For the past few years, I’ve been paying a lot of attention to economic affairs in Europe. My friends and sources on the ground in places like Spain and France want their money out of the region, generally, and most are looking at safe options overseas. Which is very understandable considering the tumult. But today I want to turn an eye to my homeland, where the economy has been surely (albeit slowly) returning to health. A number of concerns roil Americans, and whether you’re suspicious of a job-killing president or obstructionist Republicans, if you’re American, you might be looking to move your money overseas like many Europeans are. If you want to evade taxes and hide your money with disregard for U.S. law, if you want to open an offshore account illegally, please move on. It’s easy enough to do in many jurisdictions, but our legal firm does not operate that way, and opening a Belize offshore account can be accomplished within the framework of the laws of your home jurisdiction.
Although U.S. law doesn’t make it easy on you, which we’ll discuss here. Reporting requirements exist for U.S. taxpayers with Belize offshore companies (or offshore companies in any other jurisdiction). Taxpayers controlling or investing in offshore international business corporations or companies, offshore bank accounts, or offshore trusts are generally subject to the same rules as domestic investors, even if the offshore entity’s business activity is conducted entirely offshore.
Here are prevalent reporting requirements:
Foreign Bank and Financial Account – If you have authority, signature authority, or a financial interest in an offshore account or accounts worth more than $10,000 in aggregate value, the I.R.S. says you must file a Report of Foreign Bank and Financial Account (form number TD F 90-22.1).
Offshore Company / Foreign Corporation – You are required to file special tax reports on a Belize offshore company if one of the following is true:
- It is a personal holding company
- It is a controlled foreign corporation
- It is a passive foreign investment company
Foreign Personal Holding Company – A Belize offshore company/corporation is treated as a personal holding company by the I.R.S. if it derives more than 60% of the company’s income (post-adjustments) from contracts, dividends, rent, interest, and royalties, and more than 50% of the company’s stock belongs to less than six individuals
Controlled Foreign Corporation – If U.S taxpayers in the aggregate own more than 50% of a Belize offshore international business company/corporation, then each shareholder with 10% or more interest in the offshore company needs to file Information Return of U.S. Persons With Respect to Certain Foreign Corporations (Form 5471).
Passive Foreign Investment Company – Known as Subpart F Income, a Controlled Foreign Corporation (CFC) falls within this category if the offshore company includes:
- certain insurance income;
- foreign personal holding company income (FPHCI), including dividends, interest, royalties, rent, annuities, capital gains, and income from certain personal contracts;
- foreign base company sales income, which, in general, means income (whether in the form of profits, commissions, fees, or otherwise) derived in connection with purchase or sale of personal property to, from, or on behalf of a related person, whereby such property was produced or is being sold or purchased in order to be consumed outside of the home country of the CFC;
- foreign base company services income, which, in general, means income (whether in the form of compensation, commissions, fees, or otherwise) derived in connection with the performance of technical, managerial, engineering, architectural, scientific, skilled, industrial, commercial, or like services, which are performed for or on behalf of any related person outside the home country of the CFC. This position includes substantial assistance contributing to the performance of services by a CFC that has been furnished by a related person or persons.
American expatriates who have given up U.S. citizenship need to be extra careful. If you fit this description and are wealthy, you may no longer be a citizen but you may owe an exit tax to the I.R.S. under the Heroes Earnings Assistance and Relief Tax Act of 2008.
There are a lot of ins-and-outs of opening a Belize offshore account for American investors. But in reality, with an experience guide (read as: Belize lawyer), it’s remarkably easy. To speak with a Belize attorney today, please click here.
Disclaimer: this blog post is for informational purposes only, and is not intended as tax advice to any person or entity.
