Bowman Offshore Bank Transfers on Emerging markets

So in my last post I made two bold predictions on the economy in the coming century, that emerging markets in Asia and Africa will be the driving force of many of the changes we see in the world.

East Timor

Is a war torn nation that no one knows much about, or has even heard of. The currency of choice here is single American dollars. The country is extremely poor and lacks almost any infrastructure of any kind. Will any entrepreneurs step up and make a difference in this country? Where there are problems, there is opportunity.

Sri Lanka

I have a friend who recently raised 30 million from the largest telecom in the country after being in the country for just 3 months. They now have the ENTIRE e-commerce marketplace to themselves. They are quite literally; they are the only company doing e-commerce at scale in the entire country. After a few weeks of operation, they eclipsed 101 employees today. Their headliner is a daily deals site / group-on clone: anything.lk

Burma

I’ll report back from Myanmar next week, as I’ll be jumping on a plane to head there shortly. For those who are interested in visiting, the visa situation is a pain! I decided to go last minute to attend a conference, and although I qualify for a “visa on arrival” the process is anything but clear. You need a letter from a Burmese business with address IN Myanmar (as well as permission from a ministry). Full details are available at this site. It is much, much easier to arrange a visa in advance at a local embassy.

Indonesia

From what I’ve seen so far from Indonesia, I enjoy this country. However, corruption at the lowest levels, as dealing with police (or the local banjar) can be burdensome for entrepreneurs. As for most places around the world, it’s best to enjoy your time here, follow the rules and don’t make too much noise. Although it is one of the largest emerging markets, if you are going to start a business here, you better have a great understanding of the culture, a well-connected local partner and deep pockets. I’ve written about starting a business in Bali in this post. If you are able to start a business, you’ll find incredible local talent for an inexpensive rate. The workforce is (by and large) more technically skilled than many other countries in the region, and there are great developers and designers.

South Korea

Korea is a place I don’t know much about. From an outsiders perspective, it’s not an emerging market, it seems expensive and difficult to penetrate as a foreigner without extensive time and effort. Although I have Korean friends who I know and love, it doesn’t attract me from an a macro-economic perspective and I can’t see this economy having the growth potential of others in the region. It is very well developed, and in many ways the polar opposite of its neighbor to the north…

North Korea

North Korea is the last frontier of Asia – hidden behind a communist veil, much of the society is kept in secrecy. I do know some people who have been able to visit and do business in the country. Believe it or not, they run a consultancy that teaches social skills. I guess that proves that maybe there is a market in NK? Recently it came out that Google is trying to penetrate into the economy here, and bring peace to the people. This is an admirable goal in my mind, and displays how the free market and private business can accomplish something that bureaucracy and governments could never accomplish in the country – freedom, peace and profitability.

China

China is intimidating. A huge market full of opportunities. Learn more on how to incorporate a company and do business in China.

Hong Kong

Hong Kong is amazing, I love spending time in this country and it is just so damn entertaining to go out for a night on the town in this city. Hong Kong has a great culture – its not overbearing with centuries of tradition, but its deep enough to have caught its voice and be able to proudly proclaim: this is what it’s like to be Hongkongnese.

Hong Kong simultaneously both IS and IS NOT China. Technically, it is a “special administrative republic” and Hong Kong S.A.R. is an exemplar for an efficient free market economy, yet for all intents and purposes, is subservient to the centrally controlled Mainland. Although the quality of life, language, way of doing business, food, travel documents, and a lot of other things are completely different – Hong Kong IS china.

The food and the people are great, the city is so much fun, and Hong Kong is the best place to open a bank account. Scratch that, it is the 2nd best place in the world for banking and starting a business, right behind…

Singapore

Singapore is THE best place in the world to start a business. I’ve written about Singapore city here and also here. I have a deep respect for the ability of the government to spur entrepreneurship and innovation, and raise the quality of life for a society. Living here is a joy, and I love being here for that reason, now if I could only find some interests outside of my work…

Thailand

I write too much about this country already. I’m redacting my previous statements on the LOS. There is “nothing” to see in Thailand, please move along… My advice to backpacking tourists looking to “find themselves” and “see elephants” and “ladyboys” is to stay for a day, visit Phuket and then get out. We never wanted you here anyway.

For those of you who want to see the real Thailand… I recommend at least a year on the ground. Learning the language, starting a business, getting a multiple entry visa in Thailand through a Thai Company, and living in Bangkok city.

