I´d like to start this article with a question.

If you are reading this, you are probably interested in finance and international business. You most likely have your own company or are thinking about establishing one. If you have found us, you probably have a passion for business, or have a financial goal that you want to achieve.

Now that we have established your interests, here is the question:

After working for years or even decades to achieve your financial goals, would you keep your money in a jar under your bed? Your answer is very likely to be negative.

Well, the truth is that keeping your money in a jar under your bed is not very different than doing what most people do, that is putting their money on a bank account.

By putting your money on a bank account, all you are doing is to lend the money to the bank so they can use it as they please, but there are no guarantees that, during a crisis, in case you should need the cash, the bank will be able to give it to you. Let´s be honest, holding money in a bank account is just holding virtual money, that is, numbers on a computer screen.

Some may think this is too fatalistic a thought, but then again, I am a little over 30 years old and somehow thought that I would never see these kinds of things in my lifetime. The great depression, the world wars, the hyperinflation crisis in Latin America sounded like events that struck my parents and maybe forefathers but not me. At least that´s what I used to think.

But here I am and here we are, living and facing the worst economic crisis maybe in human history. I am talking, of course, about the coronavirus crisis.

These difficult times are unpredictable, and this may be the last big crisis that I am meant to struggle with, but I’m not taking any more risks from now on. Even after all of this is over, who knows when the next crisis is going to strike?

The next question is: how ready are you for the next big crisis?

How to protect my assets? 

Having an international bank account is also very important and we recommend great jurisdictions for these purposes, but that is not an effective asset protection tool in and of itself. You can use bank accounts for transactions, for cash if you need liquidity, for your company´s salaries and transactions, but the truly strongest asset protection tool has always been and continues to be the trust.

A tool such as the trust can protect you from huge global crisis like the coronavirus, or even more mundane ones (but not at all less threatening) like bad divorce cases, creditors, false claims and government persecution.

Why Nevis?

There are many interesting jurisdictions around the world when it comes to trust legislations, but one of Mundo Offshore´s favorites is the island of Nevis. The purpose of this article is to discuss why Nevis is a great jurisdiction for assets protection, business development and tax optimization.

So, let´s take a ride through some of Nevi´s best financial landscapes, shall we?

Saint Kitts and Nevis is a Federation composed by two islands that are placed in the Caribbean Sea. I am not going to dive deeply in the amazing Caribbean culture or in the breathtaking Caribbean landscapes that that can be found in the Federation. You are more than welcome to visit our country focus page on St Kitts or our “Expat living in” section.

Mundo

Mundo works hand in hand with its partner and parent company. We are talking about the oldest licensed trustee company in Nevis, which have been establishing Nevis trusts since 1994, and are the preferred provider of many international firms, multifamily offices, and individuals. Nevis trust legislation is considered to be (along with the Cayman Islands and the Cook Islands) the best and most comprehensive asset protection legislation in the world today.

Nevis trust

There are several reasons why the firm decided to work with Nevis as a trust jurisdiction back in 1994:

1-The Fort Knox:

Due to the comprehensive and solid protection of the Nevis International Exempt Trust Ordinance (NIETO), a Nevis trust is a highly secured structure. Not even the IRS was able to set aside a Nevis trust that was properly established. For this reason, the Nevis trust was many times described as the “Fort Knox” of asset protection.

2-Unbreakable structure

Nevis courts will never set aside a Nevis trust under any circumstances. Providing the trust was properly established, it will be safe from any claims including ex-spouses, bankruptcy, creditors, false claims, persecutions, forced heirship, disputes, pandemics crisis, etc. The world may be falling apart but you can rest assured that your assets will be protected and safe for your own benefit and for those you love. 

3-No foreign legal actions

The jurisdiction of Nevis does not recognize foreign judgements. If somebody starts a legal action in Nevis, they will not only have to pay extremely high legal costs, but they will also be faced with the fact that Nevis law does not allow properly formed trusts to be set aside for any reason whatsoever.

4- Tax free

Nevis does not impose tax on foreign sourced income of a Nevis trust. This means, if you hold assets abroad such as brokerage accounts or real estate, if they are property of the Nevis trust, then these assets are free of tax.

Nevis trusts are tax-free vehicles, allowing you to grow your family money free from taxation forever. 

5- Inheritance planning 

Nevis fosters the concept of dynasty trusts whereby families can hold funds in perpetuity. That is enough for your children and their grandchildren to take advantage of the immense benefits of zero taxation and asset protection.

6- Safe banking

Banking in Nevis is confidential and safe and Nevis secrecy protects the account holder’s information to a very high degree. Indeed, claimants against trusts will not be able to obtain copies of bank statements or trust information. 

Control everything

It was John D. Rockefeller who said: “Own nothing, control everything”. The wealthiest person in modern times has undoubtedly taught us a lesson that is still prevailing.

This is a sentence that is used as the motto for asset protection philosophy and strategies. And what does it mean? This is a very simple principle: what you don´t own, can´t be taken away from you. But, at the same time, you want to have control over your assets.

Let´s see an example. Let´s say you want to protect your assets (real estate, dividends, cash, works of art, etc.). If you put these assets into a trust, the trustee will now be their custodian, and the assets won’t be owned by you anymore. We have reached an excellent point considering that your assets now are protected from the evils we already mentioned above.

