1. WHAT IS AN INTERNATIONAL BUSINESS COMPANY (IBC)

2. ASSET PROTECTION BENEFITS OF AN IBC

3. TAX PROTECTION BENEFITS OF AN IBC

4. PRIVACY BENEFITS OF AN IBC

5. WHAT IS A PRIVATE OFFSHORE BANK (POB)

6. WAYS TO USE A POB

7. WHY A POB CAN PROTECT ASSETS

8. ASSET PROTECTION BENEFITS FOR BUSINESSMEN

9. ASSET PROTECTION BENEFITS FOR PROFESSIONALS

10. ASSET PROTECTION VIA INTERNATIONAL DIVERSIFICATION

11. AN IMPORTANT ASSET OF POB OWNERSHIP

12. TAX PROTECTION BENEFITS OF A POB

13. THE DUALISM OF TAX BENEFITS

14. POB AND THEIR SPECIAL STATUS IN JAPAN

15. LOSS OF PRIVACY

16. A CAUTIONARY NOTE ON TAX BENEFITS

17. REQUIREMENTS TO OWN A POB

18. STANDARD PRIVATE OFFSHORE BANK MANAGEMENT STRATEGY

19. WHAT IS AN OFFSHORE TRUST (OT)

20. AVAILABLE JURISDICTIONS FOR POB'S, IBC'S AND OT'
 BAHAMAS
 BRITISH VIRGIN ISLANDS
 CAYMAN ISLANDS
 LIECHTENSTEIN
 MARIANAS ISLANDS
 MONTSERRAT
 NAURU
 TURKS AND CAICOS
 VANUATU
 WESTERN SAMOA
 MONACO
 SWITZERLAND
 JERSEY/GUERNSEY
 
21. INTERNATIONAL BUSINESS TRANSACTIONS

22. IMMIGRATION TO THE U.S.

23. TAX FREE STOCK INVESTMENTS BY FBA

WHAT IS AN INTERNATIONAL BUSINESS COMPANY (IBC)?

An IBC is a company established in a offshore tax haven country or jurisdiction which is usually restricted from carrying on business with persons resident in that tax haven jurisdiction, and cannot invest in real property situated in the jurisdiction, other than holding a lease of property for use as an office. An IBC cannot carry on any banking, trust, insurance or reinsurance business, or provide a registered office for other companies (to engage in the business of offshore banks, trusts and insurance, there are other legal entities that are used).

An IBC can invest in stocks and bonds, trade oil, gas, commodities, and any other general business not restricted by the jurisdiction. An IBC is not taxed in the jurisdiction. Usually, there is a very small flat yearly fee that is paid to the jurisdiction to be allowed to operate the IBC.

An IBC can open bank accounts, retain local professional services, prepare and keep its books and records, hold directors' and shareholders' meetings in the jurisdiction.

ASSET PROTECTION BENEFITS OF AN IBC

An IBC can provide the following asset protection:

1. protect assets from creditors, malpractice claims, judgments, liens and bankruptcy
2. prevent erosion of assets from divorce or separation.
3. deter the initiation of civil litigation

TAX PROTECTION BENEFITS OF AN IBC

An IBC can provide the following tax protection:
1. eliminate the reporting and paying of income tax on earnings, interest, dividends and investments
2. protect against high capital gains taxes and reporting requirements.
3. prevent inheritance taxes, estate taxes, executor's fees and probate fees
4. earn tax free income through operation of an active business.
5. earn tax free income as a result of intellectual property (patents, royalties etc.)

PRIVACY BENEFITS OF AN IBC

An IBC can provide the following financial privacy:
1. prevent any knowledge of your assets from becoming public.
2. protect the privacy of your involvement with investment houses, brokers and securities markets.
3. protect the privacy of corporate ownership from becoming known.
4. prevent any person or government agency from gaining access to your hard currency.

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WHAT IS A PRIVATE OFFSHORE BANK (POB) ?

A POB is quite simply, an investment bank that the client owns by himself or with others that is situated outside the home country of the client in well known offshore banking centers. Because these banks do not operate within the home country, they are not subject to the home country's laws and regulations.

There is no more powerful method of making money globally than owning your own POB. In addition to the customer conveniences of having the ability to exchange money easily and earning higher interest on foreign currencies and having the assets owned by the bank protected from foreign judgments, there are other attractive benefits. By setting up your own POB you can legally operate an entire bank according to your personal priorities. You can lend to third parties, make highly profitable private stock/bond/option/commodity investments, accept deposits, use trusts, purchase real estate at low interest, transfer currency at your discretion, offer your customers back to back loans and tap into escrow funds for short term interest gain, all free of most taxes. Suffice it to say that the benefits available to POB owners far outweigh the advantages of most other investment vehicles.

WAYS TO USE A PRIVATE OFFSHORE BANK

POB's conduct banking and financial activities in an environment, which is essentially free of fiscal and exchange controls. They operate under very favorable banking regulations, or banking laws considerably less stringent than those in the investor's home country. There are many important ways that an investor can use his own POB. These include:

BANKING FUNCTIONS
1. Provide clients with complete banking secrecy and confidentiality
2. Borrow inexpensively at preferred lower than prime rates from European banks.
3. Make loans at competitive rates to foreign countries.
4. Make investments in high yield investments which are unavailable in low return countries such as Japan.
5. Make money on currency exchange from Yen to Dollars, Swiss Francs, pounds, Euro etc.
6. Earn the spread on bank-to-bank loans by borrowing at LIBOR rates and lending at higher rates.
7. Offer confidential numbered accounts.
8. Earn high commissions by attracting sources of capital in countries such as Japan, the U.S. or Europe and matching them with foreign banks and governments eager to borrow money from abroad. (After the "Big Bang" deregulation in Japan, some Japanese investors will be interested in switching some of their deposits from a weak Japanese bank to a POB that earns higher interest for them).
9. Issue Visa and Master Card's to bank customers.
10. Earn high returns by making legal personal high interest loans in Japan and the U.S.
11. Earn interest on the float time when a depositor writes an international check.
12. Take advantage of the benefits and protection offered by correspondent banks in Zurich, London, Monaco etc.
13. Attract large cash deposits in any foreign or domestic currency, book large internationally syndicated loans with participating banks located in various jurisdictions.

STOCK/OPTION/COMMODITIES INVESTMENTS (this requires an extra license that is easily obtained)
1. Sell stocks and bonds and earn commissions on the sale.
2. Earn commissions on options and commodity brokerage.
3. Take advantage of arbitrage opportunities and currency trading opportunities.

TRUST SERVICES (this requires an extra license that is easily obtained)
1. Provide trust and cash management services to business and individuals.

INSURANCE SERVICES (this requires an extra license that is in most cases easily obtained)
1. Provide insurance (life, casualty, auto, etc.).

OTHER BENEFITS
1. Earn larger margins because offshore banks have no reserve requirements and can thus put all their funds to work.
2. Avoid onerous debt equity ratios and lending restrictions in force in highly regulated jurisdictions such as the U.S. and Japan.
3. Diversify your assets in offshore locations.
4. Obtain an effective hedge against inflation by using currencies different from the inflating currency.
5. Make assets immune to court judgments, seizures and other judicial writs.
6. Avoid payment of country taxes on certain profits.
7. Enjoy the prestige of owning your very own international investment bank.

WHY A PRIVATE INTERNATIONAL BANK CAN PROTECT ASSETS

There are two primary reasons a POB can be so effective in protecting your assets.

First, as a foreign entity located in an offshore financial center that has strict banking secrecy and financial privacy laws, a POB provides a heavy layer of insulation between the assets of its owner and those who might wish to make claims against those assets. Once the legal ownership of assets passes from an individual to a foreign entity such as a POB, it becomes extremely difficult for attorneys, creditors or other claimants to exactly identify the nature or quantity of those assets.

In addition, if the original transfer of the assets was carefully planned and carried out - and the POB set up so that the deployment of the assets is directed by a foreign management company under orders of the bank's foreign directors it can be virtually impossible for claimants to once again link those assets to the individual against whom the claims are directed.

Second, a POB- merely by virtue of its special powers and privileges as a bank - can cloak the movement of assets and routinely arrange for their investment or disposition without attracting attention. By contrast, the same functions performed by an individual or corporation would stand out to anyone familiar with the normal pattern of personal or company financial transactions. Activities involving assets placed in a POB are camouflaged by the activities of other commercial banks. Thus, they do not attract undue attention among regulators or stand out on accounting ledgers.

