proprietorships must register with the Registration of Businesses before they can begin to operate. There is a registration fee and an annual renewal fee. An Offshore Company (or an Offshore Foreign Company) is only permitted to carry on business in, from or through Labuan. An Offshore Company may not: •

carry on business with a resident of Malaysia except as permitted by the Offshore Banking Act 1990;

•

carry on the business of Banking or Insurance or such similar business unless it is licensed so to do under the Offshore Banking Act 1990 or the Offshore Insurance Act 1990;

•

carry on business in the Malaysian currency except for defraying its administrative and statutory expenses;

•

carry on business of shipping or petroleum operations in Malaysia or carry on business as a trust company.

The Offshore Companies Act was amended recently to allow Malaysians to own offshore companies, as well as to permit foreign-owned offshore companies to invest in Malaysia subject to certain conditions. Manufacturing activities are normally carried out by companies incorporated

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The Invisible World under the Malaysian Companies Act. An activity which is neither offshore trading nor offshore non-trading will be subject to tax under the regular tax regime. Offshore insurance and banking businesses are permitted to maintain a marketing office in Kuala Lumpur until the Government decides that the management office should be relocated in Labuan. An Offshore Company is not treated as carrying on business with residents of Malaysia if: •

it makes or maintains deposits with a person carrying on business in Malaysia;

•

it makes contact with professional advisers carrying on business in Malaysia;

•

it prepares and maintains books and records in Malaysia; it acquires or holds any lease or property for operational purposes or accommodation of its employees;

•

it holds directors’ or members’ meetings within Malaysia;

•

it holds shares, debt obligations, or other securities in a company incorporated under the Offshore Companies Act 1990 or in a domestic company, or holds shares, debts obligations or other securities for the purposes of a transaction entered into in the ordinary course of a money-lending business.

Shelf companies are available for regular Malaysian companies but not for Offshore Companies. Offshore Companies are allowed to have names in a foreign language, provided they use the Latin alphabet. The words: Bank, building society, insurance, assurance, reinsurance, fund management, investment fund, trust, trustees, Chamber of Commerce, university, municipal or their foreign language equivalents require approval. To denote limited liability, any of the following are permitted: Corporation, Incorporated, Limited, Sociètè Anonyme or Sociedad Anonima or the relevant abbreviations. If the Malaysian word Berhad is used then it

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Financial Freedom & Privacy must be preceded by "(L)" to denote that the company is incorporated in Labuan. The following are some of the features of an Offshore Company: •

Beneficial ownership does not have to be disclosed;

•

The standard authorised capital is US$10,000; divided into 10,000 shares of US$1;

•

The minimum issued capital is one share, which may be fully or partly paid;

•

Registered shares of par value, preference shares, redeemable shares and shares with no voting rights are all permitted;

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Bearer shares are not permitted

•

There must be a registered office and agent in Labuan;

•

There is a minimum of 1 director and 1 secretary which can be corporate;

•

There is a minimum of 1 shareholder;

•

An annual return must be filed;

•

A set of accounting records must be kept in Labuan.

Offshore Companies that are trading pay 3% on net audited profits or the sum of RM 20,000. Offshore Companies that do not trade do not pay tax. Non-trading (i.e. investment and holding companies) and trading companies which elect to pay tax of RM 20,000 p.a. are not required to file financial statements, and do not have to employ an auditor unless they are offshore banks or insurance companies. Agents Clark & Co Lot 17(2nd floor) Lazenda Commercial Centre Jalan Tun Mustapha 87000 Labuan Telephone 0011 60 8742 5032

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The Invisible World Fax 0011 60 8742 5744 Colin Goonting & Shahabudin 19, 2nd Floor, Lazenda Commercial Centre Jalan Tun Mustapha 87007 Labuan Telephone 0011 60 8741 4322 Fax 0011 60 8741 0693 Banks Bank of Nova Scotia Level 10 Main Office Tower, Jalan Merdeka Financial Park, Labuan 87000 Phone: 0011 60 87 451 101 Fax: 0015 60 87 451 099 Deutsche Bank Level 14c Main Office Tower, Jalan Merdeka Financial Park Labuan 87000 Phone: 0011 60 87 439811 Fax: 0015 60 87 439866 Labuan in a Nut shell Language : English, Malay, Chinese Location : Malaysia Population : 150,000 Democracy : Yes Currency : International Currencies Religion : Muslim, Christian minority Security 3 Bank Secrecy 3 Potential Tax Savings 2 Residency Possibilities 3

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Financial Freedom & Privacy Liechtenstein This constitutional monarchy nestled between Austria and Switzerland has for years been synonymous with tax havens and offshore shell companies. There are currently over 30,000 private companies registered there despite the 1980 Tax Reform Law that was introduced to give the world a better opinion of the Liechtenstein authorities. This reform basically means that all companies registered in Liechtenstein must submit a profit and loss, and for certain companies a balance sheet as well, each year. If your company is a non-trading entity and only holds assets then it needs only to supply the profit and loss. In this case a declaration must be made each year that the company did not trade. If the company did trade, for example, sold stocks, sold land or imported or exported goods, then a balance sheet must be submitted to the government each year in addition to the profit and loss. Otherwise, the law changes shouldn't worry anybody, unless you plan on breaking the law by laundering money or drug dealing. The other little problem is the need for a local accountant to review and audit the books before submitting them to the authorities. This could set you back a minimum 1,500 Swiss francs. While this may seem expensive, the accountants, solicitors and banks in Liechtenstein have a reputation equal to the Swiss and enjoy a high degree of prestige worldwide. It is interesting to note that in 1988 at the United Nations convention, in Vienna it was proposed that member nations agree that the laundering of money become an extraditable offence. In principal, 80 nations agreed. The notable countries that did not agree were Liechtenstein, Luxembourg, Cayman Islands, Netherlands Antilles and Panama. As it turned out only a handful of countries actually signed the

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The Invisible World pact. However, since then, the OECD and the FATF have reversed this situation and all countries are now complying, although Liechtenstein tends to be a “stick in the mud”. To set up a company in Liechtenstein is a fairly simple process. The most common form of company is the 'Establishment' or 'Anstalt'. An 'establishment' is a very simple form of company, which can be set up in a few days, but unfortunately it will be expensive, about 3,500 Swiss francs. You then must come up with around 30,000 Swiss francs for capitalisation, but you can withdraw the money back after a few days. There are over 50 agents in Liechtenstein that can assist you with incorporation or you can use an agent in another jurisdiction if you wish. The 'establishment' also requires a director from Liechtenstein. A trust company can provide a 'frontman' for you at a price. The cost of the front man and administration will set you back about 2,000 Swiss francs per year. The rights that the local director has in the company can be assigned to the offshore owner at a later date if you wish. In addition, the 'Establishment' incurs a flat fee of 1,000 Swiss francs. Liechtenstein charges no taxes on profits, as long as the company conducts its business outside its borders. Having an office there will not change this situation at all. Trusts, Foundations and Corporations in Liechtenstein work in much the same manner as the 'Establishment' with almost identical fee and tax costs. The differences are, a Foundation is an ideal vehicle for avoiding inheritance tax. Corporations require capitalisation of at least 50,000 Swiss francs and it is the vehicle most commonly used by locals as it allows you to trade within Liechtenstein. Companies must pay a 4% coupon tax on dividends and Bearer shares are permitted. Liechtenstein bank accounts are in many ways the same as a Swiss bank account, except, unlike Switzerland there is no withholding tax on your account earnings and Liechtenstein is nowhere near as co-operative as the Swiss in furnishing foreign governments with information on suspect account holders. Bank secrecy is guaranteed by law. Liechtenstein has moderate domestic taxes, but has specialised and very flexible types of 'holding' and 'domiciliary' company as well as

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Financial Freedom & Privacy 'establishments' and 'foundations' which are tax-exempt, but cannot usually trade inside the country. There are 35,000 of these 'offshore' entities, which provide 30% of state revenues. There is also a trust regime based on common law, although Liechtenstein is a civil law jurisdiction. The headline Liechtenstein product is private banking, although holding companies must run close in terms of asset value; trusts have also been successful. After the EU reached final agreement in June, 2003, on its Savings Tax Directive, under which an information-sharing regime will be initiated by 12 out of 15 existing member states in 2005, it became clear that Liechtenstein would have to choose between information-sharing and a withholding tax; probably it will choose the latter, like Switzerland. In June 2000, Liechtenstein was identified by the FATF as a noncooperative and harmful tax haven. The result of this is that Liechtenstein was one of fifteen tax jurisdictions placed on an FATF blacklist. Each 'harmful' tax haven has a year in which to correct its tax regulations and legislation, once it has done so the tax haven will be removed from the list. The FATF released its next annual report in June 2001, in which the organisation revised its list of countries and territories deemed noncooperative. Only four were removed from the list, including Liechtenstein (the other three being the Cayman Islands, the Bahamas and Panama). Liechtenstein was praised by the FATF for its substantial efforts to conform to forty recommendations set out by the FATF in a code of good practice governing money laundering, including an amendment of the Due Diligence Act and the enactment of a new law on Mutual Legal Assistance in Criminal Matters. By mid-2002, the FATF was able to say that Liechtenstein was 'off its radar screen'. Now to the subject of residency, don't even bother trying! Liechtenstein is just as difficult to get into on a permanent basis as the USA and Switzerland, but that shouldn't put you off the many other benefits the country has to offer. Banks LGT Bank in Liechtenstein Fl -9490 Vaduz Postfach 85, Liechtenstein

Liechtensteinische Landesbank Fl-9490 Vaduz Stadtle 44, Postfach 384

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The Invisible World Liechtenstein Phone : 0011 423 236 8811 Fax: 0015 423 236 8822

Phone : 0011 423 235 1122 Fax: 0015 423 235 1522

Agents Citco (Liechtenstein) Anstalt Meierhofstrasse 5, 9490 Vaduz, Furstentum Liechtenstein Telephone 0011 423 236 1000 Fax 0011 423 236 1001 Overseas Company Registration Agents - Local Representatives P O Box 70 Stäedtle 7 FL-9490 Vaduz Liechtenstein Telephone 0011 423 236 1440 Fax 0015 423 232 6393 Liechtenstein in a Nut shell Language : German but English widely spoken Location : Central Europe between Austria and Switzerland Population : 30,000 Democracy : Yes Currency : Swiss Franc Religion : Roman Catholic Security 4 Bank Secrecy 4 Potential Tax Savings 3 Residency Possibilities 0

Luxembourg Since 1993, the days when you could walk into a Luxembourg bank, open a suitcase full of cash and deposit it no questions asked, are gone forever. International money laundering became so big that the authorities had to yield to world pressure to do something about it. This country wedged between France, Belgium and Germany became notorious as a

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Financial Freedom & Privacy money 'washing machine'. The authorities will only disclose your affairs to foreign governments if you've been involved in the drug trade, otherwise your financial secrets are 100% safe. These days all cash transactions over 90,000 French francs must be reported in much the same way as amounts over $10,000 are reported in Australia. In the first edition of the Invisible World I wrote....."Bank secrecy has been protected optimally since 1981 and not only on behalf of private persons, including money-hungry heirs (bank employees called to the witness stand in inheritance proceedings need not testify) but extends even to foreign authorities in tax evasion cases. (They refer to Article 2 of the European Legal Assistance Agreement: "Legal assistance may be denied in cases when the request is made with regards to criminal acts which are seen as fiscal crimes".) With this the protection is even better than in Switzerland. Only in normal crimes does the Luxembourg signature to the European Law Enforcement Treaty compel it to give out information - but even in this case, it is not just any narrow-minded old judge who has to make the final decision before the account may be laid open. Without the express approval of the Minister of Finance, nothing can be done. Not even the client can allow a banker to disclose any of his or her information. Only in the case of your death will your relatives be informed if you've given them permission to inquire. In Luxembourg, tax related offences are regarded as strictly fiscal offences and not criminal and therefore under no

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The Invisible World circumstances will any information be given to any government. Without a doubt, another star performer when it comes to bank secrecy”. To a certain extent this is still true today, but Luxembourg is beginning to lose it's lustre. The EU has been stepping up pressure on this small country to expose money laundering and illegal activities to other governments and they seem to be getting through. The collapse of the Luxembourg based Bank of Credit and Commerce International (BCCI) has certainly had a detrimental effect on the local banking industry and has undermined confidence in secrecy somewhat. If you need secrecy, stick to Liechtenstein. However, by 2005, there will be the EU imposed Savings Tax Directive that will come into effect which means that deposit account will have a tax imposed on the accounts, but only on savings accounts, so don’t worry too much. Incorporation in Luxembourg is easy, saving on tax is hard. The only company worth having is a '1929 Holding Company'. It is tax exempt (apart from a small flat fee of 0.2% each year based on your capitalisation) only if used to manage assets and not trade. If you do trade with the company then you will be subject to normal corporate tax in Luxembourg, which can be quite high. The '1929 Holding Company' is not permitted to trade in manufacturing, services, sales or ownership of real estate apart from your own office building. What a Luxembourg 1929 Holding Company can do is: Lend money to you at commercial interest rates. Example, you deposit money into your Luxembourg bank and company. Then you borrow back this money for profit making projects outside Luxembourg (because you can't trade in Luxembourg). You then pay this company interest for which you get a deduction onshore and the interest earned in Luxembourg is tax free. Hold patents, trademarks or licenses on your behalf. Example, if for instance you were earning commissions on a patent or charging a licence fee or franchise fee outside Luxembourg, then these fees could flow through to your holding company tax free. In which case you could then borrow that money back as per the above. Manage your securities and investments in tax free environment. Of course if any of these transactions had anything to do with Australia, you should get advice in regard CFC's and FIF's (see the first chapter of this book).

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Financial Freedom & Privacy To form a Luxembourg Holding Company you will need about US$5,000 and about US$1,500 per year to cover administration and maintenance. You will also need 1,250,000 Lux. Francs (about A$40,000) for the capitalisation of the company and a bank will be required to certify that you have deposited the money in an account. Bearer shares are permitted. You will require a minimum of two shareholders and three directors, all of whom can reside anywhere. There are nearly 230 banks for a population of 340,000 people. That's 1 bank for every 1,500 people. The banks produce 80% of the government’s revenue so it's hardly likely that the government is going to change any rules when it comes to foreigners using their banks. In Luxembourg the banks are cheaper than their European competitors when it comes to fees and charges and also for interest costs. The interest they pay you is also slightly higher than other European countries. Another good thing about Luxembourg banks is that if a relative dies and you suspect they had investments in a Luxembourg bank, but you're not sure which bank, you can contact a central agency with proof of the death and the will and the agency will contact all the banks for you. The banks then check their records and if one of them does hold the account, the bank will then contact you direct to make arrangements for the investments to be transferred to you. The central agency is never notified of the success or failure of the search. Personal tax rates in Luxembourg can go as high as 56%. Normal company tax is 39%. So this is definitely not the place to reside, well not if you want to keep at least half your income. If you're really keen to live there, you probably shouldn't have too many problems, with those tax rates, there won't be queues at the 'in' door. Banks Bank Paribas 10a Boulevard Royal L-2093 Luxembourg Phone : 0011 352 46 461 Fax: 0015 352 46 46 4141

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The Invisible World American Express Bank 69 Route d’Esch L-2953 Luxembourg Phone: 0011 352 45 90 1 Fax: 0015 352 90 20 10 Agents CITCO (Luxembourg) SA 25A Boulevard Royal, 9th Floor L-2449 Luxembourg Phone: 0011 352 472323 Fax: 0015 352 472 473 Overseas Company Registration Agents Luxembourg SA 19 Rue Aldringen L1118 Luxembourg Phone: 0011 352 224 286 Fax : 0015 352 224287 Luxembourg in a Nut shell Language : German and French, but English widely spoken Location : Western Europe Population : 340,000 Democracy : Yes Currency : Luxembourg Franc Religion : Roman Catholic Security 4 Bank Secrecy 3 Potential Tax Savings 2 Residency Possibilities 2

Madeira Madeira is a group of islands off the coast of Morocco in the Atlantic Ocean. It enjoys a mild Mediterranean style climate, which has helped a

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Financial Freedom & Privacy growing tourist industry attracting cruise ships from Europe. Even though the locals speak Portuguese as their main language, Madeira has a strong British influence and English is widely understood and spoken. Madeira is actually part of Portugal but have a degree of autonomy. Madeira has a Free Zone where companies can manufacture, process or just resell products and provide services. The companies operate completely free of tax and duties. The local government encourages businesses to establish themselves here as an alternative to mainland Europe. The Free Zone is well provided with all the necessary services and if you wish you can build your own purpose built factory or warehouse. Tax exempt companies can be incorporated for about US$3,500 with a yearly maintenance fee of US$2,000 if you maintain a permanent office there, but if all you want is a brass plaque on a solicitors wall, you can halve the amount down to US$1,000. The income from local sources is subject to local taxes, so the tax exempt status only refers to offshore income. How then has Madeira fared in the international clamp-down on low-tax jurisdictions? Presumably because it's not an independent country or territory, it was left off the FATF and OECD blacklists, although its regime is certainly no 'better' (or should it be, 'worse'?) than many that were included. But the MIBC Free Trade Zone was included on Dawn Primarolo's 'Code of Conduct' list of 66 'harmful tax practices'. The Primarolo report seems to have been quietly buried along with other contentious parts of the EU's 1996 Tax Directive, when (ironically for

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The Invisible World Madeira) the Fiera summit at the end of the Portuguese presidency pretended to reach agreement on an information-sharing directive, which has little chance of implementation. However, the EU State Aid Directorate has been pressuring the Portuguese government to do something about what it takes to be abuses of corporation tax exemptions in the MIBC, particularly by Portuguese tax-payers. The EU estimates that tax exemptions gained through the MIBC amounted to a billion euros just in 1997, through 4,000 companies that employ a mere 1,000 people. On that calculation, each job (the main object of EU regional policy is to create employment) cost a million euros, which is quite high even by Brussels' bloated standards. The arithmetic is bogus, however, because you have to ask the question, where would that job be if not in MIBC, and the answer (the OECD can tell you!) is in Barbados or Vanuatu. You can't 'lose' tax you were never going to have - Finance Ministers' speeches are always full of 'lost' tax that never existed except in their officials' imaginations. Anyway, the Portuguese tax authorities shared the EU's concerns, and the government responded in 2000 by putting through legislation which moderates the MIBC's tax exemptions and weakens the island's tight banking secrecy regime. All companies licensed before 31st December, 2000 will continue to be tax exempt until 2011. Companies licensed during 2001 and 2002 will pay corporation tax at 1% until 2011; companies licensed in 2003 and 2004 will pay 2%, and those licensed in 2005 and 2006 will pay 3% International banking has been established in Madeira with several major banks locating there. Unfortunately, Madeira is controlled by Portugal, which is a member of the EU. EU members are not known for keeping bank secrecy as their main agenda (with a couple of exceptions), so I'd probably keep my funds elsewhere and use a local bank simply for business requirements. If you wish to move lock, stock and barrel to Madeira, you won't encounter too much resistance if you set up a business that employs locals.

