How to Pay Fewer Taxes, Earn 18 Times More Interest, and
Transcription
How to Pay Fewer Taxes, Earn 18 Times More Interest, and
Bob Bauman’s May 2011 How to Pay Fewer Taxes, Earn 18 Times More Interest, and Secure Your Family’s Physical and Financial Safety… With Just One Step Knocking out three of your biggest frustrations – tax, income and security — in one step is a rare opportunity. Today, you can do just that. Together with Erika Nolan, Executive Director of the Sovereign Society, and Jeff Opdyke, Director of Investments and Research at the Sovereign Society, we have found the ideal way for you to enjoy… • A zero tax rate on your foreign income • Interest rates of around 4.5% on basic savings accounts • The freedom to easily open a foreign bank account to gain access to interest rates up to 18 times more than what’s on offer at U.S. banks • And a safe and stable social and economic environment where your money is safe, your property investments are liquid and profitable, and your family can walk the streets in complete safety. Inside This Issue Pay No Taxes...... Pg 3 Protect Your Financial Privacy........... Pg 6 The Special Deal for Retirees.......... Pg 9 1st World Living Without Big Brother...... Pg 12 Published by The Sovereign Society® You can have it all if you take one simple step: move to Uruguay. Uruguay Residency Offers it All Uruguay is one of only a few remaining countries that still offers a sound banking system that welcomes Americans and their money, has greater financial privacy than what you get in the United States, and has attractive real estate possibilities. It also has a pleasant climate and friendly citizens, and certainly qualifies as a place you might want to live. Before you begin to plan your move though, there are several details you should know… The Jewel of Latin America The official name of the country is the Oriental Republic of Uruguay. “Oriental” in this case means “eastern” because Uruguay is on the eastern side of the Uruguay River that separates it from Argentina. It is one of the most economically developed countries in South America, with a high GDP per capita. It had the 52nd highest quality of life index in the world in 2010, and ranked first in quality of life/human development in Latin America. The Economist ranked it 21 out of 167 countries on the 2010 Democracy Index. And according to Transparency International, Uruguay is the 2nd least corrupt country in Latin America, behind Chile. By most estimates, political and labor conditions in Uruguay are the freest on the continent. It was the highest rated country in Latin America on Legatum’s 2010 Prosperity Index, which produces its rankings based on factors that help drive economic growth and create happy citizens. Reader’s Digest, earlier this year, ranked Uruguay as the 9th “most liveable and greenest” country in the world. It ranked Uruguay as 1st in all the Americas. Besides all of these accolades, Uruguay has even more to make it 2 the best offshore residence for you. For one, it is still a tax haven… Pay No Taxes on Income You Generate Outside of Uruguay If you want a tax, financial, or even a residential haven, Uruguay is much more than a pretty face. In 2010, Uruguay adopted changes in its tax laws that imposed taxes on certain types of offshore payments to Uruguayans: interest on deposits and dividends. After much confusion and complaints, especially from foreigners considering residence in Uruguay, in April 2011 the government took an important step to assure that it would not tax foreigners who choose to relocate to Uruguay. A new rule was announced that applies to both foreigners who move to Uruguay, and those who already live there. That is, both groups will be exempt from taxes on any type of income generated outside of the country – at least for the first five years of their residence. Under the new rules now being drafted, the five-year offshore income tax exemption for foreigners will apply to all new arrivals and foreigners who have established residence in the last two years. 3 Uruguay in a Nutshell Government: Constitutional republic Capital: Montevideo Population: 3,308,535 (July 2011 est.) Total Area: 68,039 sq. miles Languages: Spanish, Portuñol (Portuguese-Spanish mix on the Brazilian frontier) Ethnic groups: 88% White, 8% Mestizo, 4% black, Amerindian Life expectancy: 76.33 years Currency: Uruguayan peso (UYU) GDP: US$48.43 billion (2010 est.) GDP per capita: US$14,300 (2010 est.) Time: One hour ahead of U.S. eastern standard or daylight time (3:00pm in New York is 4:00pm in Uruguay) After the five year period, offshore dividends and interests will be taxed at a rate of 12%. However, if you already pay tax on that income elsewhere — which, as an American, you do — Uruguay will not impose double taxation on you. They will credit the taxes you already paid the IRS. Our man in Montevideo, attorney Juan Fischer, offers the opinion that it is likely the tax law will be amended to extend beyond five years… “…to a more permanent non-taxed status for foreigners who move to Uruguay.” One point to remember: if you stay in