For example, an interest payment made to a POB would attract no more attention than a similar payment to a Japanese bank. However, if the interest payment were made to a foreign corporation or individual, it could be challenged in the event of an audit and would be easily noticed should the books be subpoenaed in a lawsuit by creditors or other claimants. The same would be true for loans or loan proceeds.

People - even trained investigators and attorneys - routinely expect individuals to get loans from banks. Thus, a loan to an individual or a business by a POB is far less likely to attract attention than a loan from some other source - even if the individual or company happens to be the owner of that POB.

Finally, banks are expected to make a variety of investments after all, investing is really the business of the bank. Thus, a POB can easily deploy assets - and reap profits from investing those assets without notice, whereas an individual or company doing the same thing would again attract attention.

ASSET PROTECTION BENEFITS FOR BUSINESSMEN

There are numerous other situations where private international banking can offer protection for business assets.

Take, for instance, actions by aggressive competitors. If your bank within Japan becomes involved in a business lawsuit, a court may give your opponent legal access to your financial records, seriously jeopardizing your legal position- If, on the other hand, your records are kept in a POB, they are impervious to court orders. That's because POB's are jurisdictionally immune to service of process.

The laws of most international banking centers protect the confidentiality of financial dealings and protect banks chartered there from foreign court orders, writs of execution or attachment claims. Under no circumstances can your POB be forced to divulge information regarding its assets or those of clients - even in a lawsuit.

Trade Secret Protection

Other important assets for which a POB can provide protection include your ideas. Assume you have a formula or patent you want to protect. If you copyright or patent the idea in Japan, you must disclose it to the Copyright Office. In the process, your million dollar concept becomes part of the public domain. Before you can establish a firm market, the concept can be reformulated with minor changes and marketed by your competition. Instead of going to the appropriate domestic office to file your formula, you can convert it into financial information. Call it "exhibit to an agreement between scientist and the formula's owner". If the formula's owner just happens to be a POB, the exhibit is likely to be protected under the bank secrecy laws of the relevant international center.

Protection Against Product Liability Claims

Businesses that conduct their operations through offshore entities such as POB's may also gain some immunity against domestic liability - even if the products of that business eventually come back into the Japanese or U.S. market.

This protection was verified in 1987 when the Japanese Supreme Court ruled a Japanese firm could not be tried in California for alleged liability in a fatal 1978 motorcycle accident. The high court concluded that, even though its products were eventually marketed in Japan, the Asahi Metal Company of Japan could not be sued for damages in Japanese courts because the company did not do direct business in Japan. The Justices held Asahi could not be expected to defend itself in the U.S. when it has no operations in that country. The Justices also ruled any action by Japanese courts with regard to liability would interfere with the interests of Japanese courts. Legal experts say the ruling makes it extremely difficult, if not impossible, to sue foreign manufacturers and other types of businesses for product liability damages.

Given that opinion, a foreign based business - even one owned by a Japanese citizen - might be able to insulate itself against Japanese liability claims by wholesaling its products to a POB which could then resell them to a Japanese distributor. The business might thus be protected from liability claims because it did not do direct business in the United States., while the bank would be protected by virtue of the laws of its offshore jurisdiction.

ASSET PROTECTION BENEFITS FOR PROFESSIONALS

Professionals - especially doctors and other medical personnel who face the specter of enormous malpractice judgments, especially in the U. S. courts - they are among the largest users of POB's solely for the asset protection benefits.

In the U.S. malpractice litigation has reached such a level that almost any doctor - no matter how much insurance coverage he has - could be hit with a judgment large enough to strip him of his assets. At one time, doctors countered this threat by forming professional corporations and transferring ownership of their personal assets to the corporations. However, legal opponents quickly saw through that ploy. Today, almost all malpractice suits target the doctor, his insurance company and his professional corporation. In addition, the courts have ruled separate holding companies set up by doctors to control their assets can also be 'cracked' and the assets attached on behalf of a malpractice creditor. This left doctors with little choice but to move assets offshore - and a POB, especially one with foreign management, is the perfect vehicle.

Once again, if the bank and the assets are controlled and managed by unrelated third parties, it provides a significant buffer between the doctor and his malpractice creditor. Even if he is forced to testify that he has placed assets with a foreign entity and identify that entity (which he will no doubt be required to do), he will be unable to define those assets or say how they are being used.

As a result, the creditor will most likely be unable to force disclosure of the size and location of the assets because of the secrecy laws of the private bank's host country - and seizure of those assets to satisfy a judgment will prove impossible.

In fact, if the malpractice suit is frivolous (as many filed these days by unscrupulous lawyers are), a doctor's mere admission of having the bulk of his assets based off-shore could prompt abandonment of the suit - or, at the least, a low-cost settlement. The reason is simple. The lawyer will recognize that, even if he wins a full judgment in a court, he will have considerable difficulty in retrieving the assets from the foreign jurisdiction. As a result, he may decide there are not enough readily accessible assets to warrant continuing with the suit. And, even if he does decide to proceed, he'll likely be much more willing to compromise on a smaller settlement - just to ensure he gets something for his efforts.

ASSET PROTECTION VIA INTERNATIONAL DIVERSIFICATION

Wealthy citizens of many countries have lost their personal and business assets or been prohibited from owning certain assets because of changes in the political philosophy or leadership of their countries. Diversifying your assets politically or geographically in a number of different countries can minimize this risk. Besides, in these days of worldwide investment markets, it only makes sense to spread your assets among several nations, simply to avoid economic upheavals that may beset only one country. Obviously, the more unstable your home country's military, political or economic system, the more important this tactic becomes.

AN IMPORTANT ASSET CREATED BY PRIVATE INTERNATIONAL BANK OWNERSHIP

Most people would probably think of POB's exclusively as a vehicle for protecting assets that already exist. However, there is one asset that the ownership of a POB actually creates. And, though it is often overlooked, it can turn out to be one of the most personally satisfying assets you will ever have.

This valuable asset is the prestige that accompanies bank ownership - the respect and degree of influence that friends, business associates, even strangers afford you when you own a bank. If you don't believe a bank conveys a sense of power. just look back on your own experience - when was the last time you refused a call from your banker, or failed to open a letter sent by a bank? And, how much more quickly would you respond to a call from the actual owner of a bank?

After all, a bank projects credibility, substance - and money!

It's very hard for people to ignore a bank - and that's one of the major reasons most POB owners become successful. A letter in your bank's envelope gets opened - and a message on your banks letterhead, signed by you as chairman of a bank produces action!

Whatever your goal is, your own POB can open doors that might be closed to you as an individual. They can influence government officials or corporate executives, they can help in obtaining hard-to-get loans from other banks -and they can attract hundreds of thousands of dollars from depositors anxious to get their money out of countries beset by burdensome taxes, economic depression or instability.

Thus, one of the most important assets that a POB protects is the status that the bank itself creates.

TAX PROTECTION BENEFITS OF A PRIVATE INTERNATIONAL BANK

The ability to legally avoid undue tax burdens does not of itself excuse any taxpayer from paying taxes. Further, the ability to use a POB as a means of tax avoidance does not in itself excuse taxpayers - individual or corporate - from paying taxes on their share of bank income.

However, an important distinction must be made between tax avoidance and tax evasion. Avoidance means legally taking advantage of the law to keep from paying tax. Evasion is illegal, involving willful criminal intent to defraud the taxing authorities. Also illegal is the failure to file any reports generally required of investors with overseas business interests.

Legally constituted and operated POB's do not evade taxes. However, in most cases, they can, and legally do avoid taxes pursuant to the terms and conditions of the tax laws, rules and regulations of the investor's home country. The complexity of the various countries tax laws and the uniqueness of each situation make it virtually impossible to discuss a particular tax plan. Planning of this type must be done on a case-by-case basis and constantly refined in accordance with the business dynamics of each POB.

For example, the Japanese Tax Code provides for taxation of a parent shareholder on undistributed profits from an ordinary foreign corporation. However, international banks are a special kind of foreign corporation. Because of privileges and exemptions Japanese tax law grants banks in general, and foreign banks in particular, POB's can often legally avoid undue taxation on profits derived from ordinary conduct of banking business.