Cambodia

Cambodia is the future rice bowl of SE Asia. Along with Thailand and Vietnam, this is where the bulk of food will be produced in the 21st century. it’s also a very young society, and its developing quickly. I’ve seen ventures fail here (premium beer, commerce) and other succeed (citizenship by investment, property investment, fund management, rice, micro lending) the business field is wide open. Read more about Cambodia here. Read more about Cambodia’s Flag Theory and How to Get Cambodian Citizenship | Frontier Investing | Private Equity

Vietnam

Vietnam has an emerging tech community. You would not believe the talent that comes out of this country in terms of technical ability. The currency is a dong, and the government makes it near impossible to start a business unless you know the right people. Even the locals have to go and stand in a room and be read a number in order to start a company here. I spoke to a young girl that did it herself (instead of pay a company rough $200). From the beginning, you should only pick a venture that the government will LIKE – because if they don’t like you – bye bye. Take for instance Facebook – which saw a countrywide ban when groups starting popping up opposing the incumbent party. Check this article on How to set up a Vietnam LLC for further information.

Philippines

Ahhh the Philippines. The friendliest people on earth. Despite having one of the lowest GDP per capita, they have one of the highest happiness ratings. The women here are very intelligent. If you want to set up a business here, make sure you have strong females on your side, and great government connections. They are open to foreigners doing business, but all of the guys I know here that have had success know when to show their palms, and when to show their teeth. REAL power rules.

If you are interested in setting up a company in the Philippines, or learning more, check out this post on why it’s more fun in the Philippines…

There is a lot of opportunity here; partially displayed by the fact that Google is setting up a HQ in the Philippines. As a societal whole, you really want to root for them. They have the potential, they could do better, and they even know it themselves (see this commentary called “get real Philippines” or just look at the town slogans “aim high!”

June 21, 2018by Corcoran Culleme
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Bowman Offshore Bank Transfers on Ten Tips on Offshore Savings

Here’s a guide through the world of offshore savings and a recommended approach to protecting your nest-egg against inflation.

1.      Protect against inflation – The real return savers actually make from interest rates is the actual profit you are left with after taking the effects of the currency’s inflation into account. Inflation is the rise in prices for goods and services over a period of time – usually calculated annually. When weighing up a rate offer, deduct the known inflation percentage to find out how much you’ll actually end up. Advisers also tell savers to include the impact of tax when estimating a potential profit to ensure an accurate projection of likely returns.

2.      Protect against bankruptcy – Following a period of intense merger activity within the offshore savings sector, all savers should check that their accounts are not spread amongst deposit-takers owned by the same parent institution. If so, only a portion of your overall savings nest-egg may qualify for compensation if a deposit-taker goes to the wall.

3.      Protect against lack of compensation rights – We’ve seen the collapse of two Icelandic banks in offshore Britain (Landsbanki Guernsey and Kaupthing Singer & Friedlander Isle of Man) so we know the worst does happen to some savers. It is essential to always interrogate a jurisdiction’s financial compensation scheme before putting a penny of your hard-earned cash with any of its financial institutions.

4.      Protect against ID fraud – It is imperative you comply with identity protection procedures initiated by your deposit-taker. Your part of the bargain in the fight against fraud is never reveal passwords and security codes to anyone. If savings accounts are managed online, never leave a computer screen bearing the details. Do not fall victim to an email scam asking you to re-register your personal details. Real financial institutions would never compromise their customers in this way.

5.      Protect against adverse terms and conditions – Always read the small print of any terms and conditions when opening an account. Look out for penalties in the form of loss of interest against withdrawals made outside the notice terms and ways in which you could miss out on introductory, or loyalty bonuses.

6.      Profit by comparisons – it pays to research the rates paid by deposit-takers. Be sure to compare like with like and don’t be taken in by a new rate offer that is well above the market average. Those tempting percentages could be slashed once savers have been caught in the net.

7.      Profit from a competitive market – Today’s market is more competitive than ever. To put it bluntly, financial companies want savers more than they do borrowers. Select a handful of consistent top league payers and do your research to find out which one really wants to reward your customer loyalty.

8.     Profit by tracking market movements – Rates paid are still pegged to a currency’s base rate set by central banks. If you saving in sterling, euros and US dollars, make sure you stay abreast of these currencies’ base rates to gauge the rate offers on your accounts.

9.      Profit by locking away for longer – Recent economic conditions aside, the best paying accounts are those that lock savers into a fixed term – we’re talking a couple of percentage points’ difference. Calculate how long you can manage without accessing your savings pot and match that period with a provider’s best fixed term offer.

10.  Profit by saving regularly – Get the best from regular savings with products that encourage and reward such good habits.