Uruguay for more than 183 days in one year, the law presumes Uruguay is your tax domicile and you could become liable for all taxes a local citizen would be required to pay. (Taxes on offshore income will not apply if you qualify for the five year exemption described above.) This raises the question: what tax rates would you pay in Uruguay should you become liable? The answer is: far lower rates than you pay to the IRS. The 3 Types of Income Uruguay Taxes Effective from 2011, Uruguay levies the following taxes… On assets: citizens face a small tax on offshore deposits, securities and loans. The rate is 0.07% to 0.5%. This tax, known as “IP,” is being phased out in annual steps and will end in 2017. It will not affect anyone who gets citizenship after 2017. On income: Uruguay will tax three types of income generated outside of the country… 1.Interest on deposits 2.Interest from loans to a foreign company 3.And dividends 4 The tax rates range between 0% and 25%. If you bring in less than $400,000 a year, you’ll pay only a 12% flat tax rate. Should you bring in more than $400,000 per year, you can negotiate your tax rate with the Uruguayan government. However, if you already pay income tax abroad on any of these three types of income, you will not have to pay additional taxes in Uruguay. This means you avoid double taxation. Any other type of income generated abroad, like a salary, capital gains on the sale of shares or property, pensions, lease income, or any other type of offshore income are all untaxed. The reality is Uruguayan taxes are very favorable to foreigners. How Beneficial are Uruguayan Taxes to You? Here’s an example of just how good Uruguayan taxes can be for you. Say you earn $1 million a year and you bring $100,000 a year into Uruguay… Uruguay will look at 70% of that $100,000. That means only $70,000 is taxable. There is also no tax on the first $800 of income you “earn” each month… so this further reduces the amount of income Uruguay will impose taxes on. Of that $100,000 you bring into the country each year, you’ll only face taxes on $60,400. At a flat rate of 12%, you’ll pay just $7,248 in taxes. Compare this to what the IRS would take from you for that same $100,000 annual income – $25,000 – and it’s clear that Uruguay is a low-tax jurisdiction. Besides paying less tax (if you pay any in Uruguay at all) there is another reason you should consider establishing a second residency in this Latin American gem… 5 The Bank Secrecy Statute That Protects Your Financial Privacy Unlike the United States, where financial privacy is dead and buried, Uruguay protects your financial privacy to some degree with a bank secrecy statute (Law #15,322, 1982). Under this law, banks cannot share your information with anyone. Not the government of Uruguay, not any foreign entities, nor foreign governments. The only exceptions are in cases involving issues of alimony, child support, or alleged crimes, including foreign tax evasion and then they can only share the information upon court order. Still, Uruguay does comply with Article 26 of the Organization for Economic and Community Development’s (OECD) model standards for tax information exchange requests. That is, banks may exchange information upon proof of foreign tax evasion or tax fraud. Uruguay limits such exchanges to countries with which it has signed tax information exchange agreements (TIEAs), specifically excluding both neighboring Brazil and Argentina. The Uruguayan government already has, or soon will have, TIEAs with Germany, Mexico, Portugal, Spain, France, Korea, Finland, Malta, Switzerland, Liechtenstein, India, Belgium, Hungary, Malaysia, Chile and Luxembourg. It does not yet have a TIEA with the United States. In most other countries, these information exchange agreements are a curse: they have made banks more reluctant to assist Americans in opening local bank accounts. In some countries, banks refuse to deal with Americans all together. The cost and administration involved in complying with, and accommodating, the TIEAs make foreign accounts unattractive. This is not the case in Uruguay. In fact, banks in Uruguay are quite hospitable to Americans who want to open accounts there. 6 Earn 18 Times More Interest on Your Money There are 12 local banks and 15 international banks in Uruguay. In the resource section at the end of this issue, we’ve included a list of banks and contacts we recommend. While investment accounts are available, retail or personal accounts are also welcome. In particular, Banco Itau and Lloyds TSB in Montevideo will accept non-resident American clients in their retail banking branches. When opening a bank account in Uruguay, you must be present and you must sign an IRS Form W-9. You will also need the following paperwork: • Your passport • Proof of residency, like a utility bill • A reference letter from your home bank in the U.S. • A statement of your profession and the source of funds you will deposit • And a letter explaining why you want the account You must also have a clean, non-criminal record. Once you have completed the application and given