THE DUALISM OF TAX BENEFITS

In order to understand the tax benefits associated with owning a POB, one must appreciate that it is subject to the tax laws of two jurisdictions:

The home country of the investor and the host country of the offshore bank. Tax benefits vis a vis the law of the investor's home country generally involve methods of avoidance. Tax benefits in relation to the offshore bank's jurisdiction generally mean an absence of host country income tax or other burdensome government regulation.

A corporate structure insulates the personal assets of those who incorporate because a corporation is, for legal purposes, an entity separate and distinct from the persons controlling it. Likewise, a POB is a separate corporation with a legal personality distinct from its
shareholders. Host countries have a record of preserving on behalf of shareholders the insulatory character of offshore banks they charter. This is the essence of an international haven. To this end, a host jurisdiction may reveal the name of a bank held by shareholders, but not the names of those shareholders or the scope of their financial activities. The personality of the bank is respected by the host country in a way that defends it from tax authority's interference.

Most host countries impose no taxes on profits, income or capital gains earned by a POB. Host countries do charge the bank its annual license fee, which is fixed and determinable and paid to the government as a business license fee. A few jurisdictions have a modest reserve requirement as well. If any income tax is levied, it is generally nominal.

OFFSHORE BANKS AND THEIR SPECIAL STATUS IN JAPAN

It has been said that bankers own Japan. The many tax advantages available to domestic Japanese banks but to no other corporation are but one index of this. There are however, some advantages for foreign banking corporations. The following outlines these advantages:

Treatment of Foreign Banking Corporation Activities

There are special tax privileges provided in various sections of the Japanese Tax Code for foreign banks that conduct banking business subject to Japanese jurisdiction. These privileges are available providing the bank can substantiate that it is conducting bona fide banking business outside Japan.

Once the Japanese Zeimusho respects the bank's banking status, the bank may be able to include in its "outside of Japan" gross income revenue derived from a broad range of financial activities classified as merchant banking income. Such activities include buying and selling stock as an underwriter, acting as investment adviser, merger consultant, business manager or engaging in a broad range of manufacturing and business activities outside Japan.

With respect to defining international banks as authentic financial institutions for Japanese tax purposes, the key aspect is sometimes not so much that banking business (borrowing, lending, investing) occurs, but that it takes place on behalf of persons not related to the bank in a material way - in other words, on behalf of persons or companies that are not bank shareholders.

Exclusion from Controlled Foreign Corporation Tax Penalties

If any number of Japanese, each of whom owns at least 10 percent of a bank, together owns more than 50 percent of a bank, that bank will be subject to current Japanese tax on their share of the bank's earnings - whether those earnings are distributed or not.

Should the bank wish to escape these tax penalties, it is suggested that the bank's ownership be structured for the Japanese persons to own 50 percent or less of the economic control of the bank. Under this type of arrangement, there are two options generally available.

The first is to establish a bank with a 50 percent or more foreign partner, thus permitting the bank to avoid being classified as a controlled foreign corporation. The second option is to establish a bank with 11 or more unrelated persons, each to own less than 10 percent of the bank. Under this arrangement, the bank will not be classified as a controlled foreign corporation.

In practice, it may be relatively easy to decontrol the bank under these two options. One example may be to bring in 10 friends or business associates to each own less than 10 percent of the bank.

This arrangement would have the added benefit of infusing additional capital to operate. Another example might be to offer a stake in ownership of the bank to 10 key customers.

This has the added benefit of providing the customers with added assurance since they own part of the bank with which they are doing business. With this situation, the customer feels he is part of the bank and thus has more confidence while, at the same time, he is solving the bank's tax problem.

In certain situations, it may be practical to automatically enlist each Certificate of Deposit depositor as a shareholder of the bank. In such a case the customer deposits a portion of his intended deposit with the bank and uses the remaining portion to purchase stock in the bank. With this approach, it is important to observe and monitor the percentage each person owns to be sure no one Japanese ever owns more than 10 percent of the bank.

LOSS OF PRIVACY

Little is known of the fact that within several years many western governments and Japan will be able to gain immediate access to any individual's or businesses' bank accounts. The U.S. government is currently implementing a new multi-million dollar system that will enable it to tap in and find out all about anyone's banking activities. This system will rapidly spread throughout the entire colld. Thousands of innocent citizens have already been jailed for trying to protect their hard-earned money. It is no wonder that global businessmen, high net worth individuals and corporate institutions are increasingly using legitimate offshore companies and trust structures for privacy and the protection of assets and income.

A CAUTIONARY NOTE ON TAX BENEFITS

Despite the expertise and long experience of the persons and organizations contributing to this web page, potential purchasers of private international banks must be aware that the income tax aspects of owning a POB are quite complex. As such, the tax implications should be discussed with an attorney, accountant or other professional adviser before a final decision regarding POB ownership is made.

This web site does not purport to provide specific legal advice in the area of taxation, and this section is not intended as a statement to the effect that foreign banks or their shareholders are, in all cases, free from income taxation.

REQUIREMENTS TO OWN A PRIVATE OFFSHORE BANK

Each tax haven jurisdiction has their own particular requirements to allow one to establish their own POB. The financial requirements change from time to time in each jurisdiction. They can be obtained by asking this law office. It should be noted however, there are two constant requirements among all of the jurisdictions. These are (1) you will need a local agent in the jurisdiction to represent the bank and (2) you will need prior experience in operating a bank or financial company. This law office is able to provide a local agent to represent your bank and also provide the banking experience you need to establish and operate your bank.

STANDARD PRIVATE OFFSHORE BANK MANAGEMENT STRATEGY

At the Law Offices of David Miyoshi, we believe that the client should enjoy every possible advantage that each jurisdiction can offer in protecting, growing and enhancing the assets of the client. Therefore, our common strategy is to charter the client's POB in a selected tax haven jurisdiction (for instance Vanuatu), manage it from a financial center (such as California), maintain assets in yet another country (for instance Switzerland) and establish bank accounts and securities brokerage accounts in still other countries (for instance Monaco). With this strategy, no single jurisdiction can exercise too much influence or control over the POB. This insures that the client's funds are utilized with maximum freedom and effectiveness for maximum profitability and tax savings. Of course, this law office is careful to insure that all funds it manages are lawfully acquired with no connection to illegal activities.

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WHAT IS AN OFFSHORE TRUST (OT)?

An OT is a legal relationship between three parties- the Settlor or grantor (the person setting up the Trust), the trustee (the person or entity acting as a fiduciary or person in a position of trust); and the beneficiary (the person or entity who is to receive the benefit of the trust). An OT is set up in one of the various tax haven jurisdictions and is usually an irrevocable trust (one that cannot be revoked) because this form, as compared to the revocable trust, provides the protections generally sought after. Originally, the trust concept developed under the Old English common law. It has been changed over the years by legislation. Today, trusts are normally governed by specific legislative acts in the respective tax haven.

An offshore (or international) trust essentially serves four purposes:

1. Asset protection
2. Estate administration
3. Income generation
4. Inheritance tax protection

As stated above, an irrevocable trust, once set up by the Grantor, cannot be revoked. That means the grantor cannot demand that the property be returned. This sounds frightening, but it is the very irrevocability that gives the trust its asset protection and tax protection. The idea is that if the grantor cannot demand the property back, no court or person can force the trustee to turn over that property and later have that property taken from the grantor.

Assume that a Japanese investor (Tanaka-san) put Japanese Yen 1,000,000 into a trust for the benefit of his daughter. If the trust was irrevocable, Tanaka-san would never be able to get the Japanese Yen 1,000,000 back. If Tanaka-san then had a creditor, but no money, the creditor could never force the trustee to give Tanaka-san the Japanese Yen 1,000,000 back. It would always be there for the benefit of his daughter.

The other thing is that the trustee has the power to distribute the income (different from the corpus which is the principal) to the beneficiary as her or she likes. Therefore, if Tanaka-san's daughter had a creditor, the creditor could not come in and get the money from the trust, either.

Asset protection.

The offshore trust protects the assets of the Settlor by placing those assets beyond the reach of his or her creditors. In many cases, these creditors may also be taxing authorities. The intent of the trust is not to defeat the legitimate claims of present creditors, or to evade income taxes. Rather, the aim of the trust is to ensure that the assets are beyond the reach of persons or entities who may wish to claim a part of the Settlor's wealth in the future. The trust is set up under the terms of the trust law in effect in the respective offshore haven. Under normal circumstances, the offshore haven courts are unable to force the trust to pay future creditors, so long as the trust is properly formed and administered.