June 6, 2018by Corcoran Culleme
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Bowman Offshore Bank Transfers on Tips for Offshore Company Formation

There is a common misconception that having an offshore company means that you are doing something illegal. The truth is that having an offshore company can benefit your business in a number of very legal ways. If you are looking at offshore company formation, there are a number of tips that you need to know about. These tips will ensure that the offshore company formation process works for you.

Have a List of Questions

The first tip that you need to know about is to have a list of questions ready which are related to your business. These questions should include why an offshore company will work for your business. You should also consider who will be involved with the business and what your business exit strategy will be if something were to go wrong. Any question that you have about forming an offshore company should be put on the list and you need to have this with you when you visit an advisor.

Choosing the Right Advisor

DIY offshore company formation is not recommended because there is a lot of knowledge that you will not have. This is why you will need to choose the right advisor to help you start your offshore company. The advisor will need to have extensive knowledge about different offshore locations and how you would form a company in these locations.

When you meet with the advisor, you will need to find out about their experience and training. You should also ask them the questions on the list that you have. If they are able to adequately answer all of the questions, you should consider working with them.

Choosing the Right Jurisdiction

One of the most important aspects of offshore company formation is choosing the right jurisdiction. Not all jurisdictions will work for your company and it is important to know this. You should look for a jurisdiction that has a good and long-standing reputation as well as being a stable country. The company tax of the jurisdiction should also be looked at. There are some popular jurisdictions such as Hong Kong and Belize, but you should ask your advisor for more information.

When looking at jurisdictions, you should also consider the other laws that govern the country. There are some countries that have stricter regulations for certain types of businesses and you need to know about this. You need to stay within the legal framework of the jurisdiction so knowing what this framework is will be important.

Know the Costs

There are many services that can help you form an offshore company, but not all of them will have their costs on their website. This is why you need to discuss the costs of using the service early to determine if the company is within your budget. The costs will typically include setup fees as well as the annual renewal fees.

Offshore company formation is not something that you should do yourself. However, there is a lot of research that you should do before you contact and advisor or choose a jurisdiction.

May 15, 2018by Corcoran Culleme
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Bowman Offshore Bank Transfers: How to Send an International Wire Transfer

Everything You Need To Know About Wiring Money Overseas

I’m getting a lot of feedback from people trying to send international wire transfers.

A reader wrote this week to say:

“I went to my bank branch to initiate a wire transfer on Monday. The teller had to call over the branch manager to help with the paperwork. Once the manager saw I was transferring money to Panama, she told me they wouldn’t be able to do the wire transfer. When I asked why not, she said because investing in Panama is too risky.”

A similar tale from another reader:

“I tried to wire money to Panama for a property purchase, and the teller told me they couldn’t do the wire because they didn’t have a branch in Germany. The Panama bank uses a German bank as their intermediary, but isn’t that what they (an intermediary bank) are there for—to accept international transfers?”

I share the frustration these and the other readers I’ve been hearing from are feeling. Recently, two Los Islotes investors tried to wire money for their lot purchases. The first client’s funds never made it because they were rejected by the Panama bank’s intermediary bank and returned to the client almost two weeks after the wire had been initiated.

The second client’s funds arrived the next day, after having passed through the same intermediary bank.

The difference? Who knows?

Every Bank Is Different and So Are Their Processes

Every bank has its own way of handling wires, but wiring money from one money-center bank to another money-center bank should be straightforward regardless of the banks involved as minimal information is required. However, sending money from a non-money-center bank, as the first reader I quote above was trying to do, to another non-money-center bank in a foreign country is a different story.

This is why banks work with intermediary or correspondent banks, to facilitate international transfers of funds. Unfortunately, this means another layer of information, including the recipient bank’s account number with the intermediary bank. If any of the information is missing or not included in the instructions in the expected format, the wire can be rejected, as it was for my Los Islotes buyer.

Most folks don’t send international wires on a regular basis, and, even if you do, it’s hard to keep up with all the particulars.

The easiest strategy these days is to initiate a wire online. The trouble is that online systems don’t work when trying to send a wire using a bank that requires several layers of intermediate and final beneficiary details. In a situation like that, you have to go into a bank branch to initiate the transaction in person.

When you do, don’t stand in line and wait your turn to speak with a teller. The typical bank teller in the typical neighborhood bank has never sent an international wire and probably wouldn’t be able to find the transfer’s destination on a map. You want to speak instead with a personal banker or a manager.

Engage the conversation confident in the fact that your bank can, indeed, wire your funds where you want them to go. Don’t let the banker you speak with try to tell you otherwise. Also, don’t let the banker try to talk you out of the transaction altogether. It’s your money, not his. What you do with it is none of his business (unless he’s also your money manager). You don’t have to justify your plans to him or anyone else (well, maybe to your spouse).