However, there is another stage that needs to be considered and that is that now, your assets are under the control of a trustee which can be a person or a trust company. You can always find a person you trust or one of the many trustworthy trust companies that we can recommend but let´s remember the motto: “Control everything”.

The perfect asset protection structure includes control. This is what Rockefeller taught us.

If you establish an LLC in Nevis, for example, as the custodian of the trust, you can then structure everything in such a way that you are the manager of the LLC.

The outcome would be this: your assets are owned by the trust (not by you) and managed by the LLC, which is controlled by you. Thus, the perfect circle is closed and you don´t own our assets but are still in control. 

Describing the Nevis LLC

An LLC can be established in different jurisdictions but Mundo Offshore highly recommends Nevis again because of the strong confidentiality and protective laws. Nevis offers some of the best asset protection legislations in the whole world.

Nevis´s LLCs are very similar to LLCs in Wyoming or Delaware, when it comes to structure.

A limited liability company has many of the lawsuit protection advantages of a corporation. Plus, it has the asset protection provisions of a limited partnership.

Let´s go through some of Nevis LLC´s most interesting advantages:

1-Outstanding privacy level

Nevis LLC is one of the most confidential structures in the world. Under Nevis legislation, all information from members or managers of LLCs is not available to public records and it´s not available to any local or foreign agencies. If there are not serious criminal allegations such as drug-trafficking or terrorism, then no agency, firm or lawyer in the world will be able to access the member´s personal information.

2-Asset protection

The members of an LLC are not liable for the company´s financial obligations. Being an LLC, the members are not shareholders, meaning they don´t own shares and therefore these can´t be seized by a court of law.

The Nevis legislation provides a high level of protection against creditors. If someone wants to start a legal action against an LLC, he or she must post a 100,000 dollars bond before even filling the paperwork. With this kind of laws, anyone would think twice before starting a legal process against a Nevis LLC structure.

Also, the statute of limitations for fraudulent transfer is only two years. Let´s suppose you transfer your assets to your Nevis LLC, only two years later, if someone tries to seize these assets, the court won´t even consider it.

These laws protecting against creditors are applicable for both single-membered and multi-membered LLCs.

3- Other benefits

● The manager of an LLC can control the assets without having any ownership over them.

● The LLC can have any number of members, even one member is allowed, and the members can be legal or natural persons of any nationality.

● The members are allowed to amend the articles of organization and also to merge the company with other domestic or foreign entities.

● The members may transfer their interests to other members. For example, let´s suppose the LLC is owned by a husband, wife and two children. If the father has got creditors after his share of the company, he can transfer his interests to other member (wife or children, in this case), thus protecting the assets from creditors.

● The LLC can be managed by the members of by someone especially designated for this purpose.

● The LLC is an excellent structure that can be used for group investments or joint ventures. It works like a limited partnership but with the advantages of a corporation and the liability protection inherent to the Nevis LLC.

● Nevis doesn´t levy taxes on foreign-earned income, including corporate, income, withholding, stamp tax.

● Due to the fact that the Federation is looking to attract foreign investment, an LLC can be established in only 24 hours, after all documents were submitted and fees paid.

● Low initial costs and low annual fees.

Taxation aspects under the new law

In order to clarify the status of tax residence for all corporations in the Federation of Saint Kitts and Nevis, the Federal Government of this country has established amendments to the Income tax Act. These amendments are based on the “control and management” status of a corporation and on the Permanent Establishment (PE) according to the OECD considerations on this matter.

Thus, the new regulations will apply since September 2020, and all entities will have to file their tax reports by April of each year. However, the tax return and paying of taxes for the period corresponding to April 15th, 2020 has been deferred.

The new law divides the entities in three different levels, according to which they will file taxes differently and will belong to a different type of taxation regime:

● Entities with no central management nor control on the island of Nevis, and with no Permanent Establishment status, will be exempt of taxation in the Federation of Saint Kitts and Nevis.

● Entities with no central management and control on the island of Nevis, but with Permanent Establishment status, will pay Corporate Income tax on the profits generated in or remitted to the Federation.

● Entities with central management and control on the island of Nevis, will pay Corporate Income tax on their worldwide income.

What does this mean?

In simple words, it means that, in order to be completely free of worldwide income, a Nevis LLC or NBC should not have its management and control center on the island.

If a Nevis company, for example, has income derived outside St. Kitts and Nevis, and it is managed and controlled also from outside the Federation, it won’t have any taxable income. However, remittances to the Nevis company from a foreign jurisdiction may be subject to withholding taxes from the paying jurisdiction, but there will be no double taxation. 

It is important to note that all offshore companies in Nevis which are not managed and controlled there will still have to file a modified annual tax return demonstrating no taxable income. 

The NIETO Trusts remain exempt from taxation and will have no reporting to do under current plans.

To sum up, the Federation of Saint Kitts and Nevis offers great asset protection tools and it remains a great jurisdiction for tax optimization, even with the new legislation in place.

If you would like to know more about the law amendments and about Nevis´s structures (LLC, multiform foundation, trust), please contact us and ask for a consultation.

Mundo Offshore helps you protect your assets and achieve your financial goals.