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Financial Freedom & Privacy If you require more information on these picturesque islands you can write to: The Madeira Development Company, PO Box 4164, P 9052 Funchal, Madeira, Portugal. Agents Citco Corporate Management (Madeira) Limitada Avenida Do Infante 50, 9000 Funchal, Madeira Telephone 0011 351 91 231 670 Fax 0015 351 91 226 791 Mr David Fiske De Gouveia (Part of OCRA) Madeira Management Companhia LDA Rua Das Murcas No 88, 9000 Funchal, Madeira, Portugal Phone : 0011 351 91 200 1700 Fax : 0015 351 91 227 144 Banks Banco Comercial Português SA/ Sucursal Financeira Exterior Rua do Aljube, 17-4º Andar, P-9000 Funchal Madeira Islands Telephone 0011 351 91 4277961 Fax 0015 351 91 4277979 Banco de Fomento e Exterior-Madeira Offshore Rua dr Fernando Ornelas 52-1°, P-9000 Funchal Madeira Islands Telephone 0011 351 91 3104014 Fax 0015 351 91 3101282 Madeira in a Nut shell Language : Portuguese, but English widely spoken Location : Off the West coast of Africa Population : 265,000 Democracy : Yes Currency : Portuguese Escudo Religion : Roman Catholic Security 3 Bank Secrecy 2

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The Invisible World Potential Tax Savings 3 Residency Possibilities 4

Malta Thinking of manufacturing for the European market? Malta offers 10 year tax holidays to manufacturing companies that set up there. The EC allows Maltese goods to enter the European market totally duty free and the USA allows many Maltese manufactured items to enter the US duty free. The proprietors are also able to obtain tax concessions as low as 15% on local earnings and exemption on offshore income. After the 10 year tax break, company tax reverts to 32.5%. Bank secrecy is protected by law, although they have caved in to the OECD. Information in relation to doing business in Malta is available from the Malta Development Corporation, PO Box 571, Valletta, Malta. Maltese companies are expensive, US$4,000 minimum and US$1,000 per year in maintenance. Malta now seeks to join the EU, although as late as the spring of 2002, with EU accession negotiations almost completed, the opposition labour party was still hankering after a life as the 'Switzerland of the Mediterranean'. Eventually, Malta was invited to join the EU in December, 2002, along with Cyprus and 8 Eastern European ex-Soviet states. A referendum in March, 2003, approved EU entry, and after the government was returned to power in April, it signed the EU accession treaty in Athens. Finally, the Maltese Parliament ratified the accession treaty in July, 2003.

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Financial Freedom & Privacy No turning back! Manufacturing, tourism and shipping go some way towards paying for imports, but the gap cannot be closed without the development of a financial services sector. Maltese legislation for banking, mutual funds, insurance and trust services was relatively late in arriving, and while these sectors are growing, they are not on the scale of some other OIFCs. Malta has moderately high internal taxes, but offers low-tax regimes to companies and individuals. Malta is phasing out its 'designer tax' Offshore Companies, which the EU would never have accepted, and hopes that the EU will allow their replacements, the International Trading and Holding Companies, to survive. However, in August, 2003, after Malta had already signed its accession treaty to the EU, the European Commission attacked a number of features of Malta's tax regime, including International Trading and Holding Companies. The Maltese government has indicated that it does not agree with the Commission's position. It is strange that such matters were not resolved prior to completion of the accession negotiations. Unless you're making a lot of money in Malta you probably wouldn't choose to live there. The place is crime ridden and life is to a degree quite hard with constant water and domestic electricity shortages. The locals also tend to enjoy 'ripping off' foreigners, even if they are providing locals with a place to work and steal goods from. Bank Lombard Bank Palazzo Spinola, Lombard House 67 Republic St Valletta VLT 05, Malta Phone: 0011 356 232631 Fax: 0015 356 246600 Bank of Valletta International Ltd P O Box 203, Valletta CMR 01, Malta Telephone 0011 356 21249970 Fax 0015 356 21222132 Agent Malta Trust and Nominee Company

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The Invisible World Wisely House First Floor, 206 Old Bakery St Valletta, Malta Phone : 0011 356 223125 Fax : 0015 356 241301 Abacus (Nominee) Ltd - PricewaterhouseCoopers 167 Merchants Street, Valletta VLT 03, Malta Telephone 0011 356 21233648 Fax 0015 356 21244768 Valletta Offshore Management Nominee Ltd International Corporate Services Ltd Suite 6, Paolo Court, G Cali' Street, Ta'xbiex MSD 14, Malta Telephone 0011 356 21344391 Fax 0015 356 21344229 Malta in a Nut shell Language : Maltese and English Location : Mediterranean off the Southern tip of Italy Population : 355,000 Democracy : Yes Currency : Maltese Lira Religion : Roman Catholic Security 2 Bank Secrecy 2 Potential Tax Savings 2 Residency Possibilities 4

Monaco Personally, I think Monaco is totally overrated having been there recently. I just can't see what all the fuss is about. OK, it's on the Riviera and lots of rich and famous people live there. They also have a royal family that seems to appear in the Women’s Weekly every other issue. The place is small, crowded and overly expensive. There is nothing in Monaco that can't be bought or enjoyed at half the price in Australia. Do you get the

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Financial Freedom & Privacy feeling I'm not a fan. Well I'm not. I know many of you at this point are howling - Philistine!, but I'm sorry the place has never impressed me. Enough of bagging the place, are there any financial advantages to be enjoyed in Monaco? Yes is the answer. The only problem is you must earn at least 75% of your income within Monaco otherwise you will be subject to 35% tax on your profits or income or 8% tax on your expenditure depending on whether you've kept records or not. If you qualify as earning 75% of your income in Monaco then you are not subject to income tax at all. There are a couple of minor taxes the locals must bear such as a Value Added Tax and an inheritance tax, although direct descendants are exempt. Thinking of taking up residency? Easier said than done, you need money, and lots of it. Unless you can prove that your monthly income exceeds 10,000 Swiss francs you won't even be considered. If you pass that test, you must be able to prove that you remain in the country at least 180 days per year. The problem is they know how much time you spend there. I've heard stories of monitoring water and electricity consumption and phone tapping. Bjorn Borg was kicked out because he didn't spend the required time in the country. If you go to Monaco, have a good look around and you may notice the whole place is covered in surveillance cameras. The government is quite paranoid about undesirable people taking up residence. Incorporation of a Monacan company is a complicated and costly

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The Invisible World affair with few opportunities to reduce tax. Unfortunately, the whole thing only works if more than 75% of your income is derived within Monaco's borders and if not you pay 35% tax on your total profit. The thing is, if you really want to cutdown on tax you must gain residency and earn your income there, otherwise you pay tax at rates comparable to Australia. Incorporation of a SAM (societe anonyme Monegasque) company will take about four months and cost 30,000 French Francs. You will need two directors, one must be a legal resident but nationalities are irrelevant. Unusually, two shareholders are also required. Capitalisation is a minimum 500,000 French Francs. Bearer shares are permitted. You must also appoint a local accountant as auditor. All in all, a very costly exercise. A tax treaty is in operation with France. In October 2001, France and Monaco reached agreement on initiatives to counter money laundering in the principality. According to the Ministry, Monaco has 'significantly strengthened' its stance against money laundering activities by doubling the number of staff who trace the money launderers as well as pledging to report more suspicious transactions. Monaco also undertook to increase its cooperation with the Financial Oversight Commission to revise the rules governing investment management companies and improve upon regulation and transparency in general. The statement also stressed that the OECD and the FATF have 'noted progress by Monaco in the fight against money laundering.' Crucial for Monaco, as for other small European tax havens, is the EU's informationsharing initiative. The deal reached by the EU in January, 2003 is posited on the assumption that the Monaco, along with the other low-tax jurisdictions, will apply either information-sharing or a withholding tax. Either of these will put the competitiveness of its banking regime into question. After lastminute haggling by Italy and Belgium, it seemed by mid-2003 that the Directive would enter into force in 2005. Agent Moore Stephens Services S.A.M. L'Estoril, Avenue Princess Grace, Monte Carlo, Monaco, MC-98000 Telephone 0011 377 93104121

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Financial Freedom & Privacy Fax 0015 377 93256270 Bank ING Societe de Gestion 1, Ave. des Citronniers MC 9800, Monte Carlo, Monaco Phone: 0011 377 93 105000 Fax: 0015 377 93 105005 CFM Monaco 2 Rue des Princes MC-98000 Monaco Telephone 0011 377 93102001 Fax 0015 377 93102002 Monaco in a Nut shell Language : French Location : Southern France Population : 30,000 Democracy : Yes Currency : French Francs Religion : Roman Catholic Security 4 Bank Secrecy 2 Potential Tax Savings 2 Residency Possibilities 0

Nauru Due to extensive Phosphate mining since 1906, the island has virtually no chance of replacing its mining industry with tourism. Three quarters of the island is barren wasteland. The only industry that seems to have some chance of survival is the offshore company business. Offshore companies and trusts are very welcome but unfortunately residency isn't. The offshore companies can operate free from income, property, inheritance and property taxes and should you go there on a business trip, you can avail yourself of free phone calls and free medical care.

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The Invisible World Bank secrecy is offered against foreign enquiries by the state owned Bank of Nauru. One could be forgiven for having doubts regarding a state owned bank protecting your secrecy. The official currency is the Australian dollar. To incorporate a company in Nauru will cost you A$1,500 and then A$1,200 each year after that. It will cost a little more if you want an insurance company. If you decide you want your own Nauruan bank, that will set you back about A$3,000. Of course if you wish to set up a bank, you have missed the boat. They are no longer issuing licenses. "Nauru's offshore banking sector has been eliminated," Nauru chief secretary Willie Star said in a statement. But its offshore banking operations have been used to launder money, sometimes by Russian mafia, financial investigators say, attracting the ire of international bankers and the U.S. government, which sees money laundering as a key target in its war on terror. Following a meeting in Tokyo in June 2003 with the Paris-based antimoney laundering body, the Financial Action Task Force (FATF), Nauru said it revoked 139 offshore banking licenses, keeping only one for the Bank of Nauru. It said letters had been sent to every corporation registered in Nauru informing them of the new laws ending offshore banking. "Nauru is demonstrating its willingness to cooperate with other governments and international organisations to fight global criminal activities, money laundering and terrorism," said President Ludwig Scotty. "I sincerely hope this will be sufficient to lift the counter-measures independently imposed on Nauru by FATF."

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Financial Freedom & Privacy A country, relying on nothing other than phosphate exports? Being a tax haven may be their only chance of making money in the future. Although banks may be off the agenda, offshore corporations are still alive and well. Could Nauru be the world’s last tax haven when all others have caved? Bank Bank of Nauru PO Box 289, Yaren Nauru, Central Pacific Ph: 0011 674 444 5239 Fax: 0015 674 444 3203 Agents Nauru Agency Corporation PO Box 300, Aiwo Nauru, Central Pacific Telephone: 0011 674 555-4011 Facsimile: 0015 674 444-3730

Central Pacific Agency Corp. PO Box 302, Yaren Nauru, Central Pacific

Nauru in a Nut shell Language : English Location : Pacific Population : 9,000 Democracy : Yes Currency : Australian Dollar Religion : Protestant Security 4 Bank Secrecy 2 Potential Tax Savings 4 Residency Possibilities 0

Netherlands An EU country a tax haven? In a way it is, when it’s compared to Australia. Unlike Australia, in the Netherlands if you retain the profits in the

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The Invisible World company, you don't have to pay any company tax. It is only when profits are distributed by way of dividend that taxes become payable at rates similar to ours. A practical application would be to have two companies, one in the Netherlands and the other in the Netherlands Antilles. If your company in the Netherlands was a trading company deriving profits in the EU you simply allow the profits to accumulate and then each year transfer the retained profits to the company in the Netherlands Antilles. This transfer is tax free under Netherlands tax law. The only requirement is that the Netherlands Antilles company hold at least 25% of the capital of the Netherlands company. The Netherlands Antilles company is then taxed at a very modest 3%. This scheme is employed by major corporations around the world. Have a look at the list of subsidiary companies in their annual reports. In other respects the Netherlands is not much of a tax haven and has no bank secrecy laws worth mentioning. Banks ING Bank Foppingadreef 7 1102BD Amsterdam Netherlands Phone: 0011 31 20 563 8504 Fax: 0015 31 20 563 8506

ABN Bank 32 Vijzelstraat Amsterdam, Netherlands Phone : 0011 31 2029 3249 Fax: 0015 31 2029 3222

Agent Derks and Partners PO Box 9230 3506GE Utrecht, Netherlands Netherlands in a Nut shell Language : Dutch Location : Europe Population : 15,000,000 Democracy : Yes Currency : Netherlands Guilder Religion : Christian Security 4 Bank Secrecy 1

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Financial Freedom & Privacy Potential Tax Savings 2 Residency Possibilities 1

Netherlands Antilles Located in the Caribbean, the main group of islands is just off the coast of Venezuela, and the second much smaller group, east of Puerto Rico. The main group of islands includes Curacao, Bonaire and until 1986, Aruba. For the purposes of this book, I've included Aruba as part of the Netherlands Antilles. The smaller group to the north, includes Sint Maarten, Saba and Sint Eustatius. Firstly, I'll focus on the Netherlands Antilles as they are today (without Aruba), and then discuss Aruba separately. For many years the Netherlands Antilles has been used as a tax haven, money laundering centre and as a drugs distribution centre. One report I've read on the Netherlands Antilles stated that as much as 40% of all foreign farmland owned in the USA was controlled by companies registered in the Netherlands Antilles. Money laundering was big business in this region and was due to very loose control of cash transactions and cash importation, drug bosses and major corporations could use the local situation to either launder funds or minimise taxation. The following is an actual example of the sort of thing that used to go on. A transfer of funds is requested from Sint Maarten to the Rotterdam account of a Panamanian registered shipping company in Malta. They then send the money to Singapore, to be deposited in the

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The Invisible World account of a Liechtenstein registered insurance company on the Isle of Man, which then transfers the money on to a Hong Kong registered real estate company operating out of Monaco who has an account in Los Angeles. All these transactions occurred in a little over an hour. To gain use of the money, the person simply borrows it from himself. This is what is known as a 'Dutch Sandwich' or a loan back. He then goes to the bank and negotiates a loan which is guaranteed by the company in Hong Kong which secures the transaction with laundered funds in Los Angeles. Creative wasn't it? The only attraction left in the Netherlands Antilles is the tax rates. Companies that trade in one of the free zones are exempt from duty and excise and only pay 2.4% to 4.8% profit tax. Companies such as investment funds, that operate outside the designated free zones pay around 3%. Any company that trades domestically (ie profits from trade with local companies or local people), will pay between 24% to 30%. Incorporation can be arranged through any incorporation agent. Incorporation will cost about US$1,800 or NAf 2,800 and take about two weeks. One director can be appointed and they must reside in the Netherlands Antilles, otherwise you must appoint two or more directors. Financial statements must be lodged each year with the Commercial Register. A minimum tax of NAf 250 is levied each year on offshore companies and will increase to 3% of your profit, whichever is higher. The downside is immigration or residency, the local authorities are reluctant to admit foreigners due to unemployment and civil unrest among the local population. But trading as an offshore entity using a local agent doesn't present too many problems. Even though Aruba broke away from the Netherlands Antilles in 1986, many people still refer to it as part of the island group. Aruba is a popular tourist resort with nearly 300,000 American tourists each year. The Aruba Exempt Company or AEC, is exempted from paying profit tax and lodging tax returns, but like many other tax havens, it isn't allowed to trade locally. Also, no locals can hold shares. The AEC is protected by some very strict confidentiality provisions, which are only ever lifted when double criminality has been established. Double criminality is when the

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Financial Freedom & Privacy company or its officers have committed a crime that is deemed a crime in both Aruba and the country seeking charges to be laid. The Aruba Register of Companies is also very secretive, so trying to find details of shareholders and directors is almost impossible. Unlike the Netherlands Antilles, Aruba is a zero tax haven. Bearer shares are permitted. If you want an AEC, you can contact a local incorporation agent or law firm. It will cost you about US$1,900 with about US$700 per year maintenance costs. At the end of 1999, Netherlands Antilles passed new tax legislation known as The New Fiscal Framework intended to improve the jurisdiction's image as an Offshore Financial Centre and to revitalise its financial services industry. The legislation, which came into force from 1st January 2002 along with a revised 'BRK' (Tax Arrangements for the Dutch Kingdom), removes the distinction between 'onshore' and 'offshore' companies and simplifies tax rates. However, existing offshore companies are grandfathered until 2019. Alongside the tax legislation, a new corporate form is being introduced to allow offshore operations on a tax-exempt basis: this is the NABV (Netherlands Antilles Besloten Vennootschap) or AEC in English (Antilles Exempt Company), and it is expected to supplant the offshore NV for many purposes. The Netherlands Antilles having seen the demise of the seedier side of their offshore operations has decided to enter the “E” world and has set up an E-Zone for those wanting to operate in Cyberspace. The E-Zones As of April 1, 2001, special tax legislation for international Internet companies on Curacao came into force to act as an incentive to persuade e-commerce companies to relocate their activities to the Island. The new law replaces the old Free Zone law and governs 'E-Zones' which are areas within the Netherlands Antilles where international trade and trade supportive services may be carried out by electronic communication and electronic commerce. Only legal entities with a capital divided into shares may perform activities in an E-zone. The activities of these companies must in principle be focused on trading or providing services to companies located outside

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The Invisible World the Netherlands Antilles. A company may be allowed to conduct business with other firms located in an e-zone but the company has to apply to the local authority before doing so. If given the go ahead the company must meet conditions relating to price setting, quality of the goods and services on offer and the distribution of goods. The turnover generated through local business may not exceed 25% of the company's total turnover. In terms of profit tax the profit of companies within the e-zones will be taxed at 2% - including surtax - until January 1, 2026. This rate is not applicable on the profit of an e-zone company if it is generated by the sale of goods or services to companies located in the Netherlands Antilles or generated through the rendering of services to affiliated companies located in the country. No import duties and turnover tax is due on goods entering the E-zone and services rendered by a Netherlands Antilles company to an E-zone company. Furthermore, no import duties and turnover tax is due on products delivered to or services rendered to other companies located in the E-zone or outside the Netherlands Antilles. Finally, employees who have lived in excess of five years outside the Netherlands Antilles before starting work in an e-zone can qualify for expatriate status, with certain tax-free benefits - providing certain conditions are met. An e-zone company can calculate the wage tax on the net salary of the employee without being required to 'gross up' the salary. The local authorities will see to it that E-zone companies meet the conditions as stated in the E-zone legislation. If it appears that an E-zone company is not fulfilling the conditions, penalties can be imposed or the entrance permit can be withdrawn. Two areas have been designated as E-zones and a third will be added shortly. These areas have state of the art telecommunication facilities, which provide direct and reliable internet access. It may well be that in future other areas will be added. Banks ABN AMRO Bank NV Kaya Flamboyan 1, Curaçao, Netherlands Antilles Telephone 0011 599 9 763 8317 Fax 0015 599 9 763 8217

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Financial Freedom & Privacy Antilles Banking Corporation (Curaçao) N V Wilhelminaplein 14-16, P O Box 763, Willemstad, Curaçao, Netherlands Antilles Telephone 0011 599 9 461 2822 Fax 0015 599 9 461 2820 Agents Holland Intertrust NV De Ruyterkade 58A PO Box 837 Willemstad, Curacao Netherlands Antilles Phone: 0011 599 9 613277 Fax: 0011 599 9 611 061 Citco Curacao De Ruyterkade 62, P.O. Box 812, Willemstad, Curacao, Netherland Antilles Telephone 0011 599 9 732 2555 Fax 0015 599 9 732 2500 Netherlands Antilles and Aruba in a Nutshell Language : Dutch and English Location : Caribbean Population : 180,000 Democracy : Yes, part of the Netherlands Currency : Netherlands Antilles Guilder and Aruba Florin Religion : Christian Security 2 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 1

New Utopia New Utopia will soon be ready to accept its first citizens. New Utopia

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The Invisible World is situated about 120 miles west of the Cayman Islands in the Caribbean. The man behind it all is Lazarus Long, an Oklahoma millionaire. Long has secured the ownership rights to over 285 square miles of semi-submerged reef. The plan is to build a concrete city on top of the reef. The city will have a casino, 5 international hotels, shopping mall, hospital and medical centre, banks, 1200 luxury apartments, convention centre, school, airport and accommodation for resident workers. It will be built by shipping prefab concrete platforms from Florida and placing them on concrete piles that have been driven deep into the reef. The cost of the initial stage of the city will be US$400m. Long has been given the OK by the UN and they have agreed once built and occupied, they will acknowledge sovereignty. Established on Libertarian concepts, no taxes will be imposed on the citizens. The economy will be based on financial services, tourism and gaming and the medical clinic, which will provide the world’s fastest patent service on medical and scientific inventions.

