Clients from all over the world are tired of unfair taxation. Some of our US clients are sick of the unpredictable tax changes, including the new estate tax changes implemented by the Biden administration. There’s no reason to continue to allow your home country to take advantage of your hard-earned wealth. This article looks at what a tax-friendly nation is and how you can benefit from what they have to offer. For thorough information on how to lower your tax responsibility, contact the experts of Alpen Partners.

What is a tax-friendly nation?

A tax-friendly nation is a country or jurisdiction that offers tax incentives for foreign investors and corporations. The tax savings allow investors and corporations to grow in a way they aren’t able to back home. The tax-friendly nation benefits since these benefits attract wealthy investors and companies to participate in their economy, create jobs, and encourage growth. The main benefit to these jurisdictions is reducing tax responsibility for individuals and corporations through low tax rates, lump-sum tax options, or even no taxation on certain income. For individuals, tax havens can offer lower or no capital gains tax, tax on interest, inheritance, or personal income. Many corporations have saved billions by reporting earnings to subsidiaries in countries that have better corporate tax laws. Additionally, many of these countries are home to private banks that hold assets and offer investment services that encourage investors to diversify their portfolio with offshore investments. 

Let’s take a look at some of the reasons a country may be considered tax-friendly.

Lower Taxes

Some clients are frustrated with the rate at which they are being taxed. For example, the US and many European nations have a progressive taxation system that taxes higher earners unfairly with no legal way to minimize tax responsibility. They may relocate to a country like Switzerland, where they have the option to pay a lump sum tax. This annual lump sum is often lower than if they were taxed at the federal rate. Switzerland also taxes by household and not individually. Other countries may not even have capital gains tax, income tax, gift tax, stamp duty, or inheritance tax. Other counties, like Bermuda or St. Kitts and Nevis, don’t have a corporate tax which has led many Fortune 500 companies to hold subsidiaries in these locations. As you can see, tax benefits can be at the individual or corporate level. To understand which country would benefit you the most, you can work with our skilled tax experts who can examine your goals and find the nation that makes the most sense for you.

Higher Security and Privacy

Many countries that offer tax incentives to foreigners are typically economically minded and are also home to prestigious private banks. These banks prioritize the security and privacy of their client’s assets and business dealings. As a result, banks in tax-friendly countries rarely keep individual company or personal banking information that is easily accessed by the public. In some places, it is entirely illegal for a bank to give that information to anyone. 

Diversification

By tapping into tax-friendly nations, you can also begin to grow your portfolio with offshore investments in real estate, commodities, and more. With less taxation, investors are much freer to find the assets that work best with their existing portfolio. In addition, offshore investments allow investors to fight market risks if their domestic portfolio is not diverse enough.

How to benefit from a tax-friendly nation? 

So now that we have determined why some nations are just more tax-friendly let’s briefly look at how individuals and companies can tap into these advantages. Of course, these aren’t the only ways to lower your taxes, but they are well known and proven successful. 

Forming an offshore LLC- By forming a company offshore, a person or group of people can hold assets offshore easily and legally. An LLC can protect members of the company against lawsuits, requires less paperwork than other business types, offers tax benefits, and more. The company will also allow individual investors or company members to diversify their investments and grow their wealth. 

Offshore Trusts- An offshore trust is an excellent option for an individual investor looking to take some of their assets abroad. Also known as an offshore asset protection trust, an international trust can be one of the most consequential asset protection plans for you if you do it right. They allow you to legally transfer out of reach of future creditors and put them in an impenetrable place. Assets are taken out of your name and placed in the secure trust, but you can choose the trustee and beneficiaries and maintain control of the assets. 

Relocating- Maybe it’s time to think beyond placing assets in offshore accounts and take yourself instead. Many of our clients have decided there are more benefits for them in another country and take themselves and their families to a country that can offer lower taxes, higher quality of life, and a better life. Switzerland and Monaco are two nations that attract high-earning individuals from all around the world. 

List of popular tax-friendly nations:

  • Switzerland
  • Monaco
  • Portugal
  • St. Kitts and Nevis
  • Bahamas
  • Luxembourg
  • Cayman Islands
  • Isle of Man
  • Bermuda

Are you looking to move to a tax-friendly nation? Read this article here.

Tax planning with Alpen Partners

It’s difficult to determine which tax-saving strategy is going to work best for you. Some options require placing assets offshore or creating an entity to place assets in. Others require a complete lifestyle change. By working with Alpen Partners, our clients get hands-on help with tax planning, wealth management, and so much more while working with world-class banks. Our professionals assist in all levels of financial and life planning for high net worth individuals, including tax planning, asset protection, and portfolio diversification. Contact the experts of Alpen Partners today!