Wire Transfer Terminology and Fundamentals

Here are some fundamentals and some terminology for reference.

U.S. banks use what is called an ABA number, which identifies banks within the U.S. banking system. If you’re transferring money from one U.S. bank to another, all you should need is the recipient bank’s ABA number and the beneficiary’s name and account number (maybe their address, too).

International banks are identified by what’s referred to as a SWIFT code. A SWIFT code is all letters, no numbers, and it should be all you need for most international wire transfers. Sometimes the sending bank will require the intermediary bank’s details, as well, including that bank’s SWIFT code.

In Europe, the system is much simpler in my view and is based on the IBAN number. This is an aggregated number that includes the bank identification and the recipient’s account identification along with some other numbers to guide the transfer through to the recipient. With an IBAN number, nothing else is required for the money to arrive where it’s supposed to arrive, though most banks still request account names for confirmation.

Sending a wire from one currency to another creates further complications. Again, from a reader last week:

“The bank says they can’t send a wire to Singapore for me because they don’t have any Singapore dollars.”

Another case where the teller had no idea what he was talking about. The teller was correct when he told your fellow reader that his bank didn’t have any Singapore dollars to send, but that’s irrelevant. That’s what currency exchanges are for. In the case of a small local or regional bank, it may be necessary for your banker to contact his correspondent bank first, before initiating the wire, to get the exact U.S. dollar amount required to send the specific foreign currency amount, but don’t let your banker tell you he can’t send the wire at all. That’s just not so.

When sending a wire online, you typically can elect to transfer the funds in your currency or in the currency of the recipient. Again, online is always easier when it’s an option.

Back to the reader who wrote in to say that his banker insisted he couldn’t wire money to Singapore. Finally, thanks to the guy’s persistence, the banker came around and sent the wire. However, he wired the U.S. dollar amount rather than the Singapore dollar amount. Now the poor guy is due a refund in the amount of the extra Singapore dollars.

And now his banker is now telling him the bank can’t accept a wire from Singapore.

So it goes.

April 26, 2018by Corcoran Culleme
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Bowman Offshore Bank Transfers on Offshore transfers

A non-UK domiciled but resident client has used the remittance basis since 2008/09 and made an election under TCGA 1992, s 16ZA. Remittances have been made to the UK from a mixed offshore fund.

My non-UK domiciled client has used the remittance basis since 2008/09 and made an election under TCGA 1992, s 16ZA. He remitted a significant amount of funds to the UK in 2011/12 from a “mixed fund” foreign bank account (one of several).

The deposits have been analyzed between (broadly) income, gains and clean capital for every year. However, my queries concern the treatment of withdrawals that are not remittances to the UK or transfers to other foreign bank accounts.

First, it would appear that income, gains and capital of the fund should not be allocated to the alienation of funds used for personal foreign expenditure (e.g. payment of a foreign electricity bill). Is this correct? Such items would, of course, deplete the bank account without any unremitted funds being matched.

Second, $20,000 was withdrawn in 2009/10 to acquire some foreign shares that were sold at a $5,000 loss in 2010/11 (the $15,000 proceeds being deposited in the same bank account).

I have treated the withdrawal as an “offshore transfer” thereby preserving the source of the $20,000 under the anti-avoidance rules (ITA 2007, s 809R (4)). I am also aware of the requirement to trace foreign income and gains through a series of transactions (see HMRC’s manuals at RDRM35030) that prevent, for example, reinvested income being converted into gains.

My question is how the $15,000 receipt should be analyzed if the source of the original acquisition was $8,000 income, $3,000 gains and $9,000 capital. Is $8,000 income deemed to be deposited first, followed by $3,000 gains and finally $4,000 capital?

I cannot find a rule governing the order of priority. If the loss was large enough, some unremitted income could be “lost”, potentially giving double relief for the capital loss (reduction of unremitted income and the capital loss). Surely this cannot be right?

Could any readers shed light on this?

Reply from Nick Harvey, Dixon Wilson

The use of funds that are held overseas and used for personal foreign expenditure is treated as an offshore transfer on the basis that they are not onshore transfers because any transfer that does not fall within ITA 2007, s 809Q is automatically within ITA 2007, s 809R(5).

This is subject to the anti-avoidance rule in s 809R (6), which states that the funds transferred should not fall within s 809Q before the end of the tax year and, on the basis of the best estimate that can reasonably be made at that time, s 809Q will not apply in relation to them (ie that the funds subject to the offshore transfer are not subsequently remitted to the UK and there is no expectation that they will be in future).