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So far, 600 citizenship applications have been received and many millions invested, so it would appear that it is going ahead. They have drafted a constitution, bill of rights and a judicial and political system. The bureaucracy will be kept

Financial Freedom & Privacy to an absolute minimum. The plan is to have the first stage completed by 2000 and declare its sovereignty in the UN the same year.

Plan of New Utopia If you would like to know more or would like obtain your citizenship, New Utopia is on the net at http://www.new-utopia.com However, there are many people saying this is a scam of sorts, so be aware of what you’re doing. The Principality of New Utopia c/o The Principality of New Utopia Embassy to US 5147 South Harvard Street, Suite 187 Tulsa OK 74135 UNITED STATES OF AMERICA Tel: +1 918 712 9980 Fax: +1 918 493 2216 Email: [email protected]

Panama The Republic of Panama, between Colombia and Costa Rica, has a population of 3.06m and a land area of 76,000 sq km. The climate is tropical. Panama is a sovereign democracy with a presidential style of government. A pro-business government fell from power in 1999 and the

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The Invisible World new president, Mireya Moscoso has made populist promises. Panama was part of Colombia for a while until the US helped it to become an independent country alongside construction of the famous canal, beginning 1903. As of the end of 1999, the canal and all its US facilities and bases reverted to Panama, creating a major economic opportunity for the country. The official language is Spanish, but English is understood in business circles. Panama's currency is effectively the US dollar, with the official Balboa pegged to the dollar but used only for small transactions. In June 2000, Panama was identified by the FATF as a noncooperative tax haven in the global fight against money-laundering. The result of this was that Panama was one of fifteen tax jurisdictions placed on an FATF blacklist. Each offending tax haven had a year in which to correct its regulations and legislation. The FATF released its annual report in June 2001, in which the organisation revised its list of countries and territories deemed noncooperative. Only four were removed from the list, including Panama (the other three being the Cayman Islands, Liechtenstein and the Bahamas). Panama was praised by the FATF for its substantial efforts to conform to forty recommendations set out in a code of good practice governing money laundering. Although along with many other offshore jurisdictions Panama issued a 'commitment' letter to the OECD in 2001, following agreement on the EU's Savings Tax Directive in 2003, Panama told the OECD that it considered there was no longer a 'level playing field' and that it did not consider itself by by its commitments Panama has territorial taxation, thus only locally-sourced income is taxed. There are no 'offshore' regimes as such other than the Colon Free Zone and the export processing zones. There are more than 120,000 companies in Panama, most of which trade or hold assets externally. It is reasonably easy to form corporations, and privacy is assured. There are no tax treaties. Banking and shipping are Panama's two main 'offshore' industries. There are 140 or more banks, specialising obviously in South and Central American business, and Panama is the world's largest shipping registry. Once, it would have been fair to say that drug running and money-laundering were well-rooted in Panama, but with lots of US

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Financial Freedom & Privacy pushing and shoving, the country seems to have moved in a better direction lately. There is a small but growing stock exchange, and there is 'captives' legislation which is little used The main advantages of operating from Panama are: Geographic location, close to other havens and holiday destinations as well as being only a few hours from the USA. Tight bank secrecy laws. Panamanian companies can be formed quickly and cheaply from as little as US$500 plus US$150 per year in maintenance. No taxes are levied as long as you earn your income outside the country. Facilities to establish a branch office cheaply. Manufacturers and exporters can operate in the Colon Free Zone (on the North coast) free from any government interference and with only minimal tax to pay on items exported or manufactured there. Colon is the second largest free trade zone in the world after Hong Kong. The free trade zone is used by companies to redistribute goods and take advantage of Transfer Pricing to accumulate profits in Panama tax free. Tax holidays are available initially, and after that 90% tax free allowances are available. Panama is a reasonably pleasant and inexpensive place to live, particularly due to American intervention a few years ago. Because of the USA's dependence on the Panama Canal, it is unlikely they will tolerate any threat to it's closure due to civil commotion or political unrest. Remember the US invasion several years ago? The currency of Panama is the Balboa which is linked one for one to the US$, but the currency is controlled by the US, as it's the only country that is allowed to produce the local currency. Corporations can be established in 10 days or shelf companies can be acquired immediately. The US has a firm hold on this country, not just their currency. When

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The Invisible World General Manuel Noriega started protesting against American influence in his country and also making noises about how most of the wealth was held by the white upper classes, he suddenly found himself in an American jail on drug charges. The country has no Double Tax Agreements in force and the local government is reluctant to say the least when it comes to handing over information to foreign governments. Incorporation, as I said earlier couldn't be easier. You can contact an incorporation agent anywhere in the world and they will probably be able to help you set up a Panamanian company. Bearer shares are permitted to allow anonymity. When incorporating, three directors will be required and also a resident 'agent'. Like incorporation, gaining residency is also fairly easy. There are only a few rules to follow. You must be over 45 and can prove that you can support yourself. But before you rush off and move, there is a downside, tax rates for residents that earn there income locally pay as much as 56% tax and also Panama has gift and inheritance tax of 10%. If you're interested in establishing yourself there, ensure all your income is derived elsewhere, otherwise you'll pay tax at rates higher than you're paying now. Bank Fortress Management Group P.O. Box 0832-0817 World Trade Center, Panama City, Rep. Of Panama Telephone 0011 507 315 1073 Fax 0015 507 315 1074 Midland Bank PLC PO Box 5322 Panama 5 Panama Phone: 0011 507 269 6200 Agents Offshore Solutions Inc Calle Elvira Mendez #10, Banco do Brasil

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Financial Freedom & Privacy Building 1st Floor, Ofic #1 P O Box 85-0070, Panama 5 Republic of Panama Telephone 0011 507 223 2027 Fax 0015 507 264 3224 Atlas Offshore & Management Services #86,C 67 E, S.FCO. Panama City, Republic of Panama Telephone 0011 507 226 9610 Fax 0015 507 226 1550 Belize International SA Calle 61 y 50, Grupo CAT Building P O Box 871085, Panama 7 Republic of Panama Telephone 0011 507 223 3172 Fax 0015 507 223 3387 Intercorp International Services S.A. World Trade Center Panama, 53rd Street, East, Marbella WTC-0832, Box 6-5879 El Dorado, Panama 6A, Panama Telephone 0011 507 227 2658 Fax 0015507 227 1358 Panama in a Nut shell Language : Spanish but English is widely spoken Location : Central America Population : 2,300,000 Democracy : Yes Currency : US dollar widely used Religion : Roman Catholic Security 3 Bank Secrecy 4 Potential Tax Savings 4 Residency Possibilities 4

St Kitts and Nevis This tiny island group north of Montserrat, (which of course is no

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The Invisible World longer listed in this book due to a problem with a volcano pretty much destroying the place, although they are rebuilding) in the Caribbean has abolished income tax. In its place the government has introduced a hotel tax of 5% and a sales tax of 2%. Offshore companies are exempt from profits tax as long as their income was earned offshore and local operating companies pay 50%. St Kitts and Nevis was granted independence in 1983 from Britain but still retains a British flavour. Obviously, the tourism industry is the major industry and any immigrants wishing to invest in this industry are more than welcome to enjoy a tax free life in this Caribbean paradise. Most of the 50,000 people who live here, live on the island of St Christopher and in the capital of Basseterre. One little problem with the islands is hurricanes, which unfortunately rip through the place far too often during summer. There are many advantages in establishing an offshore corporate base in St Kits and Nevis. For example there is no need to file annual returns, shareholders and directors can be of any nationality, there is no need to reside on the islands, bearer shares are permitted, a corporation may serve as a director, the registered office can be located anywhere and foreign companies can redomicile there. Redomicile means to transfer the existing company into a St Kitts and Nevis company without actually having to set up a new company. Costs are also a good reason to consider St Kitts and Nevis, about US$600 for incorporation and US$900 per year for renewal. Incorporation takes about 48 hours. Bank secrecy is guaranteed by the Confidentiality Relationship Act of

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Financial Freedom & Privacy 1985. This Act restricts any disclosure of financial information to foreign investigators and any breach will lead to those responsible spending time in jail. Again, this Caribbean nation is a signatory to the Caribbean Basin Initiative with the US so obviously US citizens and residents should be careful if they wish to retain their privacy. Is there any situation where Bank secrecy can be lifted? YES. Although Nevis' secrecy law prohibits the unauthorised disclosure of information, the law does not apply to activities that are considered crimes in Nevis, such as illegal drugs, theft, or fraud. Can foreign tax authorities obtain information on Nevis bank accounts? NO. Confidential information can only be released at present if there is suspected criminal activity such as illegal drugs, theft, or fraud, but only by a Court order issued in this Federation and is not available to foreign governments for tax investigations. Is there an income tax in Nevis? YES. Local companies are liable to pay tax at a rate of up to 40% of net annual profits. This tax does not apply to the profits of an approved enterprise which has been granted benefits under the Fiscal Incentives Act. Offshore companies which by definition are doing business outside the Federation are exempt from all forms of taxation. Are there any other taxes in Nevis? NO. There is no capital gains tax, gift tax, or estate tax in Nevis. Bank Royal Bank of Canada PO Box 91 Bay Rd & Port St Basseterre, Nevis, WI Phone: 0011 1869 465 2259 Fax: 0015 1869 465 1040 The East Caribbean Central Bank P O Box 89 Basseterre Saint George Basseterre Phone 0011 869-465-2537

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The Invisible World Fax 0015 869-465-5615 www.eccb-centralbank.org Email [email protected] Agents Morning Star Holdings Memorial Square, PO Box 556 Charlestown, Nevis, WI Phone : 0011 1869 469 1817 Fax : 0015 1869 469 1794 AMS Trustees (Nevis) Limited P.O. Box 733 Springates South Lower Government Road Charlestown Nevis West Indies Tel: 0011 869 469-2676 Fax: 0015 869 469-2677 E-mail: [email protected] St Kitts-Nevis in a Nut shell Language : English Location : Caribbean Population : 50,000 Democracy : Yes Currency : East Caribbean Dollar Religion : Protestant Security 3 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 3

St Lucia St Lucia is a Caribbean island near Barbados with a population of 145,000 English speaking inhabitants. The government is currently

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Financial Freedom & Privacy encouraging foreign business to invest in the following industries: distribution, commercial importation, building, restaurants, hotels, furniture manufacturing, printing, automotive service and repair, transportation, advertising, entertainment, laundry, quarrying, hairdressing and other small scale industries. Further information about investment opportunities in St Lucia can be obtained from the Chamber of Commerce, PO Box 482, Castries, St Lucia. The country has Free Zones and modern industrial estates to facilitate business setting up in St Lucia. Tax holidays are available to the above industries ranging from 10 to 15 years. In addition duty free importing of goods is also available. Capital repatriation is guaranteed by law, so you can also get your cash back out of the country if you need to. If you set up a business in a nonapproved industry you will be subject to company tax of 45%. Residency is out of the question as the government imposes personal income tax at a rate of 60%. Withholding tax will deduct 20% tax from any profits repatriated. Bank Barclays Bank Bridge Street Tel. 0011 1 758 456 1000 Manager 0011 1 758 456 1101 Fax 0015 1 758 452 6860 Email [email protected] Caribbean Banking Corp PO Box 1531 22 Micoud St Castries, St Lucia

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The Invisible World Phone: 0011 1809 452 2265 Fax: 0015 1809 452 1668 Agent Financial Centre Corporation NIS Building, Ground floor The Waterfront Castries, St. Lucia Tel: 0011 (1) 758 4557700 Fax: 0011 (1) 758 4557701 E-mail: [email protected] Internet: www.pinnaclestlucia.com/ St Lucia in a Nut shell Language : English Location : Caribbean Population : 140,000 Democracy : Yes Currency : Eastern Caribbean Dollar Religion : Roman Catholic Security 3 Bank Secrecy 2 Potential Tax Savings 3 Residency Possibilities 0

St Vincent and The Grenadines Continuing with tiny Caribbean islands, we move on to the islands of St Vincent. This island nation is situated just west of Barbados. The country is inhabited by 120,000 English speaking descendants of African slaves. Discovered by Columbus in 1498, they gained independence from Britain in 1979. Like many tax havens, offshore companies can exist in St Vincent tax free as long as their income is derived outside the country and no local holds more than 10% of the shares. If you live there you will be subject to

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Financial Freedom & Privacy tax rates of up to 65%, so living there, apart from the odd holiday is completely out of the question. Normal corporate tax rates are 45% on profits. A St.Vincent bank is also an International Company but one with a bank charter. For its formation and administration the same golden rules apply as for other offshore banks. You must wait for your license before engaging in any bank transactions. Be nice to the license granting authorities by furnishing unquestionable proof of sufficient capital and submitting plenty of character references. Pay your license fees punctually in the year when you start your bank and continue to do so each year otherwise you will run into trouble. In 1979 an official American bulletin threw a slight shadow on the bank haven of St. Vincent. It warned the public about numerous 'shell banks' (of which 25 were domiciled in St. Vincent alone) which had important sounding names like the 'First National Bank of the Caribbean Ltd.' or the 'Mercantile Bank and Trust Co. Ltd.' Various critics were already reproaching St.Vincent and other bank chartering centres for being content with the mere compliance with the official procedure stated above and for not concerning themselves with who the principals behind the banks were, and what they wanted a bank for in the first place. An Irish journalist commented on the undisguised St.Vincent bank chartering practices as follows: “Even if you have been previously convicted for cheque fraud and bill forgery, or certified because of schizophrenia, even if the bailiff is a constant visitor, or you may be sitting in jail at the moment, you can still get your own bank within four weeks in St. Vincent.” He goes on to say, “All you need to start your career as a master of a Caribbean credit institution are the names of three willing persons, whose identity nobody checks, a

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The Invisible World secretary, a treasurer and a president. They will not even be asked for character references on their mental condition or business background”. “As the owner of a St. Vincent bank, you can forget all about the following concepts, actual available capital, certified balance sheets, minimum reserves with any central bank and especially also, any official regulatory bodies for the banking system. Even if you move the main thrust of your banking operations to Europe, the regulatory jurisdiction over your credit institution still lies with the authorities in St. Vincent's capital of Kingstown, and they're just too generous there”. Since reports, such as the one by the Irish journalist, have entered the media, the St Vincent government has made some changes to its International Companies Act of 1976. Before an offshore bank can be established, the following information must be furnished to the local authorities: Name and address of applicant. Name and address of at least three directors including their citizenship. Character references of the company directors. Proof of financial soundness of the applicant as well as the directors. Certification of the qualifications and experience of the directors. Details of the banking activities planned. Declaration that no criminal records or unfavourable information exists about the directors. Capitalisation of EC$500,000 is required. Minimum reserve of EC$1,000,000 is also required. The registration of your own bank will cost you about US$4,000 and US$2,000 per year. If all this sounds good and you would like your own St Vincent bank, then contact the St Vincent bank registration authority: St Vincent Trust Authority Ltd., PO Box 613, Kingstown, St Vincent. Many incorporation companies worldwide handle St Vincent companies as they have become quite popular. Costs can vary so check with a few different agents. The State of St Vincent not only contains the main island of St Vincent, but also several other islands, one of which is Mustique. A playground of the rich and famous including the Royal Family. In the mid

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Financial Freedom & Privacy sixties a development company was established, Mustique Company Ltd, by a Scot, Colin Tennant. He intended to turn the island into a tourist resort. In 1988 the company was taken over by a group of well to do ex-pat locals who negotiated a sort of autonomy with the St Vincent government which is valid until 2005. The company now controls all the services you would expect of a local government. In 1975 the company gave one of the best estates on the southern coast to Princess Margaret, the Queen's sister. The estate included the five bedroom villa 'Les Jolies Eaux'. Since then David Bowie, Mick Jagger, all the members of the Royal Family, all their friends and hangers on have been photographed on the island. Mustique now boasts about 75 villas, which will cost you about US$1,500 per week to rent, which includes golf cart and household staff. Golf carts are the usual form of transportation on this 5 square kilometre island. To buy one of the estates on Mustique will cost you between US$500,000 and US$2,000,000. The island really is only for those of us that enjoy relaxing on the beach or water sports, as there are only two shops and one bar on the island. Bank Millennium Bank is a subsidiary of United Trust of Switzerland, SA, a Swiss-registered private trust company that has been in business for over seven decades. United Trust of Switzerland’s extensive experience in financial services provides Millennium Bank with a solid foundation and access to correspondent banking relationships. Email: [email protected] Web-site: www.mlnbank.com Financial Service Centre Stoney Ground, Kingstown St. Vincent and the Grenadines, W.I. Telephone: 0011 1-888-776-7720 or 0011 1-784-451-2100 Fax 0015 1-784-451-2101 Bank of Nova Scotia PO Box 237 76 Halifax St Kingston, St Vincent Phone: 0011 1 784 457 1601 Fax: 0015 1 784 457 2623

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The Invisible World Agent Argon Limited P.O. Box 1817, 97 Granby Street St. Vincent & the Grenadines, W.I. Tel.0011 1 784 485 6585 Fax: 0011 1 784 485 6586 Email: [email protected] St Vincent in a Nut shell Language : English Location : Caribbean Population : 120,000 Democracy : Yes Currency : Eastern Caribbean Dollar Religion : Protestant Security 4 Bank Secrecy 2 Potential Tax Savings 4 Residency Possibilities 1

San Marino San Marino is a small principality surrounded by Italy. Contrary to popular opinion, San Marino is a totally independent state. It has the world’s oldest intact constitution which dates from 1263 and it is actually the oldest republic in Europe. Although independent from Italy, they have formed a customs union with they're larger neighbour and hence no physical borders exist. So you can easily slip into San Marino and pickup some duty free bargains no questions asked. San Marino is popular tourist destination with about 3 million tourists visiting each year to see the magnificent medieval castles, the Tuscan architecture, 14th century San Francesco church and of course to take advantage of the saving on sales tax as San Marino's rate is half that of Italy. Tourists quite often decide to open bank accounts much to the frustration of the Italian authorities.

