Why Setting Up Your Company in USA Makes Sense?

The US is poised to be the best offshore jurisdiction in the world. How so?

Erika Kelton has recently published a story on Forbes on the IRS' initiative in combating offshore tax frauds and abuse. The tax force, consisting of 10 IRS agents, will commence with their job, which essentially revolves around the investigation on the reports about US taxpayers' wrongdoings filed by thousands of whistle-blowers.

It sounds like bad news - well, it IS bad news for US citizens - but a blessing in disguise for non-US citizens whose assets are stashed in US states, particularly in low-tax states: The US climbed up one spot in the offshore asset protection popularity ladder.

If you're, for whatever reasons you may have, exploring the idea of filing for a company formation in the US, you may want to know that it's actually a brilliant idea, for these very reasons:

Reason #1: Your assets in US jurisdictions, well-protected

Learning from what the IRS is doing in the past several years, we can conclude that the taxation rules and regulations mean one thing: It's hell for US taxpayer, but heaven for offshore asset holders.

The hell

Using the FATCA, the IRS search high and low for 'naughty' US taxpayers - and they are, to a certain degree, successful in their mission.

Here's an example: An investigation on UBS' US account holders concluded in the $780 million for settling the charges, plus agreeing on the US clients' account disclosure demand - 4,500 of them, to be exact. The ripple effect of the crackdown is favourable from the IRS standpoint: US offshore account holders, 14,000 in total, rushed to the IRS amnesty program and paid a total of $5 billion in taxes.

The heaven

The idea of FATCA includes repatriating funds to the US. So, if you're a non-US citizen wanting to take your money to the US, you're more than welcome to do so. This is especially true in US' very own low-tax states - some of the best includes Wyoming, Alaska, South Dakota, Florida, Delaware, and Nevada.

The best thing about the tax-friendly US states is the fact that they cater any company types and sizes - from one-person e-commerce companies to large corporations; many of them are shell companies.

Reason #2: It's not about secrecy; it's about non-reciprocity

The US 'quietly' jump one spot in the Financial Secrecy Index, the 2018 edition - to #2. This means that the USA is among the world's best in term of financial secrecy, right below the secrecy household name, Switzerland.

The fascinating thing about the US position is the fact that US doesn't achieve it by being one of the most secretive offshore jurisdictions. With a secrecy score of 60, US is only moderately secretive, compared to Switzerland's 76 or Cayman Islands' 72. However, US's sheer size of offshore market share, accounted for 22 percent of the trillions of dollars of assets circulating in the offshore world - nearly triple their 2015 figure.

Those facts and figures raise a question: Why such a big jump in offshore assets inflow? There are many answers and speculations, but one of the biggest factors is the US' non-reciprocity in account information disclosure.

As mentioned above, the US is launching investigations on US taxpayers' offshore accounts. The aggressive approach results in offshore jurisdictions gave up to their requests, often needed to pay heavy fines for non-compliance and had to reveal US offshore account information.

But what those offshore jurisdictions get in return? Nothing. When requested for reciprocating on their compliance, the US denies their approach. In fact, the US is protecting their offshore asset information relentlessly.

The above easily means the following: If you're a non-US taxpayer, securing your assets in a US-based company and/or bank account will give you the best protection you can get. How's that for an offshore jurisdiction?

Reason #3: Limited options elsewhere in the world

If you're not fancy of what the US is offering - perhaps the inconvenience (e.g., you have to visit the US in person for opening a bank account) or the political controversies (e.g., the mixed-feeling about the way President Trump manages the country) you may want to consider other jurisdictions.

However, things are a bit complicated today; or at least not as easy as it was in the past.

The AEoI/CRS and the global tax transparency push, especially in the European and Asian jurisdictions, reduce the secretive nature of your accounts. The policies force you to play nice with the regulations - e.g., reporting your offshore accounts to your local taxmen.

There are some jurisdictions that are still offering top-notch secrecy, such as UAE (Dubai), Puerto Rico, and Switzerland; but for how long they will maintain their status quo, only time will tell.

Perhaps the most interesting option outside the US tax-friendly states is Puerto Rico, due to its position as a territory of the US. There are local tax laws governing how businesses and individuals are taxed, but with the Federal law applied to the region, Puerto Rico somewhat enjoys the secrecy benefits offered by the US.

Takeaway

With the inevitable impacts of tax transparency on how you protect your assets offshore, you're faced with a tough decision to make: Where to protect your hard-earned assets, legally?

The USA, although not as convenient as many other jurisdictions, is probably the best option you can get for protecting your business, trade secrets, and hard-earned money.

Please note...

...that this article is written for informational purposes only. That said, before you decide on anything, make sure that you've consulted with your trusted professionals - e.g., your lawyer, tax consultant, etc.

You might also want to consult with a company incorporation service provider like us for the best options for your personal financial situations.