Advantages
Of Living Overseas
by Edmund Pankau
The Global Advisor
There
are real advantages of doing business offshore and there are
tremendous opportunities in developing and emerging countries
that are ready to benefit from the wonders of "Bypass Technology,"
the ability to piggyback off of the wireless world.
Many emerging or third
world countries are rich in natural resources, land, minerals,
and a cheap labor pool, but don't have the technology or financing
to develop the infrastructure needed for major undertakings like
utilities, telecommunication systems and financial services,
until very recently.
Countries like Belize,
Honduras, and Costa Rica haven't been able to build a national
telephone system using pre-satellite technology, which requires
a major investment in cable and equipment, but now, they will
soon be able to provide every resident and visitor with a digital
cellular phone for a fraction of the cost of the conventional
wired telephone systems that require a huge investment in infrastructure,
manpower and capital financing.
With this new technology,
combined with the graying of America, many of the emerging countries
around the world have become the home of choice for retirement,
as well as the expatriates' community. Why? Let me count the
way!
Lower Cost Of Living
The
primary promise that brings new residents to third world countries
is the ability to live on a fraction of what it costs in the
more developed (and therefore taxed) countries of the world.
Fortune Magazine reported
in 1998 that more than 600,000 Americans have become expatriates,
mainly for this reason, they just want to maintain their lifestyle
or get away from a society that does not meet their goals.
Most Americans, "the
poorest retirement savers in the world," approach retirement
with the shocking realization that they will have to live on
the meager benefits allotted by social security. Even those who
can supplement this pittance with an IRA, 401K, or company retirement
often fall far short of their goal of living in the lifestyle
to which they have become accustomed. Could you live on $1000
per month, tomorrow, if you had to? Could you even do it on $2000?
If you live in the U.S., Western Europe or Australia, fat chance!
But if you take that same money (as 50,000 shrewd retirees in
Guadalajara have done) and emigrated south to Mexico, Belize,
Honduras or Costa Rica, you could do just fine, thank you!
In recent years, Central
America has become the Florida, California and Arizona of the
1950's. Remember when you could buy beachfront property in Florida
for a song? When prices in California were dirt-cheap? Well,
those days are now in full bloom just a little further south
of the border. The slower paced climate of Central American has
awakened to the realization that it can revitalize its economy
by becoming the retirement center of the western world.
All of the things that made Florida and California booms are now happening in Belize, Honduras and Costa Rica, as is starting to emerge in Nicaragua, Panama, El Salvador and Guatemala.
- cheap real estate
- sunny weather
- lower cost of living
- low taxation
- inexpensive medical care
As
more Americans, Europeans and Canadians face the challenge of
retirement, we are seeing an exodus of retirees to sunnier shores.
If you look closely, you will find that the Europeans are right
there too, especially in Costa Rica and Cuba, the next sure-fire
real estate development in the Caribbean.
As I sit here, writing
this article in Hawaii, I look around and see the future of development
in Central America. The hotels, retirement communities and resorts
surrounding me were just dreams in the 50's and 60's when I first
came here as a soldier. Today, well, you know the story! You
try to buy a piece of the rock in Hawaii!
The lower cost of living
is the lure that attracts the outside world to the emerging countries.
It will also be the fuel that feeds their growth and development,
creating tremendous investment opportunities as well.
Quality Of Life
If
you have ever spent an hour on the freeway driving to and from
work (do it every day, do you?) or waited in line behind an army
of screaming shoppers, you know the frustration and anxiety of
what civilization can bring to your life.
Wouldn't you rather
spend that time walking on a pristine beach or staring at a beautiful
sunset, sipping on a Cuba Libre or a Pina Colada? You can, you
know; it's a lot less stressful, let me tell you.
Besides that, you will
probably live longer, as well as enjoying it more. Consider that
the average life span in Costa Rica is 76 years, that's four
years longer than in the U.S., and that is done without heart
surgeons or super drugs!
Cool ocean breezes,
hammocks in the shade, sandy beaches, and crystal clear waters.
What else is there, amigo?