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Companies established in San Marino only attract a tax rate of 20%, which in Australia would not be regarded as concessional. This means you don't have to pay tax in Australia as long as the income is 'active'.(check the section on Australian Tax Considerations). The problem with a San Marino company is that you require a local director but this generally doesn't create a huge problem as many incorporation agents can supply one at reasonable rates and you should be using nominee directors anyway. Immigration is extremely difficult and not worth a try unless your uncle is a member of the San Marinese Government. Many of the Agents in this book can assist with an IBC in San Marino if you so desire. San Marino in a Nut shell Language : Italian Location : Italy Population : 23,000 Democracy : Yes Currency : Italian Lire Religion : Roman Catholic Security 4 Bank Secrecy 2 Potential Tax Savings 2 Residency Possibilities 0

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The Invisible World Seychelles The Seychelles group of islands in the Indian Ocean comprises over one hundred named islands, most being situated between four and five degrees South of the equator. The largest island is Mahe. It is a politically stable, English speaking country. The Seychelles are not only attractive because of the beautiful scenery but also because it happens to be a zero tax haven. The Seychelles has a population of around 72,000, descended primarily from French settlers, African slaves, British sailors and traders from India, China and the Middle East. Discovery of the islands is credited to the Portuguese explorer Vasco de Gama. The first French settlement was established on St. Anne Island on the 27th August 1770 and two years later this was followed by a settlement on Mahe on the site of what is now the capital city, Victoria. In 1814 the Seychelles, along with Mauritius, were ceded to Great Britain under the terms of the Treaty of Paris. It was only in 1960 that the first gradual constitutional reforms were introduced. Seychelles is currently an Independent Republic within the British Commonwealth. The Company Law was formulated in 1978 by two Swiss experts and the system appears to work well. It is now known as the International Business Companies Act 1994. Incorporation costs about US$1,000 or the equivalent in Seychelles Rupees and can be arranged on the island or by an agent elsewhere. The only requirement is that you don't trade in the islands otherwise you will be taxed at the rate of 35%. You only require one

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Financial Freedom & Privacy director/shareholder and bearer shares are allowed. You must maintain a registered office on the islands but this can be arranged through a local agent. Annual cost are about US$100 per year and no disclosures are made to the authorities. Total anonymity can be achieved with a Seychelles company you have a choice of suffixes with "Limited", "Corporation", "Incorporated", "Societe Anonyme" or their abbreviations being acceptable. Other suffixes such as B.V. GmbH, SARL may also be used. Beneficial ownership of shares is not disclosed. The Seychelles economy is primarily tourism based, but the rapidly expanding financial sector, linked to the establishment of the Seychelles International Business Authority and a suite of progressive laws facilitating the establishment of offshore structures and encouraging inward investment. The Free Trade Zone is now becoming a major element in the economic development of the area and the Industrial Fisheries Section is also increasing in importance, based mainly on the issue of licences to foreign tuna fishing vessels. There are a growing number of international banks and insurance companies have established either branches or subsidiaries who, together with local management, accounting and legal firms, provide clients with support equal to that of any major offshore financial centre. There are exchange controls but International Business Companies are exempted. Agents International Business Registration Agents (Pty) Ltd Revolution Avenue, P O Box 18 Victoria, Mahe, Seychelles Telephone 0011 248 322577 Fax 0011 248 324069 International Corporate Agents Limited 102 Aarti Chambers, Mont Fleuri, P O Box 870 Victoria, Mahe, Seychelles Telephone 0011 248 225755 Fax 0015 248 225991

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The Invisible World Mayfair Trust Group Limited Suites 25 & 27, Second Floor, Oliaji Trade Centre Francis Rachel Street, PO Box 1312 Victoria, Seychelles Telephone 0011 248 226099 Fax 0015 248 226043 Bank FIFCO (Offshore) Services Ltd Suite 102, Premier Building, P O Box 308 Victoria, Mahe, Seychelles Telephone 0011 248 323332 Fax 0015 248 324009 Seychelles in a Nut shell Language : English Location : Indian Ocean just off the coast of Africa Population : 72,000 Democracy : Yes Currency : Seychelles rupee Security 3 Bank Secrecy 2 Potential Tax Savings 4 Residency Possibilities 3

Singapore Most people think of Singapore as a business centre and a place to take an overseas holiday, few would think about the financial and tax benefits that now qualify Singapore as a tax haven. Singapore gained independence from Britain in 1965 and economically hasn’t looked back. The major benefit of Singapore is that income derived offshore is not taxed at all. Companies can be incorporated for approximately A$3,000 to $4,000. This can be done by contacting an incorporation agent in Australia. You will need two directors and one of those must be a resident. The

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Financial Freedom & Privacy company secretary must be also be a resident. There are no exchange controls and numbered bank accounts can be opened. Agent Overseas Company Registration Agents 24 Raffles Place 26-04 Clifford Centre Singapore 048621 Phone: 0011 65 535 3382 Fax: 0015 65 535 3991 Bank Standard Chartered Bank 6 Battery Rd Singapore 049909 Phone: 0011 65 225 8888 Fax: 0015 65 789 3756 Singapore in a Nutshell Language : English , Mandarin and Malay Location : SE Asia Population : 2,800,000 Democracy : Yes Currency : Singapore Dollar Security 4 Bank Secrecy 2 Potential Tax Savings 3 Residency Possibilities 2

Switzerland When people mention tax havens or secret bank accounts, they immediately think of Switzerland. And with good reason, the place is still the benchmark for many emerging tax havens. When I originally researched this book one thing became obvious to me, the section on Switzerland would be complex. This is due to the fact that Switzerland is actually a federation of Cantons or regions. Each of these Cantons have a

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The Invisible World degree of autonomy when it comes to financial regulations and even taxation. In an attempt to simplify this chapter, I have divided it into subsections concentrating on some of the various issues and the more interesting Cantons. We’ll firstly look at the famous Swiss Bank accounts. Swiss Bank Accounts In recent times the Swiss have come under a lot of flack for supporting the Nazis in WW2. The fact that it would appear the country is now very prosperous (which by the way only occurred after WW2) is due to the mountains of Nazi gold extracted from the Jews and others, as well as the numerous accounts (such as the ones we are about to talk about) that were “stolen” by the Swiss banks. This went on over fifty years ago and shouldn’t make you suspicious of Swiss banking practices these days. The Swiss have now agreed to hand over US$1.3 billion to the 31,500 holocaust survivors and their families. It has been reported that UBS shredded thousands of records of accounts dating from the thirties and forties. The discovery was made by one of their own, ex-UBS employee Christopher Meili, who went to the media with the story of the Swiss bank’s dishonesty over this issue. They don’t do this sort of thing anymore, thank goodness. But despite the banks’ protestations, they did “lose” these accounts with millions of Swiss francs in them. The Swiss don’t lose anything! They are probably the most efficient and fastidious people on earth. According to the London times, 40% of all private assets worldwide

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Financial Freedom & Privacy are managed by Swiss financial institutions. This is staggering when you consider the private wealth in places like the USA, Europe and the oil rich Arab states. But, it gives you some idea where the ‘smart’ money is. To open an account with a Swiss bank you must convince the bank to deal with you. This sounds ridiculous but it’s true. When I last visited Switzerland, I tried to open an account and the person behind the counter treated me like a tourist trying to open an account for the sole purpose of being able to say “ I have a Swiss bank account”. Unfortunately, a few years ago American tourists would indulge in this practice much to the annoyance of the humourless Swiss bankers. When opening an account you will need a substantial amount so as not to be treated as a tourist with ‘Swiss bank account envy’, say Sfr100,000. You will also need plenty of identification. But there is another way instead of actually going to Switzerland. You can write away to a Swiss bank and ask them to send out application forms to you. All you have to do is complete them, attach some travellers cheques or a cashiers cheque (for secrecy) representing your opening deposit, and send them back by registered mail. They will require identification such as a local bank reference or a passport, sometimes both. If you open an account and then grant somebody power of attorney on the account, in the event of your death, it will be deemed invalid under Swiss law. Your account interest will attract 35% withholding tax. Bank Secrecy Seldom can a country have been simultaneously as successful and yet as stressed as Switzerland. On the one hand it has a strong currency, a thriving economy, and is home to some improbably large percentage of the world's private wealth. On the other hand, the world's multilateral organisations, including the EU, the UN, the OECD and the FSF are increasingly trying to use the promise of closer ties and the benefits of globalisation as levers to break down Switzerland's fabled banking secrecy, the rock on which its financial success is built. What’s a poor country to do? Surrounded by the EU since Austria joined, and about to be even more thoroughly surrounded as the

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The Invisible World enlargement process proceeds, Switzerland has no choice but to develop commercial, transport and human links with its neighbours - hence the bilateral accords reached last year between Switzerland and the EU, which dealt with some of the more urgent economic issues raised by the country's increasing integration with the single market. But the EU, sadly for Switzerland, is not just an economic body. No, the EU has Ambitions to be all the things that Switzerland has spent 1,000 years learning not to be, like aggressive, interventionist, global and generally bloody-minded. And like most bullies, it can't leave well alone. What has brought things to a head for Switzerland has been the EU's ill-fated attempt to impose a uniform withholding tax on savings. This was originally just one measure included in a package of tax harmonisation measures, sneaked into the EU's agenda by the Brussels 'Europe Is A Superpower' gang in the guise of a single-market measure. Anyway on to bank secrecy as was and still is. The cornerstone to the Swiss banking system has been their secrecy laws. Before the start of WW2, the German Jews began placing their money and valuables into Swiss banks because the Nazis had started confiscating Jewish assets. The smart Swiss immediately realised this could work out well for their banks had the government legislate bank secrecy. Funnily enough, it was the Nazis who also used these laws to their advantage. By stashing millions of dollars worth of gold, artworks and foreign cash to fund the Nazi war machine and just in case things turned sour, the Nazi hierarchy would have a nestegg to take to South America. In recent times Swiss bank secrecy has come under constant attack, most notably the Jewish community regarding the ‘stolen’ money. I have read there are between 500-1,000 breaches of Swiss bank secrecy each year mainly in relation to criminal charges. In articles 27 and 28 of the Swiss Civil Code, a banker’s breach of confidentiality is deemed to be an offence, and is therefore regarded as an unauthorised act according to Articles 41 and 49 of the Swiss Law of Contract. The bank client can thus easily justify a claim for damages. In addition, Article 47 of the Federal Law on Banks and Savings Banks promulgated in 1934 (for the benefit of the Jews, Nazis and of

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Financial Freedom & Privacy course most importantly, the Swiss themselves) and amended in 1971, threatens bank employees who pass on information about their clients to third parties with severe punishment. Even the government has trouble finding out about bank clients. In requests for legal assistance, foreign courts can theoretically ask a Swiss civilian judge to undertake certain actions (eg. Summoning a bank director as witness) as long as these are of a particular significance for the court case pending overseas. Legal assistance for civil suits is governed by the Hague Convention on Civil Procedure, dated 1904, which most countries of the western world signed. Legal assistance in criminal cases is governed by the extradition treaties signed by Switzerland with all the EU countries. Tax, political, military as well as well as foreign exchange offences are excluded from such legal assistance, only simple tax evasion and not tax fraud, is excluded. However, what may constitute tax fraud (eg false invoices) in many other countries, may only be considered a minor violation in Switzerland. In the case of an emergency, Swiss banks still have another way out of appearing in court as a witness against their clients, by calling on Article 273 of the Swiss Revenue Code. This Code strictly forbids so called commercial espionage and according to precedents set by the federal courts, this can cover virtually any business information passed on where interests are to be protected. Even the Nicaraguan Sandinistas, achieved nothing when they asked the Union Bank of Switzerland for information about the return of $500,000,000 that Nicaragua’s former dictator, Somoza, had extorted from the country and put into a Swiss bank via the bank’s Panama branch. Ethiopia’s Emperor Haile Selassie may have lost his freedom and life to the military which staged a coup but not his 15 billion dollar nestegg which he built up little by little in Switzerland. He was able to do so by depositing 500 kilos of gold every year in the cellar of his Swiss bank. The Kopp affair occurred in November 1986, US federal authorities, acting on a tip, seized three suitcases at Los Angeles International Airport, bound for Switzerland with a Turkish drug dealer named Dikran Altun. Inside was US$2 million of what would become known as the ‘La Mina’ money. Altun was to deliver the suitcases to Jean and Barkev Magharian, Syrian born brothers who had been laundering profits for the Medellin drug

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The Invisible World cartel for a number of years. A Swiss investigation revealed that the Magharians had washed perhaps as much as US$2 billion for their clients, using 20 different accounts in Zurich. One of the banks involved, Credit Suisse, eventually admitted that, on those occasions when counterfeit notes had been found in bundles of cash being deposited by the Magharians, they had returned the bad notes but had never bothered to advise the police. It also emerged that directors at Credit Suisse had been warned by an internal audit committee that the Magharian brothers were conducting questionable activities through their account. Again, the bank did nothing about it. The Swiss, on principle, never grant legal assistance to foreign authorities in debt collection and bankruptcy cases. Which means, Switzerland will not hand over any assets from a foreign bankrupt’s estate stored in their foreign territory, nor will Swiss banks give out any information to foreign bankruptcy authorities. In recent times the Swiss Federal Banking Commission has provided banks with a set of ground rules. They request banks to be suspicious of any sudden activity taking place in accounts that have been inactive for some time; cash being withdrawn immediately after being deposited (money laundering style); accounts opened with amounts in excess of Sfr25,000 cash; and customers that refuse to supply information. While Swiss bank secrecy laws have been the benchmark for all bank secrecy laws worldwide, there are better places to put your money these days. Unfortunately, the banks can be severely fined if they don’t inform on dodgy customers to the authorities. Of course you could say to yourself, “I’m not dodgy”, so I haven’t anything to worry about, but what if you were suspected wrongfully, and reported on. I must say, I would put my money elsewhere. The Isle of Man, Jersey and Austria would be my first choices.

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Financial Freedom & Privacy The Swiss Don’t Give An Inch! – November 2003 Switzerland and three other countries have blocked attempts by Australian authorities to track overseas money trails. The treasurer, Peter Costello has admitted that Switzerland and three other countries had vetoed the Government's attempts to make them cooperate with tax avoidance surveillance. This all came about due to stockbroker Rene Rivkin, former Labor minister Graham Richardson and Qantas director Trevor Kennedy were the owners of a stake in a printing company held through Swiss bank accounts. The ASIC has launched an investigation into the case to see whether the Federal Court was misled about the ownership of the shares and their sale, which netted more than $20 million. Switzerland had recently rejected an Organisation of Economic Co-operation and Development (OECD) move to lift bank secrecy by the end of 2005 and adopt a common definition of tax fraud. Switzerland has been long regarded as a tax haven like many other lesser lights because of its strict privacy laws, which prohibit banks identifying clients and making funds almost impossible to trace. It’s interesting that Labor assistant treasury spokesman David Cox said the failure of the OECD plan meant the Government no longer had any way to tackle tax havens. There is definitely a feeling now this will strengthen the resolve of other countries to resist OECD moves that they feel interfere with their sovereign rights. The Rivkin affair has also exposed serious flaws in the $11 million-a-year AUSTRAC, which provides financial intelligence to several federal authorities. Last year as much as $8 billion left Australia through “tax havens” or Offshore Financial Centres. But the ATO has raised just $242 million over four years from information, which has been provided by AUSTRAC. Lance Spicer was interviewed on ABC radio with Ian Rogerson on Friday 31st October 2003 on the subject of Swiss bank accounts and offshore banking

During 2001 and 2002, and despite the events of September 11 in the US, the Swiss steadfastly refused to give in to EU pressure over disclosure of information on savings interest, thus threatening the EU's Savings Tax Directive with its plans for information exchange. In January, 2003, however, it seemed that Switzerland had finally negotiated an acceptable withholding tax regime with the EU, allowing Finance Ministers to reach a heavily-fudged compromise Savings Tax Directive package. After last-

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The Invisible World minute haggling by Italy and Belgium, it seemed by mid-2003 that the Directive would enter into force in 2005. In October, 2003, the Swiss cabinet reiterated that it is not willing to lift banking secrecy in its negotiations with the European Union on the second set of bilateral treaties. Incorporation There are three major types of company in Switzerland, Holding, Operational and Domiciled. A holding company must have at least 75% of its interests outside of Switzerland. If this is achieved, the company can remain almost tax exempt. Even if the company fails to meet the 75% rule, tax is still quite moderate depending on which Canton you are operating from. Operational companies are normal trading companies that manufacture watches etc. They are subject to normal taxation of around 38% but this can vary depending on which Canton you are situated. Domiciled companies can operate from only a few Cantons. These companies are the typical ‘paper’ companies. They are not permitted to trade or employ staff in Switzerland. All their income must be derived outside the country. While these companies are basically tax exempt, unfortunately due to the restrictions the Swiss place domiciled companies you would be hard up convincing the tax authorities this was a legitimate trading base. The costs involved in incorporation vary from Canton to Canton but if you use Sfr2,000 as a guide you shouldn’t be too far off. Yearly maintenance will set you back about Sfr2,000 per annum. Residency Unless you intend to invest heavily and employ people it is extremely difficult to gain residency in Switzerland. There are of course some side entrances if you're not rolling in it. Read the sub-sections on Busingen and the Geneva Free Zone and also go back and read the section on Campione.

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Financial Freedom & Privacy Busingen Thinking about buying a Swiss cottage and settling down in Switzerland? Moderate tax, low crime rates, picture postcard scenery everywhere, well there is a way, via Busingen which is in the Canton of Schaffhausen. The first thing you must have is an EC country passport, if you don't have one, a Portuguese passport is relatively easy to obtain. As an EC citizen you can immigrate to German Busingen. As a Busingen resident you live inside the Swiss border although you're actually still on German soil. When living in the 760 hectare community you follow Swiss time which is one hour behind Germany in Summer and you buy Swiss goods. To the uneducated you would appear to be living in Switzerland. But here's the good bit, if you actually live in Busingen you can apply for immigration, work and residence permits. It will take 10 years for approval but it is an absolute certainty that you will be granted Swiss citizenship. A shortcut to the 10 years is to marry a Busingen resident that has already qualified. Although you will be subject to German tax, it is becoming almost impossible for the German authorities to work out how much a non-salaried Busingen resident is earning, especially since they all have their money in the Swiss banks that predominate. Bank Schaffhauser Kantonalbank PO Box 8201, Schaffhausen, Switzerland Phone : 0011 41 53282222 Fax : 0015 41 53253848 Jura Jura is the youngest of the Cantons of Switzerland founded in 1979, and it is seriously thinking of breaking away from the Swiss Confederacy. The separationist party Rassmblement Jurasein is now gathering public support for a break in the near future. They propose a jurisdiction along the lines of Liechtenstein. It could be interesting for anybody with interests in the Canton if they do gain independence. Bank Banque Catonale du Jura PO Box 2900, Porrentruy, Switzerland Phone : 0011 41 66651331

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The Invisible World Fax : 0015 41 66661530 UBS Rue du Jura 11 2900 Porrentruy Switzerland Telephone: 001141-32-465 25 25 Facsimile: 0015 41-32-465 25 50 Geneva Free Zone The Geneva Free Zone has a fascinating history, Geneva was once part of France and at the time of the French Revolution in 1789 had become a Swiss enclave on French soil. At the Vienna Convention of 1815 at the conclusion of Napoleon's reign, the city was granted a four kilometre corridor of land to connect it and it's Swiss people with the rest of Switzerland. In order to protect the economic supply of Geneva, the city was granted an additional area called the Savoy Heights. A decree brought down by the International Court of Justice in The Hague in 1934 assures that France will respect Switzerland's right to this zone. There are some very interesting characteristics to this zone. The Swiss immigration quota doesn't apply to people that have been living here for longer than six months. Once you have completed six months in the Free Zone, you will be entitled to a work permit. Once you have a work permit then you are well on your way to gaining residency. There are also no restrictions regarding starting up your own business. Banks Royal Bank of Canada Ave Francois – Diday 6 Case Postale 1211 Geneva 11, GE 1204 Switzerland Phone: 0011 41 22 819 4242 Fax: 0015 41 22 819 4343 Handelsfinanz-CCF Bank Place de la Fusterie P.O. Box 5054 CH 1204 Geneva Schweiz

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Financial Freedom & Privacy Tel.: 001141 22 310 5444 Fax: 0015 41 22 310 1344 Lugano Lugano is a small town near the Italian border and right across the lake from Campione. It is, for all intents and purposes an Italian town inside Switzerland. This quiet little town has acquired quite a reputation as a place to hide money. The attraction for people to hide their money here is due to several reasons. One is the casino across the lake in Campione, where money launderers travel each day via ferry to 'cash in their chips'. The 'gamblers' enter the casino with their cash buy a moderate sum in chips from the cashier, go to the tables and lose a few thousand lira. They then repeat this process over and over during the course of the day. At the end of the day they have accumulated quite a lot of money in chips. They then go back to the cashier and cash in their chips. The cashier then issues a cashiers cheque to the 'gambler' due to the amount involved. The gambler gets back on the ferry to Lugano and banks the cheque tax free and laundered into his Swiss bank account. There are about 100 banks in Lugano to facilitate these transactions. It's not unusual to see well dressed people stepping on to the ferries to Campione carrying leather attaché case in one hand and espresso and croissant in the other each morning. And then returning that afternoon to bank their 'winnings' before the banks close. Banks Banca di Credito e Commercio Via Cattori 12 CH-6902 LUGANO Switzerland Tel. 0011 41 91 994 24 31 Fax. 0015 41 91 994 92 62 Banco Unione di Credito PO Box 6901 Lugano, Switzerland Phone : 0011 41 91293111 Fax : 0015 41 91227009