Clearly, if the money has been spent on a foreign electricity bill, there is no such prospect and, as such, the personal foreign expenditure will result in a proportional reduction of the unremitted foreign income, capital gains and clean capital in the account.

With regard to Dollared’s second query, accounting for the original investment as an offshore transfer appears to be the correct approach. The problem, as Dollared states, is in interpreting the derivation principle where an investment containing the unremitted income and gains is sold at a loss.

HMRC’s Residence, Domicile and Remittance Basis Manual at RDRM35030 does address a similar scenario where £25,000 of unremitted income is used to purchase a car which is subsequently brought to the UK at a time when the car is worth just £14,000.

In this case, HMRC state that they would treat the original £25,000 income as remitted. Unfortunately, the manuals do not cover the position if the car was sold abroad and the £14,000 was remitted to the UK.

One would hope that a purposive approach enables one to limit the income and gains remitted to the amount of funds received in the UK. Any other approach would make it impossible, in many scenarios, to disclose remittances on a “worst case scenario” basis.

For example, a remittance of £100 from a mixed fund which has been in existence for decades should be accepted by HMRC as a remittance of £100 income if the taxpayer does not wish to pay for the professional costs of analyzing the funds passing through the account since inception.

However, if the derivation principle is taken to its extreme, there is nothing stopping an inspector arguing that the £100 could have derived from income of £1m which was invested (very) badly indeed.

It is arguable that each element of the $15,000 proceeds should be proportionally reduced (giving $6,000 income, $2,250 capital gains and $6,750) and full disclosure made on the 2011/12 tax return.

However, it may be more prudent to treat the proceeds in the way suggested by Dollared because this will provide the highest tax take. If the loss was larger (say $12,000), it would be sensible to treat the proceeds of $8,000 as no longer containing any clean capital or capital gains so that a subsequent remittance would be treated entirely as income of $8,000 (assuming taxable remittances are limited to the amount received in the UK as suggested above).

I am not sure that I agree with the suggestion by Dollared that such an approach could result in double relief (as a result of the reduction of unremitted income and the benefit of the capital loss). What if the $20,000 investment had become completely worthless?

The income/gains attaching to the offshore transfer could clearly never be remitted, but one would imagine that the capital loss (arising perhaps through a negligible value claim) in these circumstances would still be allowable under TCGA 1992, s 16ZA.

Dollared’s queries are a good reminder that the mixed fund rules are often unworkable in practice and my own experience is that HMRC will accept a pragmatic approach.

Closer look... remittances from foreign income or gains

The reply from Nick Harvey raises the issue of remittances derived from foreign income or gains. HMRC’s Residence, Domicile and Remittance Basis Manual at paragraph RDRM35030 provides examples of calculating the amounts of remittances from abroad where non-cash value is involved. In each of the examples, the person involved is a remittance basis user.

In HMRC’s “example 3”, Johanna is a remittance basis user whose son has guitar lessons with a master guitarist, Kurt, every week. Johanna has a timeshare apartment in Morocco and pays £8,400 from her relevant foreign earnings each year which allows her to use the apartment for four weeks every year.

In 2013/14, rather than pay Kurt in cash for the guitar lessons, they agree that he may use the apartment for two weeks in June 2013. Here the consideration (the use of the Moroccan apartment) for the service provided in the UK derives indirectly from Johanna’s relevant foreign earnings and the amount remitted is related to the amount of income and gains from which the consideration derives, i.e. £4,200.

In example 4, Marianne purchased a car abroad for £25,000 from her foreign chargeable gains. The car is therefore treated as derived from foreign income and gains. Instead of bringing it straight to the UK, the car is kept in Italy.

A few years later she brings the car to the UK for the use of her and her daughter. At this time the approximate market resale value of the car is £14,000. However, the amount remitted is still £25,000, i.e. an amount equal to the chargeable gains from which the property was derived.

HMRC’s example 5 shows the converse. Ali purchases a sculpture in Sweden in 2012/13 for £80,000 using relevant foreign earnings. He gives the sculpture to his wife who keeps it at her mother’s home in Stockholm.

In 2015/16 Ali’s wife brings the sculpture to the UK. The sculptor has become famous, and the work has appreciated in value to £120,000.

As a result of Ali’s wife bringing the sculpture from Sweden to the UK, Ali has made a taxable remittance of £80,000 in 2015/16, i.e. the original amount of foreign income used to purchase the sculpture.

April 10, 2018by Corcoran Culleme
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