Estate Administration
The offshore trust acts as an estate administration devise because the trustee is empowered to make divisions of the property and the income according to the directions of the Settlor. The trustee is also authorized to pay such taxes as are needed to repatriate income or property to the country of the investor. Most importantly, the property held in the trust is not subject to administration by local courts in the investor's home country. The Trustee can act immediately to make divisions and investment decisions without court approval and without the costs associated with court approval.

Inheritance Tax Protection.

The offshore international trust acts to insulate the assets from inheritance taxes. However, certain countries such as the U.S. will impose taxes if the assets of the trust is U.S. real estate. So long as there is a minimal amount of property in the investors home country, and none of it is real estate, there will be no need to administer the estate in that home country. Even though nations may claim that they have the right to tax all of the property of their citizens upon their death, no matter where located, the reality is that the country cannot tax that which it cannot
attach.

In most countries such as the U.S., a gift to an irrevocable trust is taxed. The reason for this rule is that the country does not want to lose an opportunity to impose an inheritance tax and if the trust is not be included in the Settlor's estate when he or she died, the country could not impose such an inheritance tax. In order to get around this rule, the grantor retains the right to add beneficiaries. Under this arrangement, the home country interprets this as an incomplete gift. Therefore, no gift tax is due.

If the Trustor ever wants to add property, including cash or other stocks or bonds, the trustee can usually accept those gifts immediately. The only requirement is that the trustee be given notice, and that the trustee consents to the transfer of the property.

It should be noted however, some property is not appropriate to be transferred to an offshore trust. For example, a gift of real estate in the U.S. would probably not be a good gift to the trust, because the trustee would not be in a position to manage the asset, and would have to pay tax on the sale of the asset if it were sold. Also, it should be noted that if a grantor first sold real property and then transferred the cash to the trust, the grantor would be liable for income tax on any money earned from the sale. For that reason, it is generally advised that the grantor transfer property directly to the trust before selling it.

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AVAILABLE JURISDICTIONS FOR IBC's , POB's AND OT's

The following is a list of the offshore jurisdictions available through the Law Offices of David Miyoshi and their respective characteristics. Please consult the Law Offices of David Miyoshi for the requirements to establish an IBC, POB or OT .

BAHAMAS

Country profile: The Bahamas comprise an independent nation within the British Commonwealth, and are home to some 200,000 full time residents. A 700 mile long archipelago in the Caribbean, the islands are perhaps the oldest and most well established offshore center in the region and remain one of the world's favorite vacation spots.

Type of Government: An independent member of the British Commonwealth with multiparty democracy.

Legal system: Legislation is created from English common law and Bahamian statute law.

Economy: Tourism is the main industry. Finance is a close second.

Facilities: Local communications systems (telephone, fax, mail) are first class.

Taxes, privacy and attitude: This country imposes no taxes on profits, corporate income, or capital gains. It enforces stringent secrecy laws, and maintains a favorable attitude toward offshore banking. The Bahamas enjoy an excellent relationship with U.S. banks. The jurisdiction is second only to London as a base for Eurodollar transactions.

Ranking: If you are only interested in using an offshore bank, the Bahamas should probably rank at the top of your option list. But because the local government is reluctant to issue a bank license to individuals or small corporations (they prefer the applicant to already be an established bank), the islands is a difficult choice for the private investor or small consortium to own their own bank. However, if the client is able to afford the high financial requirements, we may be able to obtain a private bank license for you.

BRITISH VIRGIN ISLANDS

Country profile: The British Virgin Islands are forty islands (many uninhabited), have friendly people, beautiful beaches, and an efficient infrastructure. It is a British Dependent Territory, with locally elected members and a Governor appointed by the British Crown. The BVI special niche is its proximity to the United States. It is 60 miles east of Puerto Rico in the Caribbean, only 2 hours by jet from Miami Florida (however you must transit through Puerto Rico). The BVI have the basic offshore financial center attributes: stable, capitalistic government, good communications, an educated population, no exchange controls, and a tax and regulatory climate that encourages offshore activity.

Type of Government: A British Dependent Territory, its governor is appointed by the British Crown.

Legal system: Legislation is created from English common law.

Economy: Unlike the Cayman Islands and other Caribbean offshore centers, BVI does not have a diversified financial services industry, but what it does, it does well. It is the world's leading jurisdiction for IBCs. There are more than 180,000 IBCs registered in the BVI (the Caymans have around 35,000). Most of these IBCs are private companies. These IBCs generate nearly half of the territory's national income in management fees.

Facilities: Local communications systems (telephone, fax, mail) are good.

Taxes, privacy and attitude: This country imposes no taxes or withholding taxes on IBCs.

Ranking: Along with the Bahamas, this is the jurisdiction to use for an international business company. While several offshore centers (including the Cayman Islands) offer similar advantages as the BVI, in most cases there are onerous administrative, legal and statutory costs to bear and these may have the effect of eroding the benefits of low taxes. Currently, only the Bahamas offer a less expensive cost regime for incorporating an IBC than the BVI. By avoiding the necessity to involve the principal in hefty fees, duties and charges by virtue of its uncomplicated operating procedures and statutory requirements the BVI has justly earned a reputation as one of the least costly offshore centers worldwide.

CAYMAN ISLANDS

Country profile: The Cayman Islands are three small islands (Grand Cayman, Cayman Brac and Little Cayman) about 480 miles south of Miami Florida USA in the Caribbean Sea. The population is now about 28,000, made up of about 20% Caucasian, 25% black and 55% mixed race. It is racially integrated, socially and otherwise, and color is not considered a real issue to these fun loving islanders. They are an English speaking British Crown colony especially suitable for U.S. businessmen and Canadian businessmen owing to their close proximity to North America. Because of many recent financial scandals and exposure in news and entertainment media it has become one of the world's most noted offshore tax haven countries.

Type of Government: Being a British Crown colony, its governor is appointed by the British government and there is no likelihood of independence being predicted for many years to come.

Legal system: Legislation is created from English common law.

Economy: Finance is the main and largest industry. Forty-six of the largest 50 banks in the world are represented in the Caymans, as well as all of the big accounting firms. It is the fifth largest financial center in the world, trailing New York, Tokyo and London.

Facilities: Local communications systems (telephone, fax, mail) are excellent.

Taxes, privacy and attitude: This country imposes no taxes on profits, corporate income, or capital gains. It enforces stringent secrecy laws although recently, these laws have loosened due to pressure from the U.S.

Ranking: If you are only interested in using (as opposed to owning) an offshore bank, the Caymans, like the Bahamas are an excellent choice. But if you are interested in establishing your own private bank in the Caymans, bank charters and licenses are very hard to obtain, being available only to long established companies and banks with paid in capital requirements in the millions of dollars. The small to medium investor is left out completely. Other than the governments special involvement with big business and its closed-door policy toward individual investors, the Caymans are a perfect choice for using accounts in existing offshore banks and setting up and using offshore corporations.

LIECHTENSTEIN

Country profile: Liechtenstein is one of the smallest countries in the world, encompassing only about 65 square miles in area and wedged between Switzerland and Austria. It has maintained its stature as a leading European tax haven since the 1920's. While small in size, Liechtenstein is a giant as far as offshore financial centers and tax havens are concerned, and is reputed to be the third richest country in the world. Aristotle Onassis is said to have kept over half his wealth in a Liechtenstein "public wealth foundation", the purpose and activity of which was, and still is, a well-kept secret. The country's literacy rate is 100 percent and about 83 percent of the population is Roman Catholic. The climate is typical for the Alps - snow in the winter and rain in the summer, similiar to the northeast United States. It has a population of 30,000 and its capital and largest city is Vaduz. The principal languages are German and Alemanni.

Type of Government: A hereditary constitutional monarch, it gained complete independence on July 12, 1806, after being part of the Holy Roman Empire for nearly 100 years. The principality is headed by Prince Franz Josef II. The present constitution, dated 1921, calls for a 15-member legislature that is elected every 4 years.

Legal system: The prince of the state and the legislature jointly pass law. Civil and criminal procedures have an Austrian influence, contract and property law a Swiss orientation, and commercial law a German base. The principality maintains its own court system.

Economy: Although best known as a fiscal and corporate paradise, Liechtenstein does have local industries, which have enjoyed steady growth. The major ones are textiles, metalwork, pottery, and chemicals. Exporters, tourism, and (of course) postage stamps are important revenue centers.

Facilities: Local communications systems (telephone, fax, mail) are excellent and afford worldwide direct dialing. The postal system is exceptional.