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The Invisible World Kredietbank Lugano SA Via Balestra 2 P.O. Box 2781 CH 6901 Lugano Switzerland Tel.: 0011 41 91 911 0636 Fax: 0015 41 91 911 0690 Nidwalden There is really only one good thing about Nidwalden from an investor’s point of view, it's a cheap place to register a company as far as Switzerland is concerned. About 3,000 Swiss francs will buy you a Domiciled company. More opportunities are available in the Canton of Zug to be honest. Bank EKN Bank in Nidwalden PO Box 6370 Stans, Switzerland Phone : 0011 41 41631188 Fax : 0015 41 41614909 Samnaun Samnaun is a small town about 5 kilometres north of the Swiss/Austrian border town of Vinadi on S15. The unusual thing about Samnaun is that there are no sales taxes on things like Gold bullion, Silver, Platinum, Palladium, Diamonds, Swiss watches, designer clothes such as Armani and the list goes on. The precious metals can be purchased at most of the banks in town. The reason for this little aberration is due to geography. For hundreds of years the people of Samnaun have traded with the people of the Tirol in Austria due to the lack of roads heading west, the only people they came in contact with were across the border. When in 1848, the Swiss government introduced duties and sales taxes, this affected the people of Samnaun quite badly as this unbalanced the trading situation with the people of the Tirol. Samnaun petitioned the Swiss government, which relented in 1892 and allowed Samnaun to be free of duties and sales taxes. In 1913 a road was constructed connecting Samnaun with the rest of Switzerland but the legislation allowing Samnaun

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Financial Freedom & Privacy a tax free status was never repealed. To this day it is a bargain hunters paradise to those in the know! Banks Credit Suisse Phone : 0011 41 8495455

Grison Cantonal Bank Phone : 0011 41 8495212

Zug The Canton of Zug (just south of Zurich) imposes a tax rate on its residents of only 16% which is about half of the national average. But Zug paper companies are even better off. The municipality and the Canton simply charge them flat rates regardless of their income. In the case of a limited company with the minimum legal capitalisation of 20,000 Swiss francs, the tax amounts to only 300 Swiss francs. The Swiss federal tax (called Wehrsteuer), although not a flat rate, is still very low by Australian standards. A minimum of 3.6% and a maximum of 9.8% on the profits are collected. In addition, you can deduct a uniform 50% from the gross profit before this tax is assessed for the 'shareholders' efforts'. And naturally, you can also deduct your actual operating expenses from the remaining half. Incorporation will cost 3,150 Swiss francs with maintenance costs 2,500 Swiss francs plus any accounting fees you may incur, say 1,000 Swiss francs. But the numerous large international companies that have decided to establish an office in Zug are attracted by a type of company offered in this particular Canton, they are called 'Mixed Companies', which make at least 80% of their profits outside Switzerland. As long as the majority (50.001% is sufficient) of the company's shares are in the hands of non-Swiss, then only a quarter of their foreign profits are subject to a maximum 7% income tax. 75% of the profits remains untouched by taxes. So, if an accredited 'Mixed Company' makes a profit of a million francs offshore, for example, the total federal, cantonal, municipal and possibly church taxes due, will come only to 127,575 Swiss francs which is less than 13 percent. If you are going to establish a base in Switzerland, this is where the smart money goes. If you would like to know more, phone Phillipe Schnadt on 0011 41 41 711 88 41. I have had a bit to do with Mr Schnadt and he

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The Invisible World seems to be a very helpful and professional man. He can arrange any thing you need in Switzerland or Luxembourg. Bank UBS Baarerstrasse 14a 6300 Zug Switzerland Mailing Address: UBS AG Postfach 757 6301 Zug Switzerland Telephone: 0011 41-41-727 33 33 Fax: 0015 41-41-727 35 80 Zuger Kantonalbank PO Box 6301 Zug, Switzerland Phone : 0011 41 41 709 1111 Fax : 0015 41 41 709 1555 Agents CITCO (Suisse) SA Haus Zum Schwert, Weinplatz 10 8001 Zurich, Switzerland Telephone 0011 41 1 226 8210 Fax 0015 41 1 226 8220 Ilex Trust Services SA 6 Pl des Eaux-Vives, P O Box 3338 CH-1211 Geneva 3, Switzerland Telephone 0011 41 22 849 8340 Fax 0015 41 22 786 1846 Morgan & Morgan Corporation Services SA 63 rue de Lausanne, P O Box 2565 CH-1211 Geneva 2, Switzerland Telephone 0011 41 22 738 0630 Fax 0015 41 22 738 7321 Multifiduciaire Geneve SA

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Financial Freedom & Privacy 1 Carrefour de Rive, Case Postale CH-1204 Geneva 3, Switzerland Telephone 0011 41 22 786 2650 Fax 0015 41 22 786 5890 Radcliffes Trustee Company Limited 12 rue de l'Arquebuse CH-1204 Geneva, Switzerland Telephone 0011 41 22 807 2000 Fax 0015 41 22 807 2005 Thalmann Consulta Services SA Place Issac Mercier No 3, P O Box 2257 CH1211 Geneva 1, Switzerland Telephone 0011 41 22 732 4588 Fax 001541 22 732 2927 Von Sury Trust Limited Spalentorweg 20, P O Box 109 CH-4009 Basel, Switzerland Telephone 0011 41 61 269 2020 Fax 001541 61 269 2000 Other Swiss Banks Banca Privata Edmond de Rothschild Lugano SA Via Ginevra 2 CH 6901 Lugano Schweiz Tel.: 0011 41 91 913 4500 Fax: 0015 41 91 913 4501 Banco BPI SA Rue de Lausanne 44 - 2ème CH 1201 Geneva Schweiz Tel.: 0011 41 22 906 1790 Fax: 0015 41 22 906 1793

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The Invisible World Bank Morgan Stanley AG Bahnhofstrasse 92 CH 8023 Zürich Schweiz Tel.: 0011 41 1 2209 111 Fax: 0015 41 1 2209 800 Banque Nationale de Paris SA Aeschengraben 26 CH 4002 Basel Schweiz Tel.: 0011 41 61 2765 600 Fax: 0015 41 61 2765 500 JP Morgan SA Rue de la Confédération 8 P.O. Box 5160 CH 1211 Geneva Schweiz Tel.: 0011 41 22 7391 111 Fax: 0015 41 22 7391 444 Lavoro Bank AG Talacker 21 CH 8001 Zürich Schweiz Tel.: 0011 41 1 217 9595 Fax: 0015 41 1 221 1241 Switzerland in a Nut shell Language : German, French, Italian, Romansh but English is widely understood Location : Central Europe Population : 7,000,000 Democracy : Yes Currency : Swiss Franc Religion : Catholic Security 4 Bank Secrecy 4

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Financial Freedom & Privacy Potential Tax Savings 2 Residency Possibilities 0

Turks and Caicos This group of islands lies south east of the Bahamas. The islands are a dependency of the UK and have been since 1962. In 1962 they went from being an independent nation to becoming a 'colony' due to national bankruptcy. The British placed the islands under the control of the Governor of the Bahamas. But when the Bahamas were granted independence some years later, the Turks and Caicos were granted their own Governor. A year later the islands decided to become independent again, but a short time later, again lost their nerve and the parliament voted to join Canada. The Canadians basically fell about laughing and refused the 'belongers' (this is what the local islanders call themselves) union with Canada. So, with their tail between their legs, they asked Britain to again take them in, which of course they did. And that is the state of political play at the moment. The whole place, as a result of their 30 years of turmoil, is a mixture of British, West Indian, Canadian and American culture and lifestyle. For instance they use the US$ as the official currency and half the banking industry is controlled by Canadian banks. There is no income tax or company tax, no gift, inheritance, property or sales tax. The government will also provide a 20 year tax free guarantee, this is very

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The Invisible World valuable aspect of incorporating in the TCI. There is however a small estate tax. This is easily avoided by assigning all your assets to an anonymous company. The islands earn their revenue by imposing import duties and stamp duties. If you wish to reside or work here it will cost you US$2,000 for a permit. No other problems will be encountered. But don't go there thinking you will pick up a job, they are scarce, so you must be able to survive off your offshore investments which is probably the reason you'd go there in the first place anyway. In recent years members of the government attempted to do a deal with drug bosses importing drugs into the US. The idea was to use the islands as a stopover for aircraft carrying drugs. But the whole thing failed and the Prime Minister and the Minister for Trade were arrested by the Miami Vice Squad. I have been told these days the government is pretty good and things are settling down quite well. The islands provide two types of companies, the regular and the exempted. Now you are probably wondering what an exempted company is, considering there are no taxes anyway. An exempted company guarantees you tax exemption for 20 years in addition to other benefits. The exempted company only needs one director, one shareholder and one founder. The founder and shareholder can be other companies if you wish. Corporate confidentiality is very high as the government does not record the name of directors or shareholders. The founder, director and shareholder can be all the same person or they can be a nominee if you wish. The Turks and Caicos company could be regarded the most simple and untraceable company structure available. Corporate and banking secrecy breaches by locals attract a $50,000 fine and 3 years in jail, so nobody on the islands will be giving too much away. Bearer shares are permitted and the shares don't have to carry a par value and can actually be owned by the company itself. There are no requirements for minimum authorised capital. Costs are basically US$600 for incorporation and US$300 annual fee. In addition you may have to engage a local management company to maintain a registered office etc. It takes about three days to incorporate. There are other benefits in addition to the exempted company

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Financial Freedom & Privacy structure. For instance the Companies Ordinance of 1981 allows you to convert foreign companies into a Turks and Caicos company. This means if you have a company elsewhere you can have it relocated or redomiciled to the Turks and Caicos and in effect it becomes a proper Turks and Caicos company. You first must check that the type of company you have is able to be redomiciled. A local incorporation agent can assist you with all the forms. When it comes to bank secrecy, they try hard but due to fairly outdated practices, secrecy can't be 100% guaranteed. Possibly look at banking elsewhere if you can manage it. Unfortunately, if you are an American, all airmail passes through Miami, which may diminish your anonymity and confidentiality. All in all, these days it’s a good cheap place to incorporate (if you do so through a reputable company), but hold off banking there. Bank Barclays Bank International PO Box 236 Butterfield Square Providenciales Turks & Caicos Islands Telephone: 0011 1 649 941-3606 Fax: 0015 1 649 941-3430 Bordier International Bank & Trust Limited P O Box 5, Caribbean Place, Providenciales, Turks and Caicos Islands, B.W.I. Telephone 0011 1 649 946 4535 Fax 0015 1 649 946 4540 Agents International Company Services Ltd. PO Box 107, Oceanic House Grand Turk, Turks and Caicos, British West Indies Phone : 0011 1 649 946 2828 Fax : 0015 1 649 946 2825. The Chartered Trust Company Town Centre Building, P O Box 125 Providenciales, Turks and Caicos Islands, B.W.I.

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The Invisible World Telephone 0011 1 649 946 4881 Fax 0015 1 649 946 4041 Turks and Caicos in a Nut shell Language : English Location : Caribbean Population : 10,000 Democracy : Yes, British Colony Currency : US Dollar Religion : Protestant Security 3 Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 4

Vanuatu Vanuatu, formerly the New Hebrides, is a group of islands north of New Caledonia. Since 1980 it has been an independent nation. Since it achieved independence it has become well known as a Pacific tax haven with many International Companies being registered. The International Company or Exempt Company can be registered in 24 hours and will cost you about A$2,000 plus about A$1,000 each year in maintenance costs. This will provide you with a tax exempt company not too far from home. Returns and records are not made public and there is no need to disclose beneficial owners to the authorities. Secrecy is guaranteed under Section 381 of the Companies Act. You only need one director but you need two shareholders, nominees are OK. This form of company is not permitted to trade or derive income from within Vanuatu.

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Financial Freedom & Privacy If you, like quite a few other Australians and New Zealanders, would like to move to this tropical paradise, then you 'should make a positive contribution to the economic development of the country'. The government requires you to invest US$50,000 in an approved investment and also lodge an immigration bond to pay for your repatriation if anything goes wrong. You can also opt to buy real estate instead of investing US$50,000. But be careful, you will only be entitled to a lease of 55 years after which you may renew the leasehold agreement or the land returns 'to the traditional owners and their descendants'. You can acquire the required permits from the Department of Lands. To find out a little more about the cost of real estate, you can contact, Investment Real Estate, PO. Box 545, Vila, Vanuatu, fax 0015 678 22502. Once you have 'leased' your real estate you will be subject to some local taxes. These are, 7% of the official purchase or lease price upon purchase or signing of lease agreement; annual property ownership fees of 5.5% of a fictitious "unit price"; and finally, if you should engage in the lucrative rental business (eg US$ 600 per month for a 3-room flat) then you will also have to pay 11% as a private lessor or 15% as a company lessor, on the rental income. Your reward for all these efforts: 10% to 15% net yields, which will be sent to you anywhere in the world without any further deductions. The people of Vanuatu have very vivid imaginations. This has already been expressed in the unique way they have developed one of their official languages, English. John from America, for example, is called John Frum.

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The Invisible World Since 1939, John Frum has been regarded as the Messiah, which can be traced back to the vision of Kahu, clan chieftain of the village of Ikohukahuk, he saw a big white man, John, landing with many ships and bringing the island wealth and good fortune. When the dream was fulfilled in 1942 (when GIs established supply bases and gave the natives food) John Frum was firmly enshrined as an idol. Shrines and temple have been built in his honour. It took British colonial officials years of diligence to finally drive away the ghost of John Frum, they succeeded only by replacing him with the Duke of Edinburgh. Now, the legend says that Prince Philip will leave Buckingham Palace and come sailing to the coast one day, and set his foot on a certain rock. Then he will give out gifts and establish paradise on earth. Banks ANZ Bank (Vanuatu) Ltd PO Box 9003 Port Vila Vanuatu Phone: +678 26 355 Fax: +678 24 615 Email: [email protected] European Bank Limited P.O. Box 65, International Building, Port Vila, Vanuatu Tel:0011 678 27700 Fax: 0015 678 22884 Email: [email protected] http://www.europeanbank.net/ Agents KMPG Peat Marwick PO Box 212 Port Vila, Vanuatu Phone : 0011 678 22091 Fax : 0015 678 23665

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Financial Freedom & Privacy Vanuatu International Trust Company Limited (VITCO) BDO House, P O Box 240, Kumul Highway Port Vila, Vanuatu Telephone 0011 678 22280 Fax 0015 678 22317 International Finance Trust Company Limited First Floor, Moore Stephens House, P O Box 211 Kumul Highway, Port Vila, Vanuatu Telephone 0011 678 22198 Fax 0015 678 23799 Vanuatu in a Nut shell Language : English and French Location : Pacific Population : 10,000 Democracy : Yes Currency : Vatu Religion : Protestant Security 3 Bank Secrecy 2 Potential Tax Savings 4 Residency Possibilities 4

Western Samoa This small independent island state has emerged a viable offshore financial centre in recent years. A former German and the New Zealand territory, it gained independence in 1962. It has a stable economy and has stable political system with the Western Samoan Monarch as head of state. When the current monarch dies, the new head of state will be selected by the parliament and their days as a constitutional monarchy will end. Incorporation of an International Company under the International Companies Act of 1987 is a simple and fast process taking only one or two days. It is also quite cheap costing only about A$600 and a redomiciled company A$400. No minimum capital requirements are made and only one

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The Invisible World director is needed. Nominees are ok and not disclosed. Shares can be quoted in any currency and bearer shares are permitted. The only problem is the company secretary must be a local and an office must be maintained. There are quite a few trustee or management companies only too happy to do this for you for very reasonable costs. Western Samoa is a zero tax haven as long as your income is earned offshore and not from the local economy. Western Samoa has no tax treaties with any countries and bank secrecy is guaranteed by law with penalties applicable for any breaches. No exchange controls are in place. Banks Bank of Western Samoa Beach Road PO Box L1855 Apia, Western Samoa Phone : 0011 685 22422 Fax : 0015 685 22595

Pacific Commercial Bank PO Box 192 Apia, Western Samoa Phone : 0011 685 20000 Fax : 0015 685 22848

Agents Western Samoa International Trust Company Ltd. PO Box 3271, Apia, Western Samoa Phone : 0011 685 24550 Fax : 0015 685 21837 European Pacific Trust Company PO Box 2029, Apia, Western Samoa Phone : 0011 685 21758 Fax : 0015 685 21407 Western Samoa in a Nutshell Language : English and Samoan Location : Pacific Population : 162,000 Democracy : Yes Currency : Tala Religion : Protestant Security 3

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Financial Freedom & Privacy Bank Secrecy 3 Potential Tax Savings 4 Residency Possibilities 3

The World Join Princess Caroline, Donald Trump and Hollywood’s celebrities on the first moving tax haven. The World. The World is a superliner with 15 decks, 1,000 feet in length and contains 300 luxurious apartments. The cheapest start at $1.4m and go all the way up to $12m. The ship has a vast business centre as well as all the things you expect in a luxury vessel, casino, bars, restaurants, theatres etc. The concept is that the residents of the ship will no longer be residents of their home countries and by doing this will avoid tax forever. They become Perpetual Travelers (PT’s). There are still around 200 apartments left and maintenance costs run into anything from $100k per year to $430k, which isn’t too bad if you are paying millions a year in tax. If you need to get to work from the ship, the ship’s helicopter service will deliver you to the nearest airport and you can catch up with the ship at the next port. The ship is currently cruising the world and visited Australia in 2003.

Wyoming, USA Similar to Delaware in many ways, this western US state is becoming flavour of the month with many offshore investors. Why? Several reasons, single director -shareholder incorporations, no minimum capital, no records required of directors or shareholders and it's cheap at around the US$300 mark complete. No annual returns are lodged and as long as you don't earn income within the US and the money doesn't pass through the US, no tax is levied. On the basis the government doesn't know who you are, nobody else can. But, be careful the US cooperates with most countries

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The Invisible World when it comes to exchanging information on defrauders and suspected criminals, you may just be 'exchanged' on suspicion and the whole purpose of incorporating offshore will be lost - anonymity. Agents Corporate Service Center of Wyoming, Inc 1919 Central Ave, Cheyenne WY 82001 USA Phone : 0011 1 307 634 7920 Fax : 0015 1 307 634 8801 CorpAmerica, Inc 30 Old Rudnick Lane, Dover, Delaware 19901 USA Phone : 0011 1 302 736 4300 Fax : 0015 1 302 736 5620 E-mail : [email protected] This company can incorporate a company in any state of America at between US$300 and US$400 and it can be done on the internet from Australia instantly. They will ship everything to you via airmail. Wyoming in a Nutshell Language : English Location : Central western USA Population : 500,000 Democracy : Yes, part of the US Currency : US dollar Religion : Various Security 4 Bank Secrecy 1 Potential Tax Savings 2 Residency Possibilities 0

Examples of actual Tax Haven Schemes In addition to the examples of tax havens in the chapter on Tax Haven Strategies, I've listed some more schemes that have been successfully used by offshore investors (not necessarily Australians) to establish an offshore nestegg. The examples shown give you an idea of

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Financial Freedom & Privacy how these schemes have been setup and the combinations of jurisdictions used. Check with your accountant or solicitor to ensure anything you do is legal as the examples shown may not comply with Australian tax laws. Example 1 A company importing goods from the UK purchases goods via a Cayman Islands company using a bank account in the Isle of Man. These goods are then forwarded directly from the UK to the destination country that happens to be a high taxing country and the real corporate base of the purchaser. The purchaser then issues an invoice from the company in the Cayman Islands on the basis it was the licensed UK distributor. This invoice is issued at a rate per item that only leaves a small percentage of profit in the goods once they arrive in the country of destination. The accounts in the country of destination will never expose the original manufacturer, they will only show the invoice of the Cayman Islands company. Most of the profit has been retained in the Cayman Islands but the cash is in the bank account on the Isle of Man. The tax payable on the goods in the high tax country has been reduced to almost zero after the company's overheads have been taken into account. The tax on the profit in the Cayman Islands is zero as it was derived offshore and the authorities in the Caymans aren't interested. Effectively, the company has transferred it profits offshore where the tax is nil. The Cayman Islands company has issued bearer shares so nobody knows who owns it and the directors are appointed local nominees with no connection to the trading company. The owner of the company utilises the profits in the Isle of Man bank account for overseas holidays and withdraws small amounts of cash using an international debit card issued by the bank in the Isle of Man. The withdrawals are made using local ATMs. These withdrawals cannot be traced as the cards are issued in the name of the Cayman Islands company and due to its setup and disclosure regulations can't be traced. Technically, this is a case of fraudulent transfer pricing and quite illegal in Australia but who would ever be able to find out? Not even the FBI in the US can stop this type of operation, which quite often involves millions of dollars. Example 2 A local company signs a license agreement with a company registered in Liechtenstein to manufacture and distribute goods to the automotive trade. The agreement requires that each month a set percentage of gross

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The Invisible World sales are sent to them to their bank account in neighbouring Austria. This doesn't seem unusual as the agreement clearly states the company in Liechtenstein was the inventor of the products and also maintains full worldwide rights to the products. Also, the agreement is dated before the local business commenced operations. Everything seems totally legitimate from the local authorities perspective. Firstly, the company in Liechtenstein is a bearer share company so nobody, not even the Liechtenstein officials knows who owns it. One director is an accountant in Vaduz, Liechtenstein and his title is that of Managing Director and naturally he handles all accounting and administrative enquiries. The other director is a 'silent' director who is more of an 'investor' than an executive. This 'silent director' is actually a company with a similar name to the Liechtenstein company but it is a company registered in the Turks and Caicos Islands and again it is bearer share company and only has one director who is a Turks and Caicos nominee director. The shares in both these companies happen to be held by the person who owns the local trading company that is paying the license fee to the Liechtenstein company in the first place. The bank account in Austria is an anonymous numbered account and the details of the operator are unknown and wouldn't be disclosed anyway. Effectively what this person is doing is transferring his profit or a large amount of the profit into a bank account in Austria tax free. The trail of ownership is so murky that it would take more money than it's worth to track it down and from the outside the whole setup looks 100% legitimate.