the bank all the supporting documents they need, it will take about two weeks for the bank to open and activate your account. Many banks will assign an English-speaking account manager to you. However, the government only guarantees bank insurance on deposits up to $2,500. Another bonus is the country’s interest rates, which are around the 7.5% mark. Banks offer up to 4.5% on various types of accounts. That means your money can earn 18 times more than it does sitting idle in an U.S. bank account (where you could get the minimum of 0.25%). So, Uruguay stands out as the stable country of the Latin Americas, it is a great low tax jurisdiction, and its banks welcome Americans and their money. These three elements alone make it an ideal place to establish a second residency. 7 The fact that you can acquire this residency with ease seals the deal. You Need Just 3 Key Proof Elements to Apply for Uruguayan Residency Acquiring Uruguayan citizenship is a relatively straight forward process. It starts by filing a residency application. Immediate residency is easy to get with three key proof requirements: 1.A birth certificate (authenticated and stamped by the Uruguayan Consulate in your country of birth) 2.A home-country, clean police record, and 3.Proof that you can support yourself financially during the year of the residency process (known as the “income requirement”) As proof that you have a clean police record, you must present a police certificate from your country of origin and from those countries where you actually resided within the past five years. As an American, the U.S. record you need is a statement from your local police or the Interpol office. You fulfill the income requirement by proving that you have a yearly income of at least US$6,000. That can be a pension, a mutual fund, real estate or lease income from assets in or outside Uruguay, dividends of any nature, or certified salary sources. How to Begin the Application Process It is important to note that to become a Uruguayan resident, you don’t need to own property or have investments in the country. In fact, simply owning property does not eliminate the income requirement as described above. To become a resident, you must enter Uruguay as a tourist and then file a formal request at the Immigration Authority (“DNM”). The application takes eight to 12 months. 8 Once you apply for residency, you can stay in Uruguay indefinitely. You also can request a national identification card, which allows you to travel without a passport to neighboring Argentina, Brazil, Chile and Paraguay. Five years after filing for residency (three years in the case of couples or families), you can apply for citizenship. At this point you must have established Uruguayan residency, have had a permanent connection with the country and not have been absent for more than six straight months during the five year period. You can show proof of Uruguayan residence by evidence of salaries to household staff (maids), doctor or dentist bills, ATM receipts, and local bank information. Uruguay does allow dual or multiple citizenships, as does the United States. Special Deal for Retirees A special law (#16,340) expedites citizenship for foreign retirees with an annual official government pension of $18,000 or more. In addition to the pension, you must also buy or own real property in Uruguay valued at $100,000 or more. The “passport” granted under this law appears the same as the one issued to any citizen, but in fact is only a “travel document” that states that “this passport was granted to a Uruguayan Permanent Resident with (name of country) nationality.” Eventual citizenship comes with a Uruguayan passport that allows visa-free travel to all of Latin America and several European countries as well. United States citizens entering Uruguay for business or pleasure must have a valid passport. However, you do not need a visa for a visit of less than three months. What Truly Makes You a Resident in Uruguay? Simply: your presence. 9 The immigration law states that residency is granted to those “who show intent to reside in Uruguay.” This means you must have an established address in Uruguay (rented or owned), which the Immigration Department may randomly verify. This does not stop you from coming and going, or spending several months outside of Uruguay during your application process. However, if you don’t meet the minimum “presence requirement” then your application may be delayed. After Uruguay grants you permanent resident status, there is no longer any requirement to stay in the country. You keep your residence status so long as you do not live out of the country for more than three years. With the need to be in Uruguay for a few months every year, and the beauty and stability of the place making this requirement easy to meet, you should consider investing in local property. Erika and Jeff spent some time in country recently, exploring the real estate, banking and investment opportunities there first hand. This is what Erika had to say about property in Punta del Este… Rising Values and High Liquidity Make Property in Punta del Este a Worry-Free Investment Punta del Este is Uruguay’s answer to Newport, Rhode Island. Bridge nights and cocktail parties are part of the routine. Many people of wealth make their home there and international cruise ships regularly visit the harbor. As an Atlantic Ocean-side town, Punta del Este has a great deal of “old money,” which makes it a more established re-sell market. Prices are not cheap because of international demand, but your investment is safer because you’ll be able to find a buyer when you want to cash out. There are currently 70 new developments in Punta del Este, all of them without mortgages. It’s a cash business that is owner/developer financed. 