Taxes, privacy and attitude: There are no income taxes but only a very small annual capital tax, stamp duty and withholding tax on distributions to shareholders. Liechtenstein is not a party directly or indirectly to any exchange-of-information agreements, and its secrecy laws are even greater than those of Switzerland. Bankers won't assist law enforcement officials with drug, fraud, theft, or tax investigations. They consider their rigid secrecy laws to be their most important advantage, the cornerstone of their success. However, the three main banks in the principality have beefed up precautionary measures intended to curb money laundering.

Ranking: Liechtenstein recognizes a variety of enterprises and company forms, in fact the most of any tax haven and has designed legislation that is particularly favorable to the protection and administration of financial structures. However, for the small to middle size investor, this charming but miniscule principality has little to offer. Its users tend to be very high net worth individuals, large international corporations, and multinational banking institutions. But, if you love forests or like to ski, and you have a lot of money to spend, this could be a viable option for you.

MARIANAS ISLANDS

Country profile: The Marianas are located 400 miles north of Guam and 1,800 miles southeast of Hong Kong. With a resident population of just 15,000, an average year around temperature of 80 degrees, and evening sunsets that remind visitors of Gauguin, these Pacific Basin islands are among the most remarkable vacation spots on earth.

Type of government: It is the only jurisdiction in the world standing as a self-governing colony of the United States, the Marianas offer international investors the benefits of a unique political environment. For instance, assets housed here are beyond the reach of a client's home country law but remain as secure as those held on account in any U.S. bank.

Legal system: Bicameral Democratic system like the U.S.

Economy: Tourism is the main industry. Finance is second.

Facilities: Excellent in all respects including a modern communications system,

Taxes, privacy and attitude: The Marianas remain one of the newest offshore centers. Investors can be certain all assets deposited here will be protected by the US Federal Deposit Insurance Corporation (FDIC). Bank confidentiality is assured. Overall, the Island's government welcomes
foreign capital; gain international recognition by hosting reputable offshore bankers; and enhance the present infrastructure by improving already acceptable professional services and increasing the number of commercial banks operating on the islands.

Ranking: When compared to all other jurisdictions, the Marianas Islands appear to be one of the better choices for your private offshore bank. However, the problem is the Islands have a very large paid in capital requirement of $700,000 and this capital must remain in the islands. This
lessens the attractiveness of this location. There is a movement to try to reduce this requirement so we must wait and see what happens.

MONTSERRAT

Country profile: Montserrat is a small island just 40 square miles with a total population of 11,5000. It is a British colony with an active volcano. In fact a few years ago the volcano exploded showering the island with white ash and stopped business for quite a long time. It is often called the "Emerald Isle" surely because of the lush green that floods every lookout.

Type of government: A British dependency that has a ministerial system of government and its own constitution. The Governor represents the British monarch.

Legal system: The system is based on English common law.

Economy: Traditionally, the economy has been based on agriculture, light industry and manufacturing. Tourism plays a role also. The offshore financial sector began to emerge in the late 70's.

Facilities: Communications between the island and the rest of the world are good. There are adequate local facilities, and an impressive infrastructure supports the islands sizable investment community.

Taxes, privacy and attitude: No taxes are levied on offshore banking income, and there are no withholding taxes imposed on interest payments remitted to local banks. In general, the Montserrat government favors offshore banking and the local regulations are fairly good. The islands also maintains tight secrecy laws, enjoys a good reputation among domestic bankers and offers comprehensive tax protection.

Ranking: If you are a risk taking entrepreneur looking for your first offshore involvement, Montserrat may well be a good jurisdiction for you.

NAURU

Country profile: Nauru has the distinction of being the smallest country in the world, with a single national resource: phosphate. The island nation is 8 square miles of visually unappealing terrain. Giant columns of phosphate jut from the center and create an eerie silhouette at sunset.
Communications are limited as are the air transportation into the island.

Type of government: Nauru has had a parliamentary system of government with its own constitution since 1968.

Legal system: Basically patterned after English common law. There is specific legislation for corporations, banks, trusts and insurance companies.

Economy: Unlike the other islands, Nauru does not have a tourist industry because it is not a place most tourists would pay to go. Interestingly, the people have one of the highest per capita incomes in the world as a result of their government's desire to share the wealth with the 4000 plus natives. Each year, every man, woman and child receives nearly $30,000 in royalties from the production and export of phosphates.

Facilities: Fair to poor.

Taxes, privacy and attitude: In a determined effort to diversify out of its monolithic phosphate industry, Nauru has enacted tax haven legislation to transform the country into a Pacific offshore financial paradise. Bank privacy is relatively strong. The single biggest difficulty in doing
business with Nauru is finding a professional who knows anything about local laws and customs. The government's attitude to outsiders is of paramount importance to have a smooth business relationship.

Ranking: Overall, even though the financial requirements are the least of all countries, Nauru is not one of our favorite jurisdictions to set up a private investment bank.

TURKS AND CAICOS

Country profile: These islands have been largely ignored in the rush to open offshore banks in other, more established Caribbean jurisdictions. Yet the Turks and Caicos located at the southern end of the Bahamas chain may offer great promise as a future financial center. Watch these islands carefully and see how their position changes. The islands lack of international notoriety may eventually prove their greatest appeal. Already, one-on-one relationships (with bankers, accountants, tax lawyers, and government representatives) have become easier to achieve within this locale. And pristine beaches rolling alongside crystal blue waters make this islands nothing short of gorgeous, tranquil hideaways.

Type of government: The Islands are another stable, self governing British Crown colony.

Legal system: There is a good legal system based on English common law.

Economy: A major economic strength is tourism. Exports of seafood and a few agricultural products also contribute. The offshore financial sector does a brisk business and has steadily increased since the passage of the New Company Act in 1982.

Facilities: The communications systems are acceptable at best. The banking infrastructure is fair.

Taxes, privacy and attitude: There is no tax imposed on offshore banking income, but there is a U.S. withholding tax on interest payments remitted to a Turks and Caicos bank. Local government is less than enthusiastic about expanded banking activity (although the islands did recently pass a strict financial secrecy law).

Ranking: In the final analysis, the Turks and Caicos would appear to be one of the less desirable selections for today's offshore banker. But watch for tomorrow.

VANUATU

Country Profile: Vanuatu, formerly the New Hebrides is an independent country located 1,400 miles southwest of Sidney, Australia. It consists of a string of 100 islands having a population of 100,000 people. Air connections from the US, Japan and Europe are very good via Sidney, Guam and Hawaii. It is a beautiful vacation spot and the government has publicly supported and encourage offshore financial activity which indicates that it is more politically stable than other countries.

Type of government: Vanuatu became an independent republic with its own constitution on July 20, 1980, and has since remained politically stable. This parliamentary democracy is headed by an elected president. The government is divided into three branches: executive, legislative and judicial.

Legal system: Commercial law is based on English common law. Regulations were influenced by the British prior to independence. Today, both British and French type companies are incorporated, but only the British type has any usefulness offshore.

Economy: Agriculture is the principal economic force. The major products are copra, cocoa, coffee, cattle and timber. Other industries include tourism and financial services.

Facilities: The communications systems are excellent and the region's infrastructure is exceptional.

Taxes, privacy and attitude: No taxes are imposed on offshore banking income. The government's attitude toward offshore banks owned by non bankers is very good. Experts rate the quality of local banking regulations are very high. And strong secrecy laws are regularly monitored and secured. One definite advantage of this location is the paid in capital can be deposited anywhere in the world, such as in a bank in Zurich, London, Monaco, etc.

Ranking: On a comparative basis, Vanuatu is one of today's most attractive offshore banking centers.

WESTERN SAMOA

Country Profile: Western Samoa is a group of Polynesian islands clustered in the middle of the South Pacific northeast of Australia and further northeast of Fiji. The principal industry is agriculture. Western Samoa became a tax haven in 1987 making it one of the newest tax havens in the world.

Type of government: Western Samoa is a parliamentary government with a constitution that provides for a head of state, a prime minister and a cabinet of ministers. Parliament is represented by two major parties, both of which support offshore financial activities. Total independence was achieved in 1962.

Legal system: English and Commonwealth common and statutory law prevails.

Economy: Agriculture is the principal industry, producing half of the gross domestic product and 90 percent of export earnings.

Facilities: The country has a well developed infrastructure and excellent communications.