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Financial Freedom & Privacy Chapter 6 The Skase Case During the collapse of Qintex (1989-1990) I worked as a consultant to the Mirage Group who managed luxury hotels in Queensland and Hawaii. This was my first real experience of blatant corporate corruption. Since that time, I have spent a lot of time researching the Qintex collapse and Skase's involvement. My conclusion is that Skase was a remarkably intelligent man with 'rat cunning'. He manipulated everybody around him to get what he wanted and had no regard for anybody else. I suppose that is stating the 'bleeding obvious'. How did Skase get away with it? Well, if I was to put it all to paper it would fill another book. For the purposes of this book I'll try to summarise the events as best I can. This summary of events should give you some idea of how somebody who had (and still does) millions at his disposal organised his invisible world. During 1989 Skase realises Qintex is in trouble and pays himself management fees through QGMS over and above what is fair and reasonable and takes these fees at a time Qintex was in real terms, insolvent. This was against the law. He knew he had to get the money as fast and as much as possible. In late 1989 Skase incorporates companies in Bermuda, the Isle of Man and the British Virgin Islands. This was organised by Skase’s legal representatives in London. The purpose of these companies was to provide Skase with the secrecy he needed for his assets and income. He was working on the basis that if they can't find the companies - they can't find the assets and income. It worked. At the same time he is loading personal possessions and Qintex assets into containers and shipping them to London prior to forwarding them on to the final destination, Majorca. I witnessed the 'theft' of these assets personally. I was personally involved with the control of these assets and one Monday morning showed up at work to find priceless antiques and other goods had been removed. This was done at the direct instruction of Pixie Skase. At the time I was told they were being auctioned at the instruction of the receiver and management of the company. That was a

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The Invisible World lie, they were being stolen by the Skases and nobody realised it at the time. I hope nobody out there feels sorry for this pair of crooks, they are without a doubt among the most corrupt people I've ever come across. Feel sorry for the creditors and shareholders. In early 1990 Skase has his people in London incorporate the Halcyon Group of Companies. These are organised in such a way to ensure profits derived from the operations are quarantined in tax havens by transfer pricing. As an example he would establish a company in the country he wished to run a legitimate business. He would then issue an invoice against that company periodically from a company in a tax haven. The amount of this invoice was by total coincidence equivalent to the total profit derived by the legitimate business. These fees related to Skase's consultancy or other services provided. The end result was that no tax was paid, as the legitimate company made no profit and the company that did make the profit was in a tax haven and because the profit was deemed an 'offshore' profit, no tax is paid there either. Skase had similar structures in place when Qintex was up and running. The most infamous of these schemes was the so-called management fees paid to his management company QGMS Ltd. This transfer of some $70 million dollars is what had everybody, including the ASIC upset. Skase transfers his base and home to Majorca in the Mediterranean. Majorca is actually part of Spain and due to the rather lax tax collection procedures on the island it attracts many famous and infamous people to the island. La Noria (the estate where he now lives), was purchased on his behalf through a Spanish Company which is owned by a Cayman Islands Trust which in turn was beneficially owned by Skase for approximately $3,000,000. Not bad for a guy who claimed he only had $5,000 in assets. This brings me to what I've mentioned previously, have your home in one jurisdiction, bank in another and company somewhere else. This is a perfect example how the rich really do get away with it. Skase has only had all this revealed because people close to him turned on him and told the world his little secrets. Skase opens his bank accounts in Austria with Landerbank (the Austrian Government Bank) after being advised by his solicitor in London that Switzerland should be avoided. These accounts are opened with unknown amounts of money but it is believed several million dollars still reside in anonymous accounts in Austria. Skase also

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Financial Freedom & Privacy owned a property in London worth about $800,000 this was officially owned by a company registered in the British West Indies and the directors were his legal representatives and the shareholders were his step daughters. A case of using nominees to good effect. This company, Karess Properties Ltd. used the Bank of Bermuda in the Isle of Man. Again, he got away with it. In 1991 Skase declares himself bankrupt with debts of $172,000,000 and worldwide assets of $5,000. Bankruptcy Trustee, Max Donnelly estimates Skase has approximately 5,000,000 in stolen funds. He has recovered $35,000 at a cost to taxpayers of $14,000,000. In reality, what Skase accumulated and the assets he left the country with probably amount to much more than $5,000,000. The reason, during the 1980's the controls on companies and their accounts was somewhat lax and as a result a company like Qintex grew so quickly that the accounting records were often neglected. How do I know this? I saw them. Fixed asset registers of the hotels with assets amounting to several hundred million dollars were never produced and nobody seemed to be too concerned until the receivers moved in. That was one of my jobs in 1989 when the company collapsed. Items worth millions just couldn't be found. Some of these items appeared in the Skase's home in Brisbane according to the account of Lawrence van Der Platt. In his book, Too Good To Be True, he describes several assets that had gone missing. These items had been purchased with Qintex funds for the Mirage Hotels. I was instructed by senior Qintex staff to lose these amounts in the register somewhere. I found this appalling and a practice that would not be tolerated these days. I believe these assets were stolen by Skase and other senior executives, and due to the poor accounting controls in place at the time these amounts could not be traced and assets could not be found. Quite often, the records had simply disappeared. Nobody but the Skases will ever know what happened to these assets. My estimate of Skase's ill-gotten assets and cash, based on the research I have done, is closer to $10,000,000 but Skase was once overheard to say the amount of his fortune that he was transferring to Majorca was actually in the order of $100,000,000. In addition to the financial aspects of Skase's activities in relation to the collapse of Qintex, there was the criminal and fraudulent side of this deception. His escape from the clutches of the Australian authorities was a blend of false statements, perjury, supporting friends that would

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The Invisible World lie on his behalf and a brilliant lawyer. Also, there was the incompetence of the judicial system in Australia. The courts could have made it almost impossible for him to leave but they didn't. Skase in his attempts to slow down the extradition proceedings came up with a long list of ailments that prevented him from travelling. These ailments were supported by some very 'well paid' doctors and at the same time had support from the highest levels of the Spanish Government and Royalty. Why support from the royalty? Simple, he was involved in a multi-million dollar business deal to develop resorts in Europe and America and the land was owned by Prince Tchukotua. The Prince was very influential over the King, Juan Carlos because of an affair the King was having with the Prince's wife. This affair had the blessing of the Prince but of course this could not be made public. Hence, the Prince had the King's ear. From the Prince's point of view, Skase was very important to his financial future because without Skase the resorts wouldn't happen and the Prince wouldn't get the money he needs to sustain his playboy lifestyle. I could go on for ages writing about the exploits of the Skases but it wouldn't really be in the context of this book. I've tried to give you a simple version of how Christopher Skase put in to practice some of the theories explained in this book. One day justice may be brought to bear on Skase, but hardly likely!

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Financial Freedom & Privacy Chapter 7 The Story of the late Dr Peter Clyne Dr Peter Clyne will be remembered as the man who took on the ATO (Australian Tax Office) for years and eventually lost, lost his life in fact. He was a tax lawyer and financial consultant who was respected by his peers as well as the many people he helped over the years. He was Australia’s first tax rebel. He was well known for the games he would play with the bureaucrats in the ATO. What Peter Clyne did was set up his affairs in such a way that the tax department couldn’t tax his income. He would always brag that all his assets were in a safety deposit box in Liechtenstein (Hmmmm?). The only problem was that he used to brag – he would announce this to the newspapers, radio and would advertise in an overt way that he could help you do the same. He would hold seminars and sell books and tapes about how you could do this sort of thing too (Hmmmm?, again). This infuriated the ATO to such an extent that they “declared war” on Clyne and tried to prove that the sole motivation for arranging his affairs in this way was to evade tax, not to avoid or minimise it, which was of course true. You see the ATO has a funny way of looking at things. If you set up your affairs for commercial or personal reasons and the by-product is a lower tax bill – this is ok. But if your sole intention is to reduce tax and there are no other obvious reasons for setting up your affairs in this way the ATO can determine that this is tax evasion or avoidance scheme and impose tax anyway. Again, Clyne announced that he was in fact evading tax and he announced this to the world – A Big Mistake. Clyne become public enemy number one – he had to be stopped! Peter Clyne was no shrinking violet, he would travel the world living the high life with girlfriends half his age, travelling first class and earning a fortune from his tax evading exploits and never ever paying a cent to the ATO as much as they hounded him – he was very slippery and very sharp – he knew his stuff but the ego was the problem, he just couldn’t keep his mouth shut. Every time he would speak to the media he would give away

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The Invisible World tantalising tit-bits of tax evasion information and encouraged Australians to join his tax free crusade. You can only imagine what the ATO thought? He got away with it for years! Do you want to know how Clyne did it? It was so simple. He simply employed a PT (Perpetual Traveler) lifestyle. He just ensured he was never in Australia more than six months in every twelve-month period thus eliminating his status as a tax paying resident. If he wasn’t a resident – he didn’t have to pay tax, simple as that! What Clyne did to really set the government against him was he told people openly that if they had any cash transactions, make sure they destroyed all proof of them and this was clearly encouraging people to break the law. And while everything else he was doing was open to interpretation, this clearly was not. The problem with Clyne was his ego had gotten out of control – he was believing his own publicity. It didn’t end there – he upset the Americans as well, he announced to the world how he had helped drug runners launder money and was lured into an interview with a US Drug Enforcement Agency undercover agent who was posing as a potential client in Texas. At the conclusion of this interview he was arrested – he just couldn’t keep stuff to himself! To make things worse he jumped bail and went back to Australia. At the time, there was no way of extraditing him back to the US so he felt he had beaten the system yet again. Back in Australia, Clyne was going on about his assets in Liechtenstein – He claimed he had over a million dollars of assets in that box and he wasn’t paying tax on any of it! He also claimed he had never paid a cent of tax in his life. He was now really getting people offside – A lot of people were wondering “who was this #%@&!” Do you start to see what Peter did wrong? Terribly wrong? The next thing the ATO did was send Clyne a bill for back taxes. They did this on the basis that he was indeed a resident and had been one for several years and should have been paying taxes the whole time. They based this on the fact that he had lived at the luxurious Sebel Town House in Potts Point, Sydney. They had reviewed his residency records, his bar and restaurant bills and worked out, based on this, he had exceeded his 183 days residency limits. They now had him! They were a little smarter

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Financial Freedom & Privacy than he thought. He had always regarded them as stupid. While they couldn’t prove exactly what his income really was, they pieced together an “estimated” income based on his expenditures they could identify. He had a very lavish lifestyle which was public knowledge. The ATO simply said if his income was less than they had estimated, “Prove it!” The ATO was able to drag him to court and place him under oath and in risk of committing the crime of perjury. The sharks were closing in. During the court case he was questioned about the assets in Liechtenstein and while he didn’t want to give too much away he was also risking perjury. You see, by this stage he was totally rattled. He didn’t know how much they knew of his affairs. He was worried. Clyne stated, “There are no records but my major assets are indeed in a box in Liechtenstein”. They questioned him about his income and how he lived such an extravagant lifestyle? He stated it was due to accumulated earnings from his days as a judge in Nigeria. As far as the assets in Liechtenstein were concerned he knew they wouldn’t know much about them as it was against the law for any disclosure to be made regardless of who was asking and a “foreign” tax misdemeanor was hardly any reason to divulge any details. However, it soon became nasty for Clyne. The prosecutor wanted to place Clyne in jail for contempt of court if he didn’t give the court power of attorney to retrieve the box and use the contents as evidence against him. But what the court agreed to do was place Clyne into bankruptcy if he didn’t pay the outstanding tax bills and associated fines. The court’s plan was that Clyne’s bankruptcy trustee would retrieve the contents of the box with the power of attorney given to the court, pay the tax bill from the contents and Clyne would leave a free man. Which is just what the ATO wanted. The ATO also suspected the box may also contain further incriminating evidence of Clyne’s clients – it may certainly turn out to a good day for the ATO if they retrieved those records. The court levied huge fines and tax bills against him, which were made artificially high using their “estimates”. They challenged Clyne to disprove their claims. Guilty before proven innocent it would seem. The court placed Clyne in bankruptcy for non-payment of tax bills. They appointed a trustee to go to Liechtenstein and retrieve the box and bring it back. The worst had come true for Clyne. The unthinkable had happened – they had got him!

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The Invisible World Clyne was placed in custody and after some time agreed to send a letter to his lawyer in Liechtenstein to allow the trustee to gain access to the box. Keep in mind that Clyne had stated under oath that all his assets were in this box. As it turned out, the contents were actually owned by a Liechtenstein foundation with the power of control with his lawyer in Liechtenstein. In complying with the request to give the court access to the box, they allowed him to leave jail and no bail was required under law. The court ordered him to hand over his passport, but what they didn’t know was he had a second one (smart boy). Under normal circumstances he would simply go to the airport and slip out of the country and that would be the end of it – he would simply disappear. But no, this didn’t happen. Because he was so well known, and high profile he was apprehended at the airport and taken into custody yet again. He lost his second passport. What he was trying to do was beat the court to the box, remove the contents and disappear forever. He thought he could still pull a big win! But just in case he didn’t make it in time he wrote to the bank (where the box was) and his lawyer, and told them to disregard all previous orders to open the box. Well, when the court appointed trustee arrived and was told “no”, he informed the judge back in Australia what Clyne had done and and Clyne found himself back in jail on yet another charge of contempt. This time with no back up plan. Because Liechtenstein had received so much bad publicity and there were claims that Clyne had been charged with crimes other than tax evasion, which isn’t a crime in Liechtenstein, they considered not protecting him any longer and that the Liechtenstein court may order the contents be handed over to the Australian authorities. But then a break came. The Liechtenstein judge demanded before any decision was made, he read a transcript of the Australian court case. The fact that Clyne had refuted all charges and claimed under oath that he owed no taxes allowed the judge to refuse access to his records or the box on the basis of unproven charges and claims. They would only act if Clyne had been convicted. This was to prove the belief that few countries will enforce the tax claims of another. The Liechtenstein court believed the Australian action was nothing but a set up of Clyne to enforce a tax claim and had nothing to do with any criminal activity. The ATO was foiled. They were powerless to do anything. Had Clyne clutched victory from the jaws of defeat?

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Financial Freedom & Privacy The ATO decided to try something else. They now had the name of Clyne’s Liechtenstein lawyer and they thought they may try some leverage there. They knew he was the “controller” of Clyne’s assets and maybe they could play one off against the other. They were in luck, they discovered the lawyer had substantial land holdings in Australia. The Australian Attorney General sent a registered letter to the lawyer that, due to his lack of cooperation in the case, the government had placed a lien over the property ensuring he could never sell it without first paying Clyne’s bill. They did this on the basis that they knew he was holding assets on behalf of Clyne, assets that they believed they were entitled to. This caused chaos, the lawyer was beside himself. The problem one suspects, was that these properties were not his own, but belonged to several of his high powered clients that would be furious at this development. It was suspected that these clients were far more important than Clyne was. The result for the lawyer could be very bad unless something was done. What they did know, is they weren’t Clyne’s. This was a ploy often used by governments against unco-operative banks when chasing tax evaders. They would place a lien against their local assets in an attempt to get them to give up their clients. The lawyer dropped Clyne in it almost immediately. What lessons have we also learned? Don’t use a trustee or agent that has links to your home country and the same applies to your bank. Offshore banks that have local branches can be a problem. And never ever use a bank from your home country, this is madness. Also, don’t use governments that must co-operate with your home country for any one of a number of reasons. The result of all this was the lawyer opened Clyne’s safety deposit box in front of the trustee and all was revealed and Clyne was still in jail for contempt and was powerless to stop it. The assets were in an Anstalt (Foundation) and under normal circumstances the founder (Clyne) would have a say in what could happen to the assets but strictly under the law, the lawyer had full discretionary powers to do what he wanted, and used them to the detriment of Clyne. Clyne had lost big time or had he? When the box was opened, there was no million dollar asset. All there was in the box were a few gold coins, a reel of audio tape and a couple of receipts for the coins that had been bought many years earlier and some documents that supported his story that he had in fact lived off his saving from being a judge in Nigeria. Could Clyne have been telling the truth the whole time? Was the million dollar asset story a red herring? Could the

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The Invisible World case, that had cost Australian taxpayers millions of dollars, proven to be the biggest goose chase in our history? But what of the audio tape, could this be the evidence they were seeking, maybe the names of clients would be revealed, possibly financial records exposing other assets? When the tape was played by the authorities, it was nothing but a recording of an orchestra playing an opera. But could it have been some sort of code directing Clyne to stashed away millions? After some time, Clyne was released from jail and was declared bankrupt. But again, he couldn’t help himself and went straight to the papers and announced that the million dollar asset was indeed the tape. But how could it be worth a million dollars? “Yes” everybody thought, “it is a code”. But they were all wrong. The tape turned out to be The Vienna Symphony Orchestra playing a rendition of “The Bell Song”. But something else was strange about the tape, it had the worst singer anybody had ever heard on it – what was going on? Peter Clyne had spent one million dollars hiring a hall and the entire Vienna Symphony Orchestra so his tone deaf girlfriend could perform with them. She dreamt of a operatic career and Peter decided to make the dream come true, for one night at least. The Australian public were once again right behind Peter Clyne, he was now elevated to Ned Kelly status and a folk hero. The ATO dropped the case under howls of derision and protest from the public. The ATO were now the bad guys – they had lost and lost in more ways than one. They were angry at this loss. From that point on they embarked on a campaign of disinformation, harassment and attempted to catch him out one day. They were relentless. They made up charges dragging him into court time and time again trying to break him. He was under 24 hour surveillance and they knew he knew it, they were trying to make his life a living hell, and they succeeded. His clients were harassed and audited relentlessly, they never gave up. It was to the point where he was arrested almost daily for questioning. These days no government or bureaucrat would dare do this – the 70’s and 80’s were less enlightened times. Unfortunately, for Peter he couldn’t leave the country, he wanted to as you can imagine but he had no passport, so he had to bear the full weight of the government harassment. He applied for a new passport and because he wasn’t being charged with any offence, he was entitled to one, but they kept “losing” his application. They were now getting even – this was

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Financial Freedom & Privacy no longer a government playing fair – it almost seemed as though they were trying to kill him, mentally. Years later, after going through all his testimonies with a fine tooth comb, they found enough evidence to charge him with perjury on the most minor of issues, it was a technical breach, but a breach never the less. Finally, they had him. He was convicted of the charge and while he was out of jail on appeal he decided to take a legal action against the government for trying to frame him, harassment and many unproven accusations. He claimed he was nearly broken by the relentless attack. He couldn’t stand up against the teams of tax payer funded lawyers and continuous attacks. His attack failed, he was finished. He had no money to defend himself and still the attacks came. His friends deserted him – he was alone. The government had won, they even stole his gold coins and tape. The government would pursue him until he died, he knew that. His life was over, destroyed by his own government. A man destroyed because he felt that paying tax was optional. Big brother won – the little guy lost. Soon after Peter Clyne died of heart failure, the strain of years of fighting had finally taken their toll. A folk hero was dead. Government 1, Citizens 0. It wasn’t so much that Clyne was cheating on his tax that the public supported him, it was the fact that he was a little guy fighting bureaucrats. The public would always support the underdog. What can we learn from Peter? Here is a list of lessons learned: • Remain low profile at all times • Never brag about your exploits • Receive sage advice and keep it to yourself • Never break the law unless you want to end up like Peter • Keep your finances private • Don’t cheat on your taxes – Legally minimise them • Don’t get caught up in court cases of any kind – especially with the government. • Always understand when it comes to court battles – He who has the most money wins – There are no winners and losers – everybody loses in a court battle • Be careful where and whom you establish your finances with – it may bite you on the backside one day. • And most important of all – Don’t start fights you can’t afford to lose. Peter lost – He lost his life, how much are you willing to lose?