10 The lowest entry-point price on the peninsula is $300,000. The lowest you’ll pay for a studio apartment in the area is $160,000. Historically property in Punta del Este has increased in price and holds value well. The rental market is strong during peak summer season — January to March – with a return of 3–4%. Adjacent to Punta del Este is the small town of La Barra. It is highly sought after so you’ll pay between $600,000 and $800,000 for property there. But with art galleries, shops, narrow, Europeanstyle streets, and youth oriented activities, from daytime sports on the fine sandy beach to all night discos, it is well worth the investment. According to Erika, another great place to invest in Uruguayan property is in the country’s capital… Montevideo: One of the World’s Safest Cities Montevideo is an attractive, modern city — among the safest in the world. Located on the southern Atlantic coast of the country, the city contains many impressive high-rise buildings. Those most suitable for the expat community conveniently face the city golf course. The average price for a 2,500 square foot apartment in this area is about $550,000. New construction prices are higher, closer to $750,000. A smaller apartment of about 1,800 square feet, in an equally good section of the city, would cost you around $350,000 plus. Most apartment buildings have association fees of a few hundred dollars a month. These allow you to use common areas and enjoy a parking spot. Overall, the Uruguayan property market has a dependable security that makes investments safe and stable. For example, farmland prices have increased in value ten times over since 2002 to a present average price of $2,100 per hectare. 11 What Else Makes Uruguay a Great Offshore Haven Uruguay is an open, free market economy, with no exchange controls or foreign currency limitations. 80% of bank deposits in Uruguay in U.S. dollars or euros. Accordingly, the prices for most big-ticket items like real estate and cars are denominated in U.S. dollars. An export-oriented agricultural sector characterizes Uruguay’s economy. It has a well-educated work force, and high levels of social spending. The country’s main industries are tourism and farming. Political stability has boosted the economy. Uruguay is not a country where you should look for a cheap retirement. Its first world living standards comes with first world prices. But, as proof of how attractive this market is, Sotheby’s International Realty Affiliates announced they will develop the Sotheby’s International Realty brand throughout the country. They’re calling it Uruguay Propiedades Sotheby’s International Realty. For First World Living Without Big Brother… Go to Uruguay Uruguay offers you financial and physical security – you feel safe walking the streets in Monte Video or Punta del Este… or anywhere else in the country. It has one of the lowest tax rates for foreigners anywhere in the world. Its banks welcome Americans and they offer interest rates 18 times higher than what you get in the U.S. 12 It has a strong property market with high liquidity and consistent growth. And acquiring residency is relatively easy. If you want to learn more about what the country can offer you, contact Juan Federico Fischer of Fischer & Schickendantz. His web site, www.fs.com.uy, offers an informative free report on property purchases, immigration and taxes. Then schedule a trip to see the country first hand. If you like what you see, return and rent a place for at least six months so you can see if you’d really like living there full-time. As an offshore haven, Uruguay is definitely a place to consider seriously. Until next month, Bob Bauman 13 Resources U.S. Taxes & Reporting Compliance JOSH N. BENNETT, JD Address: 440 North Andrews Avenue, Ft Lauderdale, Florida 33301 Telephone: (954) 779-1661 Email: [email protected] Website: www.joshbennett.com Josh Bennett deals with aspects of international tax, estate, and gift tax planning for U.S. citizens, resident aliens, and non-resident aliens. MICHAEL CHATZKY, JD (Chatzky & Associates) Address: 6540 Lusk Boulevard, Suite C121, San Diego, CA 92121 Telephone: (858) 457-1000 Email: [email protected] Michael Chatzky specializes in federal and international taxation and wealth protection with an emphasis on business, estate and asset protection planning. Recommended Banks BANCO ITAU Contact: Macarena Olmedo Address: Pedro Berro 1039, 