Taxes, privacy and attitude: Companies or licensees established under any of the international offshore laws do not pay taxes. There are no currency exchange controls, restrictions, or regulations that affect the offshore sector. In fact, offshore banks are exempt from currency and exchange controls. Strict secrecy laws and penalties are imposed on financial, banking and insurance companies.

Ranking: If it were not for the very high initial paid in capital requirements, Western Samoa would perhaps be the most attractive center to establish a private investment bank.

MONACO

DMLAW does not use Monaco as a jurisdiction to charter a POB. Instead we use the banks located there as depositories to hold the client's bank's investment funds. The banks in Monaco are predominately French, Swiss, English and Italian.

Country Profile: Monaco is the jet setters' capital of the world. This country is the second smallest in the world and conjures up vivid images of conspicuous consumption at its finest. The 456 acre country is in the heart of the French Riviera, where super yachts decorate the tiny harbor, Ferraris caress the hairpin curves, seaside mansions perch high above the Mediterranean Sea, and rich playboys gamble nightly at the elegant Casino de Monte Carlo. For most people, it's a land of make-believe, its style and mood well captured by Cary Grant in the movie To Catch a Thief.

Type of government: This world-renowned principality is the second smallest country in the world. It is a stable, independent sovereignty that initially gained recognition in 1489. The government is a hereditary and constitutional monarchy led by Prince Rainier III.

Legal system: Traditionally based on Monegasque law, Monaco employs the French civil code in business practice. Monaco has close ties with France, as a result of many treaties. In fact France is the only country Monaco has a treaty with. Some of France's regulations apply to Monaco.

Economy: Tourism and banking are the main revenue producing sources for the small principality. Real estate development, postage stamp sales, and the business establishment contribute to the economy. The tax haven's aspects are limited, but for the right person, the specific advantages and inherent nature of Monaco can be very appealing. During the 1800s, Prince Charles III saved the economy by introducing gambling, but today this revenue accounts for a modest 4 to 5 percent. Value added taxes (VAT) are a principal revenue source.

Facilities: Typical of Europe, Monegasque communications are top-notch.

Taxes, privacy and attitude. Citizens of Monaco do not pay taxes. Foreign and local companies are responsible for 35 percent tax on net profits. Taxes are imposed on commissions, royalties, interest, dividends and capital gains on the disposal of assets but these taxes are relatively low.

SWITZERLAND

As in the case of Monaco, DMLAW does not use Switzerland as a jurisdiction to charter a POB. Instead we use the banks located there, mostly in Zurich as depositories to hold the client's bank's investment funds.

Country profile: Nestled high in the Alps, Switzerland is centrally located in Europe with its borders shared by France, Germany, Austria, Liechtenstein, and Italy. The literacy rate is 99.5 percent. The population is almost equally divided between Protestant and Roman Catholic.

Type of government: The Swiss federal government has three branches: executive, legislative, and judicial. The 26 cantons (states) are administrative subdivisions with independent powers. Switzerland is a very stable country and politically neutral. At the present time, Switzerland is attempting to join the European Community, which will abolish its present position of neutrality.

Legal system: The legal system is based on civil law and commercial law.

Economy: Switzerland's healthy economy is supported by banking, financial services, manufacturing, foreign trade, and tourism.

Facilities: Excellent in all respects.

Taxes, privacy and attitude: Switzerland has taxes, but they are modest compared with those of high tax countries like the United States, United Kingdom and Japan. An operating company within Switzerland can expect to pay 3.63 to 9.8 percent worldwide income tax. The Swiss banks are famous for their bank secrecy. But recent scandals involving the holding of Nazi treasures during World War II by Swiss banks has reduced their efforts to maintain secrecy. Now, the Swiss banks are becoming depositories for the very rich rather than the very discreet. Even with this development, Swiss bank secrecy is still regarded as superior to that of most countries. If an activity isn't considered a crime in Switzerland, the Swiss will not cooperate with foreign authorities seeking to gain access to confidential bank information. Private banking such as that practiced by this law office's clients is a Swiss banker's preference, availing the affluent of the best services that Swiss banking offers. There are no currency exchange controls. Like Monaco, Switzerland imposes very low taxes.

Ranking: This is still the best place in the world to bank ones money.

JERSEY/GUERNSEY

Jersey and Guernsey are two islands located in the English Channel off the coast of France. Because they are similar in characteristics they are presented together here. As in the case of Monaco and Switzerland, this law office does not use either Jersey or Guernsey as jurisdictions to charter a POB. Instead we use the jurisdictions for establishing IBC's and depositing client's funds.

Country Profile: Jersey is the largest and Guernsey is the second largest of the Channel Islands off the northwest coast of France. The languages of both are English and French with English predominating in business. The climate of both is warmer than the south coast of England. The population of Jersey is 83,000 and that of Guernsey is 55,000.

Type of Government: For Jersey, the constitutional relationship between the it and the United Kingdom is unique. The respective legislative assemblies have the exclusive right to legislate on matters of domestic concern to the islands (including taxation) while the United Kingdom home office is responsible for the island's external affairs. As for Guernsey, since 1204 its sovereign has been the English Monarch. However, it has its own separate legislature. The United Kingdom remains responsible for the island's defense and foreign affairs.

Legal System: Both have their own legal systems patterned after English Common law. The majority of the islands legislation is derived from the United Kingdom but there are significant differences, particularly in areas such as inheritance and company law.

Economy: Both island's economies are predominantly based on tourism, farming and financial services with the later growing increasingly important

Currencies: English, French, Jersey and Guernsey currencies are all accepted and exchanged in both jurisdictions.

Facilities: Excellent in all respects.

Taxes: The major tax in Jersey is on income. The law relating to income tax can be found in the Jersey Law of 1961 as amended. There are no wealth, capital gains, gifts or inheritance taxes and the current rate of income tax is 20 percent for resident individuals and corporations. It is the policy of the Guernsey Islands' treasury to maintain a rate of direct taxation at 20 percent. There are no wealth, capital gains or inheritance taxes with the exception of short-term capital gains taxes that apply to property.

Ranking: Excellent in all respects as havens for IBC's.

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INTERNATIONAL BUSINESS TRANSACTIONS

Our office assists U.S clients to market their products and services in Japan. We use our knowledge of the country and relationships with overseas government and other officials to speed your effective entry into the overseas market.

For Japanese clients, we use our knowledge of U.S. law, market opportunities, distribution companies and local, state and federal government regulation to assist Japanese firms in selling their products quickly or in setting up U.S. based subsidiary companies.

For both U.S. and Japanese clients our law office provides negotiation and drafting services in the following types of
International business transactions:

 U.S. Customs Matters
 Import and Export Contracts and Transactions
 Licensing Technology, Patents, Trademarks and Copyrights
 International Joint Ventures
 International Letters of Credit
 International Financing
 Foreign Distributorships

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IMMIGRATION TO THE UNITED STATES FOR FOREIGN INVESTORS

A great number of overseas investors have invested heavily into the United States, especially during the past decade. Many of these investors have sought passage to the United States and the ability to remain and work there, and also bring their families. There are several visa categories that may be of interest to the foreign investor. These include such visa as the Treaty Trader or Investor visa (E-1 & E-2), Intra-company Transfer (L-1A), and Specialty Occupations (H-1B). For those that desire a permanent visa, there are limited number of visas always available, if certain strict requirements can be met.

The basic criteria for all working visas is that there exists a sponsor, usually, a company that is actively doing business within the United States, or in the start up process of doing "substantial" business. Passive real estate investments, regardless of value, such a raw land, small apartment complexes, etc. are seldom, if ever, successful vehicles for United States visa purposes. The following are just a few simple examples. Please be advised that these are for illustrative purposes only, and we make no assurance or representation that any or all similar cases would be approved or denied.

#1 Mr. Sato, investor, desires to acquire an existing restaurant in California. He invests $250,000; he will be president and manage the corporation that will own the restaurant; and the business has 14 employees with gross revenues in excess $1,000,000. Mr. Sato would be eligible for an Treaty Investor (E-2) visa as long as his corporation was doing business in the U.S. Note: The corporation could sell the restaurant and purchase another active business such as a dry cleaning business and the E-2 visa should still be valid.

#2 Mr. Sato, investor, decides to buy a small import/export business that employs 7 people. He invest $150,000 to purchase the company. He will be the president and manage the company. The company has total exports to Japan in excess of $2,500,000 and the company has net profits of $100,000. 90% of the exports go to Japan. Mr. Sato would eligible for a Treaty Trader (E-1) as long as his company qualifies; 51% or more of the exports must be with Japan; he must also own 51% or more of the company.