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The Invisible World Chapter 8 Money Laundering - What is it exactly? Money Laundering is an illegal process whereby cash from an illegal source is transferred through a sometimes complex cycle of transactions so that when it finishes it's 'cycle' it comes out appearing legal or 'washed'. Emphasis must be placed on the word 'appearing'. It is used commonly in the drug trade and other illicit industries. What is money laundering? – An Extract from the OECD/FATF The goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy these profits without jeopardising their source. Illegal arms sales, smuggling, and the activities of organised crime, including for example drug trafficking and prostitution rings, can generate huge sums. Embezzlement, insider trading, bribery and computer fraud schemes can also produce large profits and create the incentive to “legitimise” the ill-gotten gains through money laundering. When a criminal activity generates substantial profits, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention. In response to mounting concern over money laundering, the Financial Action Task Force on money laundering (FATF) was established by the G-7 Summit in Paris in 1989 to develop a co-ordinated international response. One of the first tasks of the FATF was to develop Recommendations, 40 in all, which set out the measures national governments should take to implement effective anti-money laundering programmes.

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Financial Freedom & Privacy Members of the FATF include 29 countries and jurisdictions – including the major financial centre countries of Europe, North and South America, and Asia – as well as the European Commission and the Gulf Co-operation Council. The FATF works closely with other international bodies involved in combating money laundering. While its secretariat is housed by the OECD, the FATF is not part of the Organisation. However, where the efforts of the OECD and FATF complement each other, such as on bribery and corruption or the functioning of the international financial system, the two secretariats consult with each other and exchange information. Some very famous people and organisations have allegedly been involved in money laundering. How’s this for a list. Al Capone, Richard Nixon, American Airlines, Oliver North, Ferdinand and Imelda Marcos, Manuel Noriega, US Government, CIA, actor George Hamilton, Erich Honecker, Shah of Iran, Frank Nugan of Nugan Hand Bank fame and you could add a couple of well known Australian entrepreneurs to the list. Richard Nixon was caught out in the Watergate Affair, which was an elaborate scheme to raise money for his re-election campaign that involved, among others, American Airlines laundering funds for Nixon through Switzerland. Oliver North, the US Government and the CIA were all caught out when the Iran-Contra Affair was exposed. Basically, the story goes something like this, North arranged for US missiles from the CIA to be sold to Iran (keeping in mind it was a no-no to sell Iran anything at the time, let alone missiles) using arms dealer Adnan Khashoggi as the go between. When Iran made payment for the missiles, they paid Khashoggi and he took his cut and put the balance in Swiss bank accounts to be 'cycled'. The money was then put through a Panamanian shell company called Lake Resources that was run by a Swiss accountant named Suzanne Hefti. It was then transferred to the Cayman Islands into a company called CSF, which was controlled by a Geneva accounting firm of the same name, then on to Bermuda, then back to Panama and into a company called Alban Values, which was controlled by CSF. From there it was transferred to Amalgamated Commercial Enterprises and then to the Contras via a company called Southern Air Transport that was registered in Miami.

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The Invisible World Confused? You should be, that was the whole purpose of the exercise! The idea in money laundering is to muddy the waters so much that nobody can easily trace what has happened to the original illegal funds. Ferdinand and Imelda Marcos siphoned off about US$10 billion dollars by using shell companies in the Philippines, Hong Kong, Netherlands Antilles and Panama. The Marcos' used Bearer Share Companies so no one could connect the assets that these companies owned to them. Marcos assisted actor George Hamilton (Hamilton has denied this) in purchasing a home in Beverly Hills using this method. Hamilton has since sold the home to a company registered in the Cayman Islands. The US Drug Enforcement Agency (DEA) recently produced a document that named Hong Kong, Liechtenstein, Luxembourg, Channel Islands, Andorra, Switzerland, Mexico, Cayman Islands, Singapore and Panama as "major conduits and repositories" for illicit drug money. Another US Government document also accused the Bahamas. This gives you some idea how much money must be going through these tax havens and 'washing machines'.

How is money laundered? In the initial or placement stage of money laundering, the launderer introduces his illegal profits into the financial system. This might be done by breaking up large amounts of cash into less conspicuous smaller sums that are then deposited directly into a bank account, or by purchasing a series of monetary instruments (cheques, money orders, etc.) that are then collected and deposited into accounts at another location. After the funds have entered the financial system, the second – or layering – stage takes place. In this phase, the launderer engages in a series of conversions or movements of the funds to distance them from their source. The funds might be channelled through the purchase and sales of investment instruments, or the launderer might simply wire the funds through a series of accounts at various banks across the globe. This use of widely scattered accounts for laundering is especially prevalent in those jurisdictions that do not co-operate in anti-money laundering investigations.

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Financial Freedom & Privacy In some instances, the launderer might disguise the transfers as payments for goods or services, thus giving them a legitimate appearance. Having successfully processed his criminal profits through the first two phases of the money laundering process, the launderer then moves them to the third stage – integration – in which the funds re-enter the legitimate economy. The launderer might choose to invest the funds into real estate, luxury assets, or business ventures.

Where does money laundering occur? As money laundering is a necessary consequence of almost all profit generating crime, it can occur practically anywhere in the world. Generally, money launderers tend to seek out areas in which there is a low risk of detection due to weak or ineffective anti-money laundering programmes. Because the objective of money laundering is to get the illegal funds back to the individual who generated them, launderers usually prefer to move funds through areas with stable financial systems. Money laundering activity may also be concentrated geographically according to the stage the laundered funds have reached. At the placement stage, for example, the funds are usually processed relatively close to the under-lying activity; often, but not in every case, in the country where the funds originate. With the layering phase, the launderer might choose an offshore financial centre, a large regional business centre, or a world banking centre – any location that provides an adequate financial or business infrastructure. At this stage, the laundered funds may also only transit bank accounts at various locations where this can be done without leaving traces of their source or ultimate destination. Finally, at the integration phase, launderers might choose to invest laundered funds in still other locations if they were generated in unstable economies or locations offering limited investment opportunities.

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The Invisible World Chapter 9 Second Citizenships Second passports as well as second citizenships can be of real benefit to offshore investors. The reasons are many but the main ones are that you can leave a country on one passport and enter again on another, which can tend to confuse anybody pursuing you. You can identify yourself legally as an national of one country but actually living in another again making it virtually impossible for people to track you down. They are also handy as identification when opening bank accounts, incorporating in offshore jurisdictions etc. There is a company that can arrange this for you in a painless and professional manner, and the passports are real. Consular Agents in the Turks and Caicos Islands offer genuine citizenship and a legal passport for the Dominican Republic for US$25,000, which will also include a drivers licence, ID card and Naturalisation Certificate. Venezuela for US$35,000 which also includes the ID Card. Panama for US$30,000 including ID card and Brazil for US$35,000 including ID card. In all cases it takes about 4 weeks and you will need 6 colour passport photos, copy of your birth certificate or passport and a list of all relevant personal information. With any one of these passports you will be able to enter countries within the EC Visa free. Consular Agents also handle company incorporations, opening anonymous bank accounts worldwide, formation of banks and insurance companies and they also provide nominee directors and shareholders if required. Consular Agents PO Box 303 164 Richmond Hills Providenciales, Turks and Caicos Islands Phone : 0011 305 947 1245 Fax : 0015 305 947 4950 For more information on Second Citizenships and Passports, I have a an extensive range of information on programs available in my 2003 released “Underground Knowledge 3” available from www.tridentpress.com.au

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Financial Freedom & Privacy Chapter 10 Final Thoughts No two people are the same, which makes writing a book like this sometimes a little difficult. While one offshore setup will suit the business, tax situation and personal preference of one person, it may be totally unsuitable to another. I've written this book from a general perspective that I hope everybody will find useful and as a guide to inform you of what is actually going on out there rather than providing you with a definitive personal plan. This of course would be impossible to do due to the fact that a book tends to be a one way conversation. As an accountant, I'm asked the same question over and over, "how can I get around paying so much tax?” The people who ask me that question are quite often let down when I can't give them the 'ancient secret of how to make a fortune and pay no tax whatsoever'. Without breaking laws it's almost impossible to escape tax in this country I'm sorry to say. The contents of this book will give you a few ideas on how to reduce tax and increase confidentiality. It will also satisfy the curiosity of those that want to know how some people get away with paying no tax at all. But you should be very cautious in the way you approach setting up any offshore structure. Many people set up these structures with very little thought to legal ramifications and end up in a real pickle. My advice to you would be to: Understand your particular need. Are you looking to invest offshore? Are you trying to reduce tax? Do you want to leave Australia and set up business elsewhere? Only you can answer these questions. Obtain more information from the banks. Contact some of the international banks in this book and find out what they can do for you. These banks are nothing like domestic banks. They are all very helpful. Their existence depends on people like you. In many of the countries and jurisdictions covered in this book, the only thing that supports the whole economy is the foreign investment in their banks. Obtain more information on setting up a business or company in a jurisdiction that suits you legally, geographically and politically. Write or fax a few of the incorporation agents, as they will give you more information and advice on your particular set of circumstances. They

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The Invisible World generally have a great deal of experience in offshore structures and will be able to advise you on different options. After you have received all this additional information you should have a pretty good idea of what you would like to do. If you aren't sure what you have in mind is legal, I suggest you speak to your accountant or solicitor otherwise you could run foul of the law. The taxman hates these 'Offshore Schemes' and does everything possible to close the loopholes, but fortunately they can't, because if they did, they would deny 'legitimate' offshore investment in the process. So, the idea is to set up your structure, using the tax laws to your advantage. Many Australian companies and individuals have set up these offshore structures at great cost, to save themselves literally millions of dollars and 'technically' they don't break the law. I should know, I worked as a senior accountant in a couple of them. A few final words of advice. Be low profile when investing offshore. It's always better to be discreet and obey the rules than to be indiscreet and obey the rules. Don’t under any circumstances break the law, the cost is too high. If you are foolish enough to break the law, you are probably stupid enough to get caught! Regardless of how much you decide to tell the authorities, always seek out jurisdictions that guarantee bank secrecy. Corporate secrecy or bearer shares aren't a bad idea either. I wish you all the best of luck for the future. Lance Spicer 2003

" The marvel of history is the patience with which men and women submit to burdens unnecessarily laid upon them by their governments " - William H Borah (1865-1940)

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Financial Freedom & Privacy Chapter 11 International Resources Incorporation Agents in Locations not listed elsewhere Britain OVERSEAS COMPANY REGISTRATION AGENTS LTD Offshore Company Formations 72 New Bond Street, London, W1Y 9DD, Great Britain Phone : 0011 44 171 355 1096 Fax : 0015 44 171 495 3017 E-Mail: [email protected] FIRST CLASS COMPANY SERVICES LTD UK Company Formations 72 New Bond Street London W1Y 9DD Phone : 0011 44 171 495 5145 Fax : 0015 44 171 495 3912 Finland OVERSEAS COMPANY REGISTRATION AGENTS (SCANDINAVIA) LTD World Trade Centre, Aleksanterinkatu 17, 00100 Helsinki, Finland Phone : 0011 358 9 6969 2569 Fax : 0015 358 9 6969 2565 Sweden OVERSEAS COMPANY REGISTRATION AGENTS (SWEDEN) Box 23008, Upplandsgatan 83, S-10435 Stockholm, Sweden Phone :0011 00 468 334720 Fax : 0015 00 468 322370 Lithuania OVERSEAS COMPANY REGISTRATION AGENTS (LITHUANIA) Liauksmino St., 8/2 2nd Floor, 2600 Vilnius, Lithuania Phone / Fax : 0011 370 2 623 081 Mobile : 0011 370 298 20198

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The Invisible World Greece OVERSEAS COMPANY REGISTRATION AGENTS (GREECE) Representative Office, 2, Ploutarchou Str., GR 11521 Athens Greece Phone : 0011 30 1 723 0766 Fax : 0015 30 1 721 7376 Cyprus OVERSEAS COMPANY REGISTRATION AGENTS (CYPRUS) 20 Queen Frederica Str., El Greco House, Office 104, Nicosia, Cyprus Phone : 0011 357 2 473688 Fax : 0015 357 2 455259 Hungary OVERSEAS COMPANY REGISTRATION AGENTS (HUNGARY) LTD. Varmegye St. 3-5 V/1, H-1052 Budapest, Hungary Phone : 0011 36 1 266 3620 Fax : 0015 36 1 266 3619 Mauritius OVERSEAS COMPANY REGISTRATION AGENTS MAURITIUS LTD Happy World House, Sir William Newton Street, Port Louis, Republic of Mauritius Phone : 0011 230 211 5100 Fax : 0015 230 211 5400 South Africa OVERSEAS COMPANY REGISTRATION AGENTS (SOUTH AFRICA) (PTY) LTD. 11A Queen Street, Durbanville, Cape Town 7550, Republic of South Africa Phone : 0011 27 21 962454 Fax : 0015 27 21 962248

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Financial Freedom & Privacy International Maildrop Directory Introduction A maildrop is basically a mail forwarding service. A place where your mail is sent, received, held if you wish and then sent on to you or possibly another maildrop. The maildrop serves as a poor man's offshore company. A maildrop provides you with an overseas address and an alternative address right here. For instance you may wish to give someone the impression you are living overseas, you may not want your Swiss bank account statements being delivered by the local mailman or being seen at home. You may even have acquired a second passport on the basis you live overseas and your mail must be addressed to an address in that country. You may wish to send mail at cheaper rates that apply in other countries. The list of reasons to have a maildrop address is endless and even if you have an offshore company you may wish to invest in the extra secrecy a maildrop can provide. If you want complete privacy guaranteed for your mail use an offshore “Maildrop”, as authorities have the ability to informally investigate your mail. The mail can then be delivered to you personally by courier. The authorities can use spray-on cleaning solvents such as carbon tetrachloride, trichlorethylene, and perchlorethylene which cause some types of envelopes to go translucent temporarily when these solvents are applied, allowing the contents to be read. There are also ways of opening envelopes that leave no traces at all if handled by a skilled operative. They use a thin flat metal tool, resembling a two pronged fork. The tool is gently slipped under the flap of the envelope and onto the edge of the letter inside, between the prongs. The letter is then rolled tightly around the tool and withdrawn, read and returned the same way. Steaming an envelope open is a simple matter and leaves hardly a trace. The use of sealing tape is no guarantee either, carbon tetrachloride will handle the tape instantly. If a maildrop is all too hard, a solution to this prying, may be to use envelopes with a heavy pattern on the inside, glue or tape down the flap securely and also encase the contents in aluminum foil, this really mucks them up. They can’t remove the contents because the foil will tear. They can’t use solvents. They can’t X-Ray or use light to see through it.

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The Invisible World Maildrops can also provide you with a 'Face lift' if you want to impress a company or someone with whom you wish to deal. There's nothing like a 5th Avenue, New York office address or an equally impressive address closer to home to impress. Perhaps you are just starting your own business and aren't sure about renting office space and want to test the waters first, a Maildrop can provide a startup address. How much do they cost? This varies greatly but between $20 to $100 per month can be used as a rough guide. Sometimes you'll be charged a small fee for each letter processed. If you require an Australian Maildrop, I suggest using Mail Boxes ETC (MBE). They have locations all over Australia and the company is constantly opening new branches. “The Best Maildrop in the World” Leyton Office Services St Georges House 31A St Georges Rd Leyton, London, E10 5RH Phone: 0011 44 181 556 2979 Fax: 0015 44 181 539 2862 ALDERNEY (Channel Islands) Pickett, Channel Island Mail Forwarding, 6, Victoria Street, Alderney, Channel Islands Puffin Off-Shore Services, PO Box 148, Alderney, Channel Islands. ANDORRA LOP international S.A., Edifici Illa 2, Escala Canolich, Carer Prat de la Creu, AND-Andorra la Vella, Principality of Andorra Servissim S.L., Roc Escolls 3-4 A, Av.Meritxell, 20, AND-Andorra la Vella, Principality of Andorra Ph 0011 33 (628) 60414/61149 Fax 0015 33 (628) 63797

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Financial Freedom & Privacy ARUBA (Dutch Caribbean) Frank Services, 37 Nyhoff Street, San Nicolas, Aruba Lope Beaujon, PO. Box 88, Oranjestad, Aruba Simariyo N.V. Officentre, PO. Box 183, Concessielaan 8, Oranjestad, Aruba AUSTRIA Buro-City, Zieglergasse 6, A-1070 Vienna, Austria Ph : 0011 43 (1) 963666 Buroring, Kreuzbichlweg 15, A-9020 Klagenfurt, Austria Ph : 0011 43 (463) 41202 Buroring, Alserbachstrasse 5/5, A-1090 Vienna, Austria Ph : 0011 43 (1) 346353 Buroservice, Siebertgasse 10, A-1120 Vienna, Austria P. Dussmann Ges.m.b.h. & Co. KG, Spittelauer Landle 3, A-1090 Vienna Ph : 0011 43 (1) 344511-1 fax: 0015 43 (1) 344511299 MSG (Austria), Management Beratungsgesellschaft m.b.H, Gonzagagasse 12,A-1010, Vienna Ph: 0011 43 (1) 5350276 fax: 0015 43 (1) 5350276 BAHAMAS Paul Hepbum, PO Box SS-6395, Nassau, Bahamas Ph : 0011 1242 3250643 fax: 0015 1242 3250646 BERMUDA Business Management International Ltd., PO. Box HM 1984, Hamilton HM GX, Bermuda Ph: 0011 1 441 2951133 fax: 0015 1441 2929943 (Maildrop services for own paper company customers only) CAYMAN ISLANDS Beth's Corporate Suites Ltd., Box 623G, George Town, Grand Cayman, British West Indies Ph: 0011 1345 9495166 Fax 0015 1345 9490365 Professional Secretarial & Managerial Services, lndustrial Park, Box 1821, George Town, Grand Cayman, British West Indies

