International tax planning helps to address a number of challenges related to the taxation of international assets and transactions.
Key planning considerations include:
- Tax optimization: The aligned structure helps minimize the tax burden on international income, assets and transactions.
- Tax compliance: Proper planning helps to comply with tax rules and regulations in different countries to avoid tax risks and penalties.
- Asset protection: helps protect assets from double taxation and financial risks in the future. This may include structuring investments using certain international instruments.
- Ensuring confidentiality: An international structure can provide an additional layer of confidentiality for investors.
- Simplifying international remittances and transactions: International tax planning can simplify and speed up the process of international remittances and transactions.
- Simplifying and Reducing Inheritance Transfer Costs: The right jurisdiction and capital allocation platform can reduce costs, simplify and target the transfer of inheritance assets.
Jurisdiction Selection
Choosing an offshore jurisdiction allows you to significantly reduce the costs associated with the storage of assets and various transactions on them.
As a rule, offshore countries have very low tax rates or no taxes at all.
Some of the countries that are often used for tax optimization are Belize, British Virgin Islands, Cayman Islands, Cuba, Luxembourg, Mauritius, Malta, Netherlands, Panama, Seychelles, Singapore and Switzerland.
Tool selection
The search for an efficient tax structure for currency investment portfolios is currently leading to the discovery of insurance policies (Private Placement Life Insurance). They are a good alternative to trusts, QICs, brokerage and bank accounts.
Bloomberg writes:
As long as the assets are in a PPLI policy, they are not taxable.
bloomberg.com
When the policyholder dies, the beneficiaries inherit the contents of the PPLI tax-free.
Capital Protection
PPLI is opened at an A-rated bank in an A-rated jurisdiction.
The insurance policy form gives full asset protection against the claims of any third parties (business partners, spouses, other parties to legal disputes).
And the entire investment process is carried out on behalf of the insurance company, allowing it to protect its assets and operations from sanctions.
Taxation
Depending on the tax jurisdiction of the policyholder, the taxation of the policy may be deferred until the policy expires or the policy is paid out. In the event of the death of the insured, an exemption may apply.
Also, under insurance programs, you can balance the financial results of all transactions over the life of the policy.
Inheritance Tax
Insurance policies have proven themselves in a number of countries as an effective way to provide capital for the future generation.
Particularly relevant for founders of inheritance and heirs with citizenship and residence permits from different jurisdictions. There is no inheritance tax in PPLI. Например, налог на наследство в США и Великобритании достигает 40%.
Also, this tool provides an expedited process for obtaining an inheritance.
PPLI allows for the realization of targeted asset transfers. The heirs named in the policy will receive 101% of the current value of the assets within 14 days of the policy owner’s death.
Case
Let’s consider an example of using PPLI to optimize the taxation of an investment portfolio.
Problem
The most common case study among clients opening insurance platforms is finding a tax efficient structure for their foreign exchange investment portfolio.
Capital gains taxes, coupons, dividends and currency portfolio revaluation eat up to 5% of the portfolio value per year for medium and long-term investments. This significantly worsens the bottom-line dynamics of the portfolio.
Investors in the West have been successfully using various options for structuring their assets for decades – trusts, CFCs, insurance policies.
Solution
Structuring assets through insurance policies allows tax issues to be addressed at all stages of investment.
The client can transfer their existing portfolio to their insurance account, optimizing their accumulated tax costs. He can then continue to invest inside the policy in a tax-free manner indefinitely.
Because the client chooses the tax date of the portfolio, he or she can minimize tax costs by changing tax residency, taking out a non-taxable loan against the policy, or simply transferring the policy to heirs in a tax-free manner.