Will operating offshore really protect your wealth? It sounds great on paper, but once you move beyond the basics, you begin to realize that there’s more to operating offshore and offshore banking than you may have first thought.

Dr. Giovanni Caporaso Gottlieb, Founder of Caporaso Gottlieb & Partners Law Office of Panama provides insight into operating offshore and provides informative tips that will help you have a better experience with operating offshore and offshore banking.

Q: What does offshore mean?

A: Offshore literally means outside of territorial waters or, in the case of a financial operation, carried out outside of the country of residence.

Q: Why go offshore?

A: Simply to protect one’s capital and to reduce tax burdens. Presently, more than 50 jurisdictions exist that offer one or more incentives to non-resident investors; some of these countries are also true vacation paradises.

Every country that is considered to be a tax shelter offers some advantages limited to residents or corporations domiciled there. For example, in the Principality of Monaco, you don’t pay personal income taxes, while corporations are very highly taxed. In Panama it’s exactly the opposite, as long as the corporation domiciled there doesn’t carry out their activities on national territory.

In the USA, during the years of prohibition and when gambling was prohibited, some bold businessmen opened up floating casinos where, outside of territorial waters, gambling flowed on rivers of alcoholic beverages.

The offshore industry is small and mysterious, although according to the latest estimates, it manages more than 60% of the world’s capital.

Q: What are the benefits of an offshore company?

A: Offshore companies basically offer the anonymity of their owners and generally have a reduced cost compared to companies in many industrialized countries.

Operating from an offshore territory, other than reducing the responsibility of the shareholders, you can also reduce the fiscal burden. Generally, 1-3 directors in the Statute and the shares are made out to the bearer. If the client doesn’t desire to appear, our legal firm offers the managers and a notarized and apostilled (recognized by the Foreign Ministry) general proxy is furnished to the owner/shareholder for the administration of the company—buying, selling, opening bank accounts, opening branches, etc. Shares are usually consigned to the bearer. The capital doesn’t have to be deposited; you only pay a tax on the same thing that is comprised in the price of registration.

Q: Why open an offshore company or foundation?

A: There are many reasons to open an offshore company or foundation, such as:

1) To open accounts abroad and/or stock exchange investments, and be able to conceal the real beneficiary in case of need (divorce, distraint of goods, etc).
2) To participate in national companies, concealing the real partners.
3) To buy and sell merchandize to your own national business, or to others, putting the desired price in the invoice.

4) To invoice services as though they had been performed abroad, avoiding the payment of taxes, (consultations, web services, projects, books, articles, etc.).
5) To protect your goods in Italy or abroad.

6) To avoid judiciary distraints.

7) To avoid inheritance taxes and to guarantee a better future for your family.

8) To create an economic alternative in complete anonymity.

9) To reduce tax burdens.

10) To invest abroad.

Q: There are several offshore jurisdictions, even some in Europe and USA. Which are the best?

A: When you decide to take the offshore step, the further away from home you go, the better your advantages will be. We prefer choosing the Panamanian companies because of their low costs, administration ease (practically, there are no requirements), and because of the fact that since 1932, Panama offers the best offshore tax laws.

Q: Did the crisis affect tax havens?

A: We provide tax planning solutions for companies looking to locate offshore. We also believe that those who are new to offshore banking are thinking twice about moving in that direction. Those who are familiar with its mechanisms feel it is a haven in the present climate.

Americans and Europeans are really worried about the situation at the moment. If you see big banks collapsing, you may think small ones are too—it’s not true. If you see crisis in Europe and the U.S., you may think there is also a crisis in tax havens, but it’s really not like this. There is a decreased demand from new clients, but an increase from people who know the offshore system, as they think the crisis didn’t affect tax havens.

Q: What is the difference between on-shore banking (that which you do from your home territory) and offshore banking?

A: Offshore banks are those that prefer working with VIP clients, with private banks and promote investments. They don’t like moveable accounts, or rather, those where 1,000 enter and 999 go out. If you don’t have a large volume of business, it’s better to alternate between two banks so that the banking system doesn’t pick up on the entrance and then immediate exit of the funds.

Q: Which bank should I choose and in what country?

A: It depends on your economic assets and on the degree of security that you desire. The banks that have an A classification may be the best choice, while the large AAA banks may be more compromising. Essentially, these large banks want nothing to do with poor clients. If you can tell us about your estimated business volume and inform us of the amount that you can deposit or invest with the bank, we can inform you of the best option.

Q: Offshore banking: institutional vs. personal accounts

A: The breakdown between Institutional and Personal accounts is thought to be evenly split. It’s difficult to make an exact determination of the relative volume of accounts for personal against business use, as there is a tendency for clients to keep their savings in commercial accounts.

Normally, we do not recommend a personal account to our clients because a personal account has a name.

Q: What about regulation?

A: We advise clients on the workings of tax havens in both Europe and Latin America, and we have been finding difficulty advocating European destinations for our clients.

Switzerland, I don’t recommend because it has become too co-operative. The problem is in Europe, when they are investigating tax evasion, they also try to put money laundering on the investigation in order to get the authorization from the judges to check accounts.

Q: What are the reasons for going offshore?

A: It all depends on the client. Sometimes we use several different banking centers and accounts in one country, credit lines in another and a company in a third one.

We prefer to deal with international banks because local banks, which are often more conservative, deal more with Latin American clients. About 90% of our clients are from outside the region and are looking to invest abroad.

In dealing with those looking to locate offshore, our law office pre-checks clients so that we know where the money is coming from. In the current climate, many institutions take great care with their reputation. At the moment, all banks are concerned with their image, so they conduct a very thorough review on new clients.