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The Invisible World Ph : 0011 1345 9499690 Fax: 0015 1345 9490592 T R C Corporate Services Ltd., 2nd Floor Regal House, Nth Church St., Box 1982G, George Town Grand Cayman, British West Indies. Ph: 0011 1345 9498425 Fax: 0015 1345 9498502 COOK ISLANDS Secretarial Services, PO Box 19, Rarotonga, Cook Islands Ph : 0011 682 28036 COSTA RICA Consultants Inc Box 959, Centro Colon 1007-PT, San Jose, Costa Rlca Elsin S.A., PO. Box 6515, San Jose, Costa Rica Global Consulting Group, PO Box 945, Suite 922, Centro Colon 1007 San Jose, Costa Rica Ph: 0011 506 320596 Intermedia Corporation S.A., Box 175, Santa Ana, 6150, Costa Rica Mail Boxes etc., PO Box 246, San Jose, 1100, Costa Rica Office Stop, Av 8, Calles 11 y 13, Edificio 1154, Paseo des los Estudiantes, PO. Box 1867 San Jose Costa Rica Ph : 0011 506 218255 GIBRALTAR Business Matters Ltd., 24 College Lane, PO Box 646 Gibraltar Business Office, PO Box 28, Gibraltar Fax: 0015 (350) 41987 Form-A-Co (Gibraltar) Ltd., 25 Turnbulls Lane, Gibraltar Ph : 0011 (350) 79959 Fax: 0015 (350) 79894 International Company Services (Gibraltar) Ltd., 2B Mansion House, 143 Main St, Gibraltar Ph: 0011 (350) 76173 Fax: 0015 (350) 70158 Private Mail Boxes Gibraltar Ltd., S 8 International, Commercial Centre, Casemates, Main St, Gibraltar Ph: 0011 (350) 42467 Fax: 0015 (350) 42465 GUERNSEY (Channel Islands) Berry + Partners, PO Box 313, Les Meuniers, Fosse Andre, St. Peters Port, Guernsey, Channel Islands CAL. Management Ltd., PO. Box 98, 10 New Street, St. Peter Port, Guernsey, Channel Islands Ph : 0011 44 1481 727272 Fax: 0015 44

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Financial Freedom & Privacy 1481 711220 HONG KONG Hong Kong Bookkeeping Services., Room 302, Kut Kee Bldg, 128 Wellington St, Hong Kong Instant Companies Ltd, 903 Kowloon Centre, 29 Ashley Rd, TST, Kowloon, Hong Kong Ph 0011 852 3760973 International Business Centre, 1111 Tower 2 Silvercord, 30 Canton Road, TST, Kowloon, Hong Kong Ph: 0011 852 3759223 Multi Privacy Offshore, 22nd Floor, Tai San Commercial Bldg, 28 Hennessy Rd., Hong Kong Ph: 0011 852 8613833 Fax: 0015 852 5270662 Paterson Tools & Supplies, B2, 7th Floor. Patterson Building, Causeway Bay, Hong Kong Plaza Business Centre, 35/F, Central Plaza, 18 Harbour Road, Hong Kong Ph: 0011 852 593111 Fax: 0015 852 5931222 ISLE OF MAN Ability Plus Ltd., 10 Prospect Hill, Douglas, Isle of Man Ph : 0011 44 (1624) 662165 Fax 0015 44 (1624) 662178 Executive Secretarial Services, The Quallium Suite, The Parade, Castletown, Isle of Man Ph : 0011 44 (1624) 824421 M.M.G. Services Ltd., 8 Mount Pleasant, Douglas, Isle of Man Ph : 0011 44 (1624) 661393 Fax: 0015 44 (1624) 661477 International Company Services Ltd., Sovereign House, St. Johns, Isle of Man Ph : 0011 44 (1624) 801801 Fax: 0015 44 (1624) 801800 Island Business Services Ltd., Bourne House, College Street, Ramsey, Isle of Man Ph: 0011 44 (1624) 813029 Fax 0015 44 (1624) 814744 Mannin Business Centre, Warwick House, 59/60 Derby Square, Douglas IMI 3LP, Isle of Man Ph : 0011 44 (1624) 672411 Fax: 0015 44 (1624) 676985 JAPAN Regus, 6-10, Yotsuda 4-chome, Shinjuku-ku, Tokyo 160, Japan Ph : 0011 81 (3) 53791353 Fax: 0015 81 (3) 53791345

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The Invisible World JERSEY (Channel Islands) Accu Rapid Business Services, 40 Seaton Place, St.Helier, Jersey, Channel Islands Ph : 0011 44 (1534) 66160 A.C.E. Secretarial Services, 8 Vine St., St. Helier, Jersey, Channel Islands Ph: 0011 44 (1534) 25075 Island Business Centre, 2 Industrial House, Red House, St.Brelade, Jersey, Channel Islands Ph: 0011 44 (1534) 41455 Fax: 0015 44 (1534) 44745 LUXEMBOURG Forum-Royal, Postfach 1317, Luxembourg Ph: 0011 352 472562 Fernand Hack LUXMANAGEMENT, 304 Route de Thionville, L-5884 Hesperange, Luxembourg Ph : 0011 352 491008 Fax: 0015 352 480553 (Will supply mail drops only to his incorporation customers) Mediation, Societe Anonyme, 30, rue Marie-Adelaide, L-2128 Luxembourg Ph : 0011 352 456745 Fax: 0015 352 456747 Norex Investments S.A., 56 route de Treves, L-2633 Senningerberg, Luxembourg Ph : 0011 352 346760 Fax: 0015 352 346761 Pedus Office, 64 Avenue de la Gare, L-1611 Luxembourg Ph : 0011 352 400811-1 Fax: 0015 352 400083 Regus, European Bank & Business Center, Route de Treves 6, Bldg. A, L2633 Senningerberg, Luxembourg Ph : 0011 352 3498981 Fax: 0015 352 34 989898 MONACO Athos Business Center, Le Concorde, 11 rue du Gabian, MC 98000 Monaco Ph : 0011 33 (93) 92050350 Fax: 0015 33 (93) 92050355 Business Aides Associates S.A.M., Victoria Palace, Bloc B, 1st floor, 13 Boulevard Princesse Charlotte, MC 98005 Monaco Cedex Ph : 0011 33 (93) 93508228 Fax: 0015 33 (93) 93507284 Monte-Carlo Services, 2 rue des Iris, MC Monte Carlo, Monaco Ph: 0011 33 (93) 93300101 Fax: 0015 33 (93) 93253979

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Financial Freedom & Privacy PANAMA Dr. Andrea Archibold, Apartado 6396, Panama 5, Republic of Panama Ph : 0011 507 244913 Fax: 0015 507 637849 Crossroads, Box-6-3200, El Dorado, Republic of Panama Ph: 0011 507 609598 Fax 0015 507 609573 PAPUA NEW GUINEA Keless Holdings Pty. Ltd., Mr. Graellle Maxwell, Boroko/N.C.D., Papua New Guinea Ph: 0011 675 231746 Fax: 0015 675 231746 ST VINCENT Hughes and Cummings, PO. Box 32 St. Vincent. W.l. SWITZERLAND Conseiller & Partner AG, Unternehmensberatung, CH-6000 Luzern , Switzerland Ph : 0011 41(41)227277 Fax: 0015 41(41)229487 Imboden Agency, Luzernerstrasse 28, CH-6330 Cham Zug, Switzerland Ph : 0011 41 (42) 364002 Fax: 0015 41 (42) 366545 Institut fur Vertrieb und Management AG, Weinbergstrasse 72, Postfach, CH-8042 Zurich, Switzerland Ph: 0011 41 (1) 3633846 International Office Services, Rennweg 42, CH-8001 Zurich, Switzerland IVM AG, Weinbergstrasse 72, CH-8042 Zurich, Switzerland Ph : 0011 41 (1) 3633844 Fax: 0015 41 (1) 3633018 UNITED KINGDOM Confidential Business Address, St Georges House, 31a St Georges Rd, Leyton E10, UK Ph : 0011 44 (81) 5562979 C&S Business Bureau, Marble Arch, 16 Connaught Street, London W2 2AF, UK Ph : 0011 44 (71) 2580077 Fax: 0015 44 (71) 7245766 Empire Mail Service, 18 Gillibrand Street, Chorley, Lancashire PR7 2EJ UK Fax: 0011 44 (257) 272405

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The Invisible World Hold Everything, Suite 401, 302 Regent Street, London WIR 5AL, UK Ph: 0011 44 (71) 5804242 Fax: 0011 44 (71) 5804729 HQ Business Centers, 28 Grosvenor Street, London, WIR 9FE, UK Ph : 0011 44 (71) 9176000 Fax: 0015 44 (71) 9176002 HQ Business Centers, Royal Albert House, Sheet Street, Windsor, Berkshire SL4 1BE, UK Ph : 0011 44 (753) 831511 Fax : 0015 44 (753) 831541 UNITED STATES HQ, 1901 Avenue of the Stars, Suite 1774, Los Angeles, CA 90067 USA Ph : 0011 1 (310) 2771359 Fax: 0015 1 (310) 2774092 HQ, Fox Plaza, 2121 Avenue of the Stars, Sixth Floor, Los Angeles, CA 90067 Ph : 0011 1 (310) 5516666 Fax: 0015 1 (310) 5516622 Mail Boxes Etc, 7095 Hollywood Blvd 104, Los Angeles, CA 90028 Ph : 0011 1 (213) 8505346 Fax: 0015 1 (213) 8505302 Pedus Office, 1888 Century Park East, Suite 1900, Los Angeles, CA 90067 Ph : 0011 1 (310) 2843100 Fax: 0015 1 (310) 2843290

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Financial Freedom & Privacy Caribbean Basin Initiative The CBI as it is called, is a little understood sting in the tail of utilising some of the Caribbean tax havens. It was developed in 1982 to stimulate growth in economic growth between the US and the 28 designated Central American and Caribbean nations. While the program assists these countries in the area of trade and manufacturing it also provides for import duty relief. These things really don’t concern us. The area that should create raised eyebrows is the tacked on TIEA. The Tax Information Exchange Agreements that have been signed or very close to signing. The countries are: Antigua, Bahamas, Belize, British Virgin Is., Dominica, Netherlands Antilles, Panama, St Kitts and Nevis, St Lucia, and St Vincent While signing the TEIA is optional, the US government has placed immense pressure on these countries to comply. The goal is to assure tax authorities in both countries that the will get assistance to secure information that might otherwise be impossible to obtain due to secrecy laws. For example any US citizen that has a company and bank account in the Bahamas and doesn’t declare the income on his account for US tax purposes could find that the information being furnished as part of the TEIA. The Mutual Legal Assistance Treaty (MLAT) signed by the Bahamas, Barbados, Bermuda, Cayman Is., Panama and several other countries is also a little alarming. The MLAT was supposed to focus on drug and other serious crimes but it easily extends to whatever the Americans want. Unfortunately it probably extends to things like revenue and privacy more often than it nabs bad guys. What does all this mean to Australians and New Zealanders? Probably not much but it’s something you should be aware of. Americans are pretty well covered by all of this and really should stay well away from Caribbean countries (except the Caymans, they told the American Government where to go!) and Australians should be thinking along the same lines unless they have good reason.

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The Invisible World International Tax Arbitrage using The Dutch Sandwich The Dutch Sandwich is one of the most popular international tax arbitrages available in the offshore market today. Although the Dutch Sandwich was pioneered in the Netherlands Antilles, Panama has become the new center of the trade. The Dutch Sandwich works this way: An individual or company using an appropriate offshore vehicle opens a certificate of deposit with a major international bank. Structured properly, the interest income from the certificate of deposit is tax free. For example, an individual opens a US$100,000 CD at 9% with a major English bank's branch in Panama. Certificate of Deposit US$100,000 Investment in Dutch Sandwich US$100,000 The English bank in turn arranges a mortgage loan from its branch in a major financial center like London, Miami, or New York for the full amount of the certificate of deposit. Continuing with the above example, the individual receives a US$100,000 mortgage at 10% from the English bank's New York office. Withdrawal of Investment US$100,000 Mortgage Loan US$100,000 The individual makes regular interest only payments on the mortgage loan. The interest is tax deductible. Assuming the above individual has a marginal tax rate of 30% his real cost of interest is 7% Gross Interest Expense US$10,000 Tax Savings @ 30% (US$3,000) -------------------------------------Net Interest Expense US$7,000 ======================== The net effect of this tax arbitrage is a 2% spread with no net capital

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Financial Freedom & Privacy invested. In income statement form, this net spread may be expressed as follows: Interest Income From CD US$ 9,000 Interest Expense From Mortgage (US$10,000) ----------------------------------------------------Subtotal (US$ 1,000) Tax Savings @ 30% US$3,000 ----------------------------------NET PROFIT US$ 2,000 ==================== In balance sheet form, the net capital investment may be expressed as follows: ASSETS: Certificate of Deposit US$100,000 ---------------------------------------LIABILITIES: Mortgage Loan US$100,000 ---------------------------------------NET CAPITAL INVESTED US$ 0 ========================= Net return on investment is as follows: Annual Net Income US$ 2,000 Divided By Net Capital Invested US$ 0 ----------------------------------------Return on Investment INFINITE ======================== Please note that this is a very simplified example. Returns can be substantially increased if you are in a higher tax bracket or initially open a larger certificate of deposit.

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The Invisible World Remember it is not necessary to conduct this transaction using an international bank. Bank fees can be substantially reduced using your own tax haven finance company combined with a domestic corporation. Before using any of these concepts, check with your accountant for their legality.

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Financial Freedom & Privacy Index 224 Belize · 65, 102, 103, 104, 264 Bermuda · 14, 31, 47, 104, 105, 106, 107, 108, 117, 235, 237, 248, 258, 264 Brecquou · 126 Busingen · 214, 215

A Accrual Taxation System · 5, 6 Active Income · 7, 48, 62 Albania · 80, 81, 82 Alderney · 118, 119, 124, 257 Andorra · 14, 24, 82, 83, 84, 85, 249, 257 Anglo-Irish Bank · 23 Anonymity · 76, 99 Antigua · 86, 87, 88, 264 Aruba · 183, 184, 187, 258 Asset protection · 76 Austria · 2, 14, 24, 28, 89, 90, 91, 92, 93, 120, 162, 166, 212, 218, 234, 236, 258

C Campione · 113, 114, 214, 217 Caribbean Basin Initiative · 25, 134, 195, 264 Cater Allen · 23, 34 Cayman Islands · 25, 114, 117, 163, 233, 236, 248, 249 Channel Islands · 14, 25, 33, 64, 65, 118, 119, 120, 121, 127, 249, 257, 259, 260, 261 Chase Manhattan Bank · 149 Controlled Foreign Companies · 5, 6, 62 Cook Islands · 127, 128, 129, 130, 259 Costa Rica · 26, 127, 130, 131, 132, 259 Credit Suisse · 212, 219

B Bahamas · 24, 47, 93, 94, 95, 98, 105, 106, 223, 249, 258, 264 Bank of Nova Scotia · 86, 110, 201 bank secrecy · 2, 14, 20, 24, 26, 27, 28, 29, 36, 73, 91, 94, 103, 128, 131, 167, 172, 182, 191, 210, 212, 225, 230, 253 Bank secrecy · 24, 25, 26, 27, 83, 87, 105, 134, 136, 149, 155, 164, 167, 174, 180, 195 Barbados · 25, 99, 100, 101, 196, 198, 264 Barclays · 86, 88, 106, 117, 225 Barclays Bank · 117, 225 Bearer shares · 109, 127, 134, 149, 164, 168, 177, 184, 192,

D Delaware · 132, 133, 231, 232 Designated Concession Income · 7, 11 Division 13 · 5, 12 Dominica · 134, 135, 136, 264 Dominican Republic · 26, 134, 136, 137, 144, 251

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The Invisible World 162 Isle of Man · 14, 23, 26, 34, 38, 47, 51, 65, 123, 152, 155, 156, 162, 183, 212, 233, 235, 237, 260

Double Tax Agreements · 12, 48, 192 Double Taxation Agreements · 149 '

J

'Dutch Sandwich · 183

Jersey · 25, 33, 118, 119, 120, 121, 122, 124, 126, 212, 261 Jura · 215

F Foreign Investment Fund · 5, 49, 62

L

Geneva Free Zone · 214, 216 Gibraltar · 137, 144, 145, 146, 147, 148, 259 Guernsey · 10, 23, 25, 118, 119, 120, 122, 123, 124, 126, 259, 260

Liechtenstein · 14, 26, 43, 65, 91, 92, 114, 157, 162, 163, 164, 165, 166, 167, 183, 215, 234, 249 Lugano · 113, 217 Luxembourg · 12, 14, 24, 27, 41, 120, 163, 166, 167, 168, 169, 170, 249, 261

H

M

Hambros Bank · 147 Herm · 118, 119, 126, 127 Hong Kong · 13, 26, 37, 50, 148, 149, 150, 183, 191, 249, 260

Madeira · 170, 172, 173 Maildrops · 257 Malta · 27, 173, 174, 175, 176, 183 MasterCard · 29, 30 McDonalds · 2 Midland Bank · 156, 192 Monaco · 65, 176, 177, 178, 179, 183, 261, 262 Money Laundering · 247 Montserrat · 194 Mustique · 200, 201 Mutual Legal Assistance Treaty · 25, 264

G

I International Business Companies · 95, 99, 100, 102, 134, 204, 205 International Company Services · 225, 259, 260 Invisible Banking · 24, 90 Ireland · 14, 150, 151, 152, 156,

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Financial Freedom & Privacy N

S

Nauru · 179, 180, 181 Nazi · 208, 210 Nazis · 208, 210, 211 Netherlands Antilles · 27, 42, 163, 181, 182, 183, 184, 187, 249, 264, 265 Nugan Hand Bank · 248

Qintex · 1, 235, 236, 237

Samnaun · 218 San Marino · 202, 203 Sark · 118, 119, 124, 125, 126 Second Citizenships · 251 Section 25(1)(a) · 5 section 515 exemption · 8 Sections 136AA to 136AG · 12 Seychelles · 204, 205, 206 Singapore · 13, 27, 122, 183, 206, 207, 249 Sint Maarten · 183 Skase · 1, 11, 235, 236, 237, 238 Sparbuch · 28, 90 Sparbuchs · 89, 90 St Kitts and Nevis · 193, 194, 264 St Lucia · 196, 198, 264 St Vincent · 198, 200, 201, 202, 264 Standard Chartered Bank · 207 Swiss Bank · 117, 208 Swiss Overseas Consultants · 92 Switzerland · 2, 11, 14, 26, 27, 28, 89, 113, 114, 120, 127, 162, 164, 165, 166, 167, 207, 209, 211, 212, 214, 215, 216, 217, 218, 219, 220, 222, 236, 248, 249, 262

R

T

Raiffeisenbank · 91 Riezlern · 89, 90, 91 Rothschilds · 23 Royal Bank of Canada · 86, 117, 195

Tax Avoidance · 12, 62 Tax Information Exchange Agreement · 25, 134 travellers cheques · 35, 36 Turks and Caicos · 28, 223, 224, 225, 226, 234, 251

O offshore trust · 9, 74, 75, 76, 77 Offshore Trusts · 74 Overseas Company Registration Agents · 77, 123, 150, 156, 170 OVERSEAS COMPANY REGISTRATION AGENTS · 37, 38, 254, 255 P Panama · 27, 47, 108, 163, 187, 189, 191, 192, 193, 211, 248, 249, 251, 262, 264, 265 Q

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The Invisible World V

Wyoming · 231, 232

Vanuatu · 226, 227, 228, 229 Visa · 29, 30, 34, 251

Z Zug · 11, 218, 219, 220, 262

W Western Samoa · 229, 230

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