Nine out of ten people
that go to Central America to retire stay there. This is a clue!
You couldn't drag them back with a Caterpillar!
Contrary to what you
think you hear in the media, crime (especially violent crime)
is lower in Central or South America than it is here in the USA.
(We are probably the most violent society in the world). Ever
since Russia went broke and quit sending Castro money to finance
his "revolutionary ways," the guerilla wars have vanished
and democracy is the word of the day. Nicaragua, once the hotbed
of discontent in Central America, now has a democratic government
and is actively soliciting retirees and investment capital. International
Living now rates Nicaragua as a "strong buy" and conducts
exploratory tours that expose tourists and investors alike to
the exciting opportunities in real estate and commercial development
there, as well as the ability to "live like a king on $1000
per month" in one of the least costly countries in the world.
Asset Protection And Liability Avoidance
If
you make the big bucks and want to keep them, or if you plan
to get there someday, this is another reason to consider the
lure of offshore. Many of the Caribbean Islands and several mainland
governments, such as Panama, Belize and Costa Rica have seen
the light to their economic future in offering wealthy investors
and high-risk entrepreneurs the ability to shelter their assets
and lower their taxable income through financial friendly trusts,
corporations, banking institutions and government legislation.
If Leona Helmsly had
set up her business empire through an offshore holding company,
the IRS would not have had a prayer of putting her in jail. Why?
Because, they wouldn't be able to touch those incriminating documents,
they wouldn't be able to trace her financial transactions beyond
the U.S. and, if she had taken citizenship from one of these
friendly financial havens, they wouldn't even have jurisdiction
over her body.
Tax Avoidance
When
set up properly, offshore financial planning can minimize personal
or corporate tax liability and even give substantial tax breaks
that do wonders for the bottom line.
Years ago, ten of us
invested in a $750,000 yacht that threw off a five to one tax
loss and gave us free use of its services in some of the best
Marlin fishing grounds in the world. Now, that was a deal!
So how do you do it?
Is it really that easy? One way to take a chunk out of your taxes
is to declare your primary residence in a foreign country and
live (more than 181 days per year) outside your former home country
and earn your income internationally (through a foreign corporation
that you own or work for). All of the big rock stars have done
this for years.
When you follow the
government's guidelines, you can legally deduct the first $70,000
of your income, your spouse's income, your children's income,
etc. and the rest of the money, well that stays in the corporation
in a tax free zone. Get the picture, Vern? How do you think all
of the doctors and engineers that work in Saudi Arabia got so
rich so quick?
You want to still play
in the market, managing money or day trading? Look at Mark Mobuis
and see how he did it. Mobuis gave up his U.S. citizenship, his
multi million dollar taxes and graciously accepted Bahamian citizenship,
not missing a stroke in his business. His clients are even happier,
because their money is now offshore, too.
Another asset is the
ability to sleep at night and know that neither the government
nor civilian creditors can tie up your assets through liens,
judgments or litigation, if you move them before you suffer or
contemplate financial business problems. By making sure that
your offshore planning predates your liabilities by several years,
your assets can be "bullet proof" against the courts,
lawyers and litigants alike; simply by moving assets into offshore
asset protection vehicles customized to your specific needs.
Ground Floor Business Opportunities
Through
the wonders of magic technology, we can now have our cake and
eat it too. We can reside in Honduras, invest in the U.S. and
Europe and bank in the Isle of Man, if we want to.
We can live in an emerging
country offering substantial financial benefits and still day
trade, video conference and watch our CNBC and Moneyline. With
the help of "Bypass Technology" such as satellite systems
and digital cell phones, we can literally be or live anywhere
in the world and conduct our affairs when, where and how we see
fit.
How about jobs? Employment
and business opportunities are waiting for the taking! When you
put entrepreneurial and sales skills' abilities in a country
rich with natural resources and technological needs good things
can happen. Many opportunities that we often take for granted,
McDonalds, movie theatres, mini storage and coin laundries are
begging to burst on the scene in emerging countries. With a small
investment in real estate and construction you could quickly
become the mini warehouse mogul of Belize, Costa Rica, or any
one of a dozen similar countries.