#3 Mr. Sato, investor, owns Sato Construction Company, Ltd. in Japan that employs 20 on a regular basis. He has no intention of abandoning the business in Japan, but would like to invest in the United States in another enterprise. His company could set up a U.S. based subsidiary and acquire either enterprise, above, and he would be eligible for an Intra-Company Visa (L-1A) that can be extended up to seven (7) years. He could also set a new corporation and business. Further, with the proper corporate and business structuring Mr. Sato would be eligible for a permanent visa.

For more information from our affiliated offices of Barry S. Morinaka click here IMMIGRATION

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TAX FREE INVESTMENTS

Under no circumstances do we ever encourage US or Japanese persons to violate any of the provisions of the laws of the United States or Japan nor will we willingly or knowingly assist a US or Japanese person in any attempt to unlawfully evade their tax obligations.

Because the Japanese Tax Code is structured similar to the US Tax Code in the area of foreign entity taxation (the only discernable difference being the US Tax Code is considerably tighter in its application leaving few avenues to avoid its obligations), references to the application of US Tax Code will also mean the application of the Japanese Tax Code, unless otherwise noted.

It is an often quoted proposition that no American [or for that matter Japanese] is bound to pay any more taxes than he is legally bound by the law and that it is the proper right of every American [and Japanese] to intentionally and carefully arrange his financial affairs so as to minimize his or her legal tax burden. During the development over the decades of the US Tax code substantial tax advantages have become available to those who carefully abide to its terms. These advantages can be enjoyed without violating the provisions of the US Tax Code. Because the provisions relating to the taxation of foreign entities in the Japanese Tax Code are for the most part modeled after those of the US Tax Code, the Japanese Tax Code application and effects are very similar. Therefore, subsequent references to the US Tax Code will also apply to the Japanese Tax Code, unless specifically stated otherwise.

The "Foreign Brokerage Account Program" as it applies to and is affected by the US Tax Code is authored by Hal Uhlrig, Attorney at Law. All references to the Japanese Tax Code and its application and effects herein indicated by brackets have been added by David Miyoshi Attorney at Law, for which Mr. Uhlrig makes no representation nor assumes any responsibility for.

The Foreign Brokerage Account Program is intended to afford a substantial tax benefit to sophisticated investors who have already invested or who intend to invest assets in excess of $100,000 into long term investment vehicles with the expectation of growth. It involves the export of assets from the United States [as well as Japan] in a fashion that provides:
1. Maximum security of the assets
2. Iron clad asset protection of those assets against attacks from creditors; and
3. Fully tax deferred growth of the assets while in the program

Most people are not aware the US is a "tax haven" for foreign investments into its securities markets (stocks, bonds, futures, options, etc.). Where a dollar invested by a "US person" (generally a citizen or resident of the US) in US securities is subject to US taxation on its earnings, this is not the case with foreign non-resident aliens to the US. For instance, a Japanese individual who does not live in the US nor has an office or place of business there can purchase US securities and not be subject to US taxation. The US government makes this possible to encourage foreign dollars to be invested in the US. [However, in the case of the Japanese mentioned above who is not subject to US taxation on his investment in US securities, he is subject to Japanese taxation on this same investment in US securities and is also subject to taxation on any investments he makes into Japanese securities. Fortunately, the Japanese investor can legally avoid Japanese taxation on these two types of securities investments by participating in the Foreign Brokerage Account Program. Unless otherwise stated herein, by using the Foreign Brokerage Account, the benefits enjoyed by US investors will also be enjoyed by Japanese investors in Japan when they invest in Japanese securities, as well as US securities].

Because the US intends that its citizens and residents not enjoy these substantial tax benefits, it applies a complex set of rules which will attribute ownership and control of monies held by foreign companies to the US persons who controls these companies, thereby making these monies subject to US taxation. For the monies to enjoy the benefit of this tax free treatment by the US [as well as Japan], the ownership and control of the funds needs to actually pass to a truly foreign "person" (the term person will include natural persons, companies, partnerships, trusts, Limited Liability Companies, foundations or other legal entities). This transfer to a foreign person must not be a ruse or a sham, but a real, legal transaction or series of transactions, that accomplishes the legal goal of tax avoidance (as compared to tax evasion which is illegal). The "Foreign Brokerage Account Program" does just this.

HOW THE PROGRAM WORKS

The Company Limited Liability:

This program utilizes a Limited Liability Company (LLC), organized under the laws of the island of Nevis in the West Indies, near the US and British Virgin Islands. This legal entity was created by statute in 1995 by the Nevis Assembly and it incorporated all of the most progressive design features of the best of the Limited Liability Company laws of the US and other countries. There was no such thing as an LLC in the English Common Law. It is entirely a creation by statute. Unlike a corporation (foreign or domestic), you cannot purchase a share of stock. Rather you become a "Member" of the LLC and the funds you transfer to the LLC are represented by a Certificate of Interest in the LLC. This defines the value of your "capital account" in the LLC and is very much like the valuation of stock in a corporate situation or the valuation of your capital account in a partnership situation. Perhaps the easiest way to describe an LLC is that it has the best characteristics of both corporations and partnerships, but it is neither.

In the US, domestic LLCs are most frequently organized so that the Members will be taxed as if the LLC were a partnership. For reasons that are beyond the scope of this introduction, partnership taxation is usually preferable to Members. Where the Member is taxed as if the entity is a partnership, that Member will be taxed each year upon his or her pro rata share of the taxable income of the LLC, regardless of whether there has been any distribution of the earnings by the LLC Manager. This is true whether the LLC or partnership is foreign or domestic. Where an LLC is organized like a corporation (has the qualities of perpetual existence, central management, etc.) the US domestic detriment from the tax point of view is the problem of double taxation. The company will have to pay the corporate tax on its earnings and then distribute dividends to the individual shareholders that are then taxed on their receipt of the dividend income. In the case of a foreign LLC the context is quite different. If a foreign company (which is not a Controlled Foreign Corporation, a Controlled Foreign Holding Company, or similar ownership-attribution entity which are defined in the US Tax Code) earns money outside of the US or earns money which is exempt under the US Tax Code from US taxation, then it has no corporate tax obligation.) If that same foreign company elects to retain its earnings and to reinvest them rather than to make any dividend distributions to its stockholders, then the stockholder receives no taxable income. The stockholder's stock may have appreciated in value because of the reinvestment of earnings, but unless the stockholder sells his or her stock for a profit, the individual stockholder has no taxable earnings.

The transfer of funds to an LLC is also, on its face a more legitimate transaction than a transfer to a grantor trust (which has absolutely no tax advantage anyhow), a foundation, or a Controlled Foreign Corporation. It is an arm's-length transaction with a true foreign controlled entity. It is a for-fair-value transaction because the US citizen receives from the Manager of the LLC a Certificate if Interest evidencing a capital account equal to the sum transferred. We will discuss the very valuable asset protection features of this arrangement a bit later, but suffice it to say that the funds used to purchase an interest in an LLC are unavailable to creditors. The US citizen will have, in the Certificate of Interest, an instrument very much like a stock certificate, except that a creditor may not seize it or reduce it to sale.

Although, in a perfect world, the strategy described above should be sufficient to overcome the hurdles constructed by the US Tax Code, the IRS is noted for taking positions that aggressively attack tax reduction strategies. In this connection, they have promulgated various rules relative to "effectively connected income." Although used most frequently with regard to American companies that have foreign subsidiaries and associated companies, the rule simply is that where a foreign company earns money that is effectively connected to a business enterprise in the US, that the foreign earnings may be deemed to be the equivalent of domestic US earnings and may be taxed to the US company. In the Foreign Brokerage Account Program, the LLC is truly a foreign company. It is not a subsidiary or associated company of any US company or the alter ego of any US "person"[or Japanese entity]. Still, the IRS by its intransigent philosophy may deem otherwise. The IRS might, for example, take the position that the use of an agreement with the Manager to segregate his funds and invest them separate from other investors of the LLC, causes the US person to retain an impermissible level of control over the funds. The IRS might deem that for tax purposes, the Member is still the owner of the funds or the IRS might rule that even though the LLC is organized like a corporation, the Member would be taxed as if it were a partnership. To avoid such treatment, a further step is required.

