It's tough to be American citizens who want to protect their wealth via the offshore path. Partly due to the pressure of US taxes, the latest data reveals that a record number of Americans renounced their citizenship in 2014 – up from 2,999 in 2013 to 3,415 in 2014. The 2014 figure is, in fact, more than triple the 2012 figure.
But the high taxes reason is just the tip of the iceberg. The bigger reason: FATCA.
FATCA – the Foreign Account Tax Compliance Act – requires foreign (offshore) banks to reveal the record of American citizens with accounts larger than $50,000.
FATCA was put into effect with a good intention; it's intended to catch tax evaders red-handed. Unfortunately, the policy has a considerable side effect: Some Americans who just want better protection for their assets were fed up by the constant pressure, and take the extreme measure: Renouncing their citizenship.
With that said, is migrating offshore a good option to take when you are fed up with the instability, high tax burden and the inability to better-protect your hard earned assets in your home country?
The answer is: It depends on several factors:
Are you an expatriate?
If working in another country while taxed by your home country doesn't make sense to you, then you might want to consider the options.
Not only the US, many countries share the same policy: Regardless of where in the world you generate your income from, when you are a citizen, you need to file tax returns to your home country.
Are you an online business owner or freelancer?
Online business owners' and freelancers situation is even more ambiguous. When you have no activities in your home country, there is no reason for you to file tax returns to your home country. Instead, the taxes you are paying depend on the jurisdiction of your choice. However, this is not the case if you are a US citizen.
You can take the offshore route without renouncing your citizenship (at this moment, this is only valid if you are a non-US citizen) – just setup an offshore company, open an offshore bank account, and you can operate from anywhere you want, and do business with anyone you want. Please note that, typically, offshore jurisdictions will need the business to pay for local taxes if it deals with local clients.
Are you going to move your HQ or establish a business?
Entrepreneurs whose company's expansion lead to a market located in an offshore jurisdiction may want to establish an HQ in that country. If most of the operations are set to be in the offshore country, they might want to consider in becoming an expatriate or even migrate.
There is no right or wrong in the decision, but if they still want to maintain the operational of their company in their home country, then it's recommended to set up an offshore company to manage revenues generated outside their home country.
Are you simply fed up of how your home country handle things?
If you have no other reasons than tired of the game played by your home country's government, politically and economically, then you may have a strong reason to migrate to another country.
When you are considering your options, you may want to consider offshore jurisdictions for wealth protection, as well as a supportive business environment. Popular jurisdictions like Singapore, Hong Kong, Puerto Rico, and countries in the Caribbean can offer you a better quality of life, and more beneficial business and investment policies.
Regardless of your decision whether you are going to migrate or not, please gather as much information as you can – from the right sources – so that you can make a well-informed decision.
As always, please consult with your legal counsellor and other trusted, neutral parties before you make any decisions.
You can also consult with us, as we can provide an unbiased view concerning your options.