11300 Montevideo, Uruguay Telephone: +(598) 2 709-9990, Ext. 523 Email: [email protected] Website: http://www.bancoitau.com.uy/ Banco Itau offers retail banking services only. You need a $2,500 minimum balance and you’ll pay a monthly fee of $30. The bank offers safety deposit boxes, ranging in price from $250 to $600. LLOYDS TSB Contact: Ignacio d”Avila Address: Zabala 1500, CP 15000, Montevideo, Uruguay Telephone: +(598) 2 916-1370, Ext. 334 Email: [email protected] / Website: www.lloydstsb.com.uy Lloyds TSB offers retail and private banking. You need a minimum 14 deposit of $10,000 but will pay no fees. Safety boxes are available for you at the bank’s discretion. You can designate which currency you want your account to be in: the dollar, pound sterling, euro or peso uruguayo BBVA PRIVATE BANKING Contact: Pablo Troccoli Fischer, Account Executive Address: 25 de Mayo, 11000 Montevideo, Uruguay Telephone: (598) 2 916-1444, Ext. 393 Email: [email protected] Website: http://www.bbva.com.uy/Inicio/Personas/ (Spanish) You need a minimum deposit of $100,000 to open an account at BBVA. Real Estate Contact: Carla Parodi Ramos, Parodi Real Estate Address: Solano Antuna 2848, Montevideo Telephone: +(598) 2 711-5045. Email: [email protected] Contact: Sancho Pardo Santayana, Managing Partner 360 International Realty Email: [email protected] / Website: http://en.360terra.com/about Punta del Este Office Address: Ruta 10, KM. 166, Punta Piedras Telephone: +(598) 4 277-5066 Montevideo Office Address: General. Paz 1428, Local 14, Punta Gorda Telephone: +(598) 2 601-2567 Miami Office Address: 1942 NE 148th St., MVD6245, Miami FL 33181 Telephone: (305) 407-1705 Recommended Attorney JUAN FEDERICO FISCHER Esq., Fischer & Schickendantz Address: Rincón 487, Piso 4, Montevideo 11000, Uruguay, Telephone: +(598) 2 915-7468, ext. 130 Email: [email protected] Website: www.fs.com.uy Fischer & Schickendantz is a full service law firm with a specialized unit in immigration, real estate and corporate law. 15 Embassy Contacts Embassy of Uruguay Address: 1913 I (Eye) Street, NW, Washington, D.C. 20006 Telephone: (202) 331-1313 / Fax: (202) 331-8142 Email: [email protected] / Website: http://www.uruwashi.org/ There are Uruguay Consulates in Chicago, Miami, Los Angeles, New York and San Juan, Puerto Rico. U.S. Embassy Address: Lauro Muller 1776, Montevideo 11200 Uruguay Mailing Address: UNIT 4500, APO AA 3403 Telephone: + (598) 2-418-7777 Fax: + (598) 2-410-0022 Website: http://montevideo.usembassy.gov/ Publisher...................................... Erika Nolan Editor..................................... Bob Bauman JD Managing Editor..... Teresa van den Barselaar Graphic Designer....................... Bruce Borich Bob Bauman’s Offshore Confidential is published 12 times per year for $495 by The Sovereign Society The Freedom Alliance 98 S.E. 6th Avenue, Suite 2 Delray Beach, FL 33483 USA, USA Toll Free Tel: (888) 358-8125 Contact: http://sovereignsociety.com/contact-us Website: www.sovereignsociety.com Copyright ©2011 Sovereign Offshore Services LLC. dba The Sovereign Society ™ All international and domestic rights reserved, protected by copyright laws of the United States and international treaties. No part of this publication may be reproduced in any form, printed or electronic or on the worldwide web, without written permission from the publisher, Sovereign Offshore Services, LLC. 98 SE 6th Ave., Suite 2, Delray Beach, FL 33483. Notice: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold and distributed with the understanding that the authors, publisher and seller are not engaged in rendering legal, accounting or other professional advice or service. If legal or other expert assistance is required, the services of a competent professional advisor should be sought. The information and recommendations contained in this brochure have been compiled from sources considered reliable. Employees, officers and directors of The Sovereign Society do not receive fees or commissions for any recommendations of services or products in this brochure. Investment and other recommendations carry inherent risks. As no investment recommendation can be guaranteed, the Society takes no responsibility for any loss or inconvenience if one chooses to accept them. The Sovereign Society advocates full compliance with applicable tax and financial reporting laws. U.S. law requires income taxes to be paid on all worldwide income wherever a U.S. person (citizen or resident alien) may live or have a residence. Each U.S. person who has a financial interest in, or signature authority over bank, securities, or other financial accounts in a foreign country that exceeds $10,000 in aggregate value, must report that fact on his or her federal income tax return. An additional report must be filed by June 30th of each year on an information return (Form TDF 90 22.1) with the U.S. Treasury. Willful non compliance may result in criminal prosecution. You should consult a qualified attorney or accountant to insure that you know, understand and comply with these and any other reporting requirements. 16