Every successful U.S.
product manufacturer and distributor wants and needs sales reps
who can do business in rapidly growing third world marketplaces.
Speaking the language is a plus, but not always necessary as
English is the language of business around the world.
What do they need?
Valves, pumps, washing machines, telephone systems, filtration
systems, satellite dishes, computers, and any other product of
state of the art technology.
The market is wide
open and the need is there. Go look at the international want
ads and see what I mean. They even need stockbrokers and investment
advisors to meet the needs of a growing investment community
of retirees.
Last but not least,
U.S. business is migrating to the suburbs. Intel has opened in
Costa Rica, Barclay's Bank and Citibank smile in Belize, and
the hotel industry is expanding everywhere!
Real Estate
One
of the best, if not the best offshore investment opportunity
is the purchase and sale of real estate. The market in the Caribbean
and Central America is red hot and has been the best kept investment
secret in the world for years.
Consider that real
estate in Costa Rica has risen 500% in five years. Honduras is
right behind, with Claudia Schiffer, Julia Roberts, Sylvester
Stalone and half a dozen other movie mavens building retreats
on their shores. The government of Belize will even donate (on
a long-term lease) a matching acreage in real estate if you buy
land, develop it and employ the locals.
Central America, being
both mountainous and having water frontages on the Atlantic Gulf
Coast and Pacific Coast oceans has a great variety of climate
temperatures and spectacular views, for just pennies on the dollar
compared to its U.S. counterpart.
You like San Diego,
consider San Jose, Costa Rica. If Denver is your dream, but a
bit warmer, then the valley of the Angels in the Honduras highlands
is for you. If you were an alligator in a previous life, a sun
and water loving creature, Belize and the island of Roatan is
your paradise. If you like California's high chaparral, but you
don't like California's high prices, Panama's Chiriqui mountain
province is waiting for you.
In all but the major
cities, land can be bought in the mountains and highlands from
$1000 to $5000 per acre, ocean views for $10,000 to $30,000 per
acre and beachfront for $50,000 per acre or more. If you buy
in volume, say in the 10 to 50 acre parcels, the prices drop
and make a fine investment through subdividing into lots that
will often double your value as soon as the first for sale sign
is put up.
If you missed out on
the boom in Costa Rica, and Honduras is still a little pricey,
there are still rock bottom opportunities in Nicaragua, Guatemala,
and Panama. Panama's Hidden Valley in the cool highlands of Chiriqui
Province. This is the next Expat Haven.
Five years from now,
I expect these prices to be up substantially with returns that
any stock market would be envious of. This is an investment you
can hold in your hands!
Lower Taxes, If
You
can avoid many of your taxes and defer much of your income, if
you follow the rules religiously. Tax avoidance is perfectly
legal and many are the ways to shave points through trusts, annuities,
and International Business Corporations (IBC's).
Trusts can help their
founders avoid probate, capital gains and certain income taxes.
Annuities can defer income from high earnings years to retirement
and dramatically lower their owner's income tax bracket.
Corporations, domestic
and foreign, can hold and own assets in their own right and pay
expenses that would otherwise be wasted on post tax dollars from
an individual return. Foreign corporations (IBC's) are taxed
less than U.S.-based companies and have other advantages such
as privacy and asset protection from nosy lawyers and their courts.
The key to minimization
is proper planning. A good plan may sound Greek to you, but imagine
what it does to the IRS! If you can lower your income tax bracket
two notches, bulk up your retirement through tax deferred investments
and perfect inheritance taxes lurking in probate court, the results
make the difference between retiring and running dry.
Don't be fooled into
buying a trust or IBC in a box, it's nothing but a shell until
you breathe life into it through proper funding and compliant
management.
All in all, there are
many advantages to living offshore, but there are more than a
few potential liabilities and dangers as well.
So, is this for you?
Are you ready to venture out?
Editor's Note: Edmund
Pankau is a contributing writer for The Global Advisor, c/o The
Corporate Group, 357 Bay St., Ste. 900, Toronto, ON M5H 2T7,
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