Wealth Protection Structures

Written by Dr. Allan Le Roux
Date: 18 October 2010

The world is constantly changing and it has become increasingly important to ensure that the correct structures are in place allowing protection and flexibility in the international market. International Organizational Structuring for the purpose of wealth protection supported with financial and tax benefits have become a necessity for every international organization and its shareholders.

The structures you apply will determine the jurisdiction and Tax Model imposed and its attached implications.  It is very important to understand that the country of residence generally determines the Tax Model imposed. The well known saying, 'The highest trees normally catch the most winds' is quite true. The level of visible wealth and cash components in various unstructured bank accounts normally draw the most attention. This visible wealth is what the Tax Authorities are using to start investigations to ensure or enforce Tax compliance.

Generally, 98% of all international organizations have a lack of experience, understanding and/or knowledge when adhering to proper tax structures in their countries of trading, even in their own country of residence. What's more, the expert advice needed is normally very difficult to obtain. This is what catches most organizations off guard and has a detrimental implication on their wealth generating companies in trading. The correct structures are normally determined by the level of wealth generation and the level of international exposure of its shareholders. The tax model will therefore be determined by the structure implemented. It is important to explore various opportunities and choose the correct structure that complies with the need. This structure will determine the Tax Model and the level of Wealth Protection with Financial and Tax benefits.

International Tax Structures and their implications are very complex and important when obtaining professional advice. Using Tax-Haven Countries to hide wealth is foolish and illegal. If you get caught you will either face heavy fines or possibly end up in jail. The two most common legal enforcement's that are used by countries are Tax evasion and money laundering. It is however important to note that most governments have entered into an exchange of information agreement and have agreed to support each other in investigating all possible cases of Tax evasion.

Governments are losing millions and have therefore committed to clamp down on Tax-haven countries or any involvement of their citizens to hide assets in this regard. There is nothing wrong in using Tax-haven countries, but it is important to understand that all Tax-haven countries comply with the information exchange treaty. Therefore it is only a matter of time before your local authorities will become aware of your assets in hiding. If wealth is not declared to the local authorities, the Tax-haven country will have an obligation to notify the authorities of your country of citizenship of the assets held by them, they will be investigated, and the Tax-haven country will have an obligation to declare all information without notice to the asset owner.

Some books make mention of Nil-Tax Haven countries, which in our view is a myth and does not exist.  The Tax-haven countries have always some kind of method to generate revenue for themselves by providing these services which could then in turn have a detrimental effect on the ill-informed customer. In some Tax-haven countries, you will not know the restrictions until you want to move your money to a different country.  It is therefore very important to design the correct structures to suit your flexibility and purpose.