The Foreign Trust:

The US Tax Code requires any American who transfers assets to a foreign trust to promptly report that transaction. If a US citizen is the beneficiary of a foreign trust, that circumstance is also subject to reporting. Where the US citizen is the grantor of a foreign trust, the IRS will disregard the trust for tax purposes, even though the trust is irrevocable, and will attribute the earnings of the trust to the Grantor as if the Grantor had earned the income individually. Thus, while there may be some asset protection advantages to such an arrangement, there is absolutely no tax advantage. Those consultants who suggest to the contrary are frankly encouraging criminal conduct on the part of their "client."

Truly foreign trusts are a different matter altogether. Where the foreign trust is settled by a foreign person, funded by a foreign person, utilizes a foreign person as the Trustee, and lists no US person as a beneficiary, such a trust is outside the jurisdiction of the US government, its regulatory agencies (including but not limited to the tax authorities), it courts, and to individual US citizens seeking to impose burdens on the trust. Such a truly foreign trust may have a brokerage account in any country in the world. Where such a trust elects to have a brokerage account that invests in US securities, such investment earnings would be entitled to the tax advantages built into the Code as discussed above. It is important to note that these funds would have to be legally owned by the Trustee on behalf of the trust and its beneficiaries. Such trust investments would be free to grow, tax free, in accordance with the existing law.

The Relationship between the LLC and the Trust:

Remember that the essential requirement for this strategy to be legal is that the legal ownership and control of the funds must actually change and no longer belong to any US person. This is initially accomplished by the acquisition of an Interest in the foreign LLC in a for-fair-value transaction. This LLC is organized so as to permit the US person to be taxed as if the LLC were a corporation. This would be exactly the same as if a US person purchased stock in Airbus, Volkswagen, or some other foreign company. The LLC, in its exercise of its discretion and in accord with the Segregation Agreement, will lend the funds in its possession (representing the US person's capital account,) to the Trustee of the foreign trust. This loan is conditioned upon the US person being appointed as the Protector of the trust. The Trustee will execute a long-term promissory note in favor of the LLC, with no interest due for a period to be determined by the note. The interest will accrue annually, as simple interest. Since the Trust will not be paying any interest payments to the LLC for some time, the LLC has no income. Its only asset (the promissory note) is increasing in value. Even if the IRS were to deem the LLC as a partnership for the purposes of taxing the Member, there is no income to pass through. Also, since the LLC is not within the jurisdiction of the US, it will file no return or other financial information with the US or any of its agencies. This is not because it has anything improper to hide. It is simply because its financial affairs are its own business and the US has no legal right to intrude.

The Trustee now has the right to invest its borrowed funds into a brokerage account, and the earnings from that investment should be entitled to total tax exemption under the US Tax Code. The Trustee will need to appoint someone to act as the Investment Advisor for the funds invested, and the LLC Member (US person) will exercise his or her power as the Protector of the Trust so as not to approve the appointment of anyone other than themselves or someone else that they trust to make sound investment decisions on behalf of the Trust. The Investment Advisor may discharge this responsibility by communicating with the brokerage house and giving instructions regarding risk tolerance, restrictions on investment vehicles, etc., or the Investment Advisor may be empowered, on behalf of the Trust to trade directly on behalf of the Trust. This would involve the use of software provided by the brokerage house to the Trustee as the owner of the funds.

The Investment Advisor could not authorize the transfer of any funds out of the account or any distributions of the funds. The Investment Advisor's authority would be limited to selecting among the many investment opportunities available through the Trust's brokerage house. It would be clear that the Investment Advisor has no legal or equitable interest in the funds. The Investment Advisor should use a reasonable investment standard in his or her exercise of the decision making process. The beneficiaries of the trust could hold the Trustee harmless from the consequences of ill- advised investment decisions by the Investment Advisor so long as the Investment Advisor was approved by the Protector.

In the scenario above, the funds should grow, free from the burden of annual taxation.

Relationship of the US Person to the Funds:

In order for the funds to enjoy the benefit of the favorable tax treatment afforded foreign investors, the funds must truly change legal owners. It is therefore not possible for the US Person to participate in this strategy legally, if that person could by simple demand, arrange for the repatriation (or return) of the funds to the US person in the US. Such an arrangement would also defeat the asset protection benefits of the Program because a US court could order the US person to have the funds returned for delivery into the hands of creditors. How then does the US person obtain the assurance of a long-term benefit and security as to his investment in the LLC and the accelerated growth that he had hoped for?

Since the US person may not legally own or control the funds, it is necessary for that person to be able to exercise sufficient influence on the entities that do in fact own the funds that the US person's expectations are protected. This is accomplished two ways.

Relationship to the LLC:

As a Member, the US Person has certain rights that are spelled out in the LLC Agreement and the Segregation Agreement between the Member and the Manager. If the Member may simply demand the liquidation of his or her capital account through the redemption of the Certificate of Interest, then any later creditor could ask the Court to order the Member to make such a demand and obtain access to the funds. This would defeat the asset protection value of the arrangement. Instead, the Member has the right to request such a liquidation of the account upon such terms as make sense. For example, a common "anti-duress clause" is utilized to assure that the request is not prompted by the compulsion of a court or administrative order. If the Member is requesting his capital account be redeemed under such duress, the Manager is free to disregard it. Also the account may be restricted in the method of redemption. As we noted above, all that the LLC now owns is a promissory note from a trust over which it exercises no control. Unless the note was repaid by the Trust, the LLC would have no money with which to redeem the capital account. Thus, the Member could either defer the monetary redemption until after the LLC had secured the payment of principal and interest under the note, or the Member could accept an assignment of the note to the extent of his or her capital account. In short there is flexibility as it relates to how the Member could obtain a return of his or her capital from the LLC. The fact that it is not easy to reduce this Interest to cash is evidence of the legitimacy of the transaction.

Relationship to the Trust:

The office of "Protector" is little used in the US, but is common in the British Common Law influenced jurisdictions. The Protector is empowered to exercise restraint on the Trustee's exercise of discretion. The Protector may not order or direct the Trustee to affirmatively do anything. If the Protector had such powers, he would be deemed in many jurisdictions (including the US we suspect) to be the equivalent of the Trustee. If a US person is the equivalent of the trustee, then the trust becomes a foreign grantor trust for purposes of attribution, and the IRS might impute the income from the trust to the US Person. Instead, the Protector exercises his or her power only in the negative. That is to say that the Trustee may not take any action without the express consent of the Protector. The Protector is free to suggest any course of action to the Trustee and the Trustee is empowered to accept or disregard the suggestion. In practice, unless the "suggestion" is illegal, unethical, or violates the Trustees duties under the trust instrument, the Trustee will likely follow 100% of the Protector's suggestions. The Trustee is already constrained to appoint the Protector or his or her designate as the Investment Advisor.

How Does the US Person Secure Compensation or the Return of the Funds:

Will Rogers once said that he was "more concerned about the return of my money than the return on my money." Here the US person needs to be assured that he can arrange for both the return of his money at an appropriate time, and to be able to enjoy some of the benefits of the returns on his money in the interim. This Program accommodates both.
Let's deal first with the US person who desires to receive financial benefit from the returns being earned on funds that once belonged to him or her. The starting point is quite simple. It is found in the very first sentence of this discussion. Citizens of the US [as well as Japan] are taxed on their worldwide income. Thus, while it possible to receive compensation from a foreign entity, a US person will be required to report that income and to pay the appropriate taxes on it. So, one way for the US person to access the income from the invested funds is to be paid by the Trust for services performed as the Investment Advisor. This payment can be accomplished by having the Trustee provide to the US person a foreign credit card and permitting the US person to withdraw funds as agreed upon or to use the card for various purchases. Where the card is used on behalf of the trust as an expense advance rather than requiring the US person to seek reimbursement for funds expended on behalf of the Trust, it may well be treated as a non-taxable use of the card. There are many activities that the Trust may want the Investment Advisor to engage in that the Trust would reasonably pay the expenses for. This could certainly include travel, educational or training expenses, the use or purchase of certain office or related equipment of services, cost of communications services such as cell phones, fax machines and phone service, etc. Where the US person accesses the card for a personal benefit, whether by withdrawing cash or charging goods or services, the IRS would typically treat these as income and such amounts should be reported as miscellaneous income on the person's annual tax return. The US person should keep careful records of such withdrawals, as the trust will not be filing any returns with the IRS or otherwise advising them of the use of the card. This responsibility falls to t