One of the advantages of using Sovereign Management Services S. A. for all of your offshore needs, is that we offer a one-stop-shop. Unlike other smaller offshore firms in our industry, we offer complete privacy because we offer all of our services from in-house. Incorporations, Investments/Brokerage Services, Banking, etc. can all be done under one roof without going through several different firms, thus keeping all of your information confidential and private.

Our clients have many different reasons for setting up an International Fiduciary Structure (IFS). Some for asset protection (of real estate, securities, retirement accounts, cash, etc) or simply for the purpose of investing in an environment that gives them the tax benefits that offshore investing does. The tax laws in Canada, US, EU, Australia, and New Zealand as well as other countries do not require foreign corporations which are not directly involved in business activities domestically (i.e. the Corporation does not have physical offices or conducts business domestically) to pay tax on capital gains obtained through investment in that country’s markets (stocks, bonds, futures, options, commodities, etc.).

Nevis law does not require Nevis Corporations to pay tax on any income generated from business activities conducted outside of Nevis, nor does it have a tax on capital gains generated from investment in securities of companies outside Nevis.

Our upgraded Nevis Corporation / Panama Foundation combination with professional management is often referred to as an "International Fiduciary Structure". This differs from our other professional management IBC/Foundation package in that it also includes a Testamentary Trust. The main components of this package are as follows:

• Nevis Corporation whose shares are held by a
• Panama Private Interest Foundation, and a
• Panama Testamentary Trust is used as the sole beneficiary of the Private Interest Foundation and lists all of the client’s beneficiaries.

This structure allows you to legally invest through the Nevis Corporation in many different global markets without the burdensome capital gains taxes. The structure also provides some of the basic entities necessary for the protection of assets such as real estate, securities, domestic businesses, and just about any other asset you can think of. There are a number of other tax deferral techniques through offshore structuring that can be utilized through your business or consultancy income, sale of real estate, real estate rental properties, retirement plans, and many other forms of income.

The basic structure we recommend consists partly of a Panama Private Interest Foundation. The Foundations main purpose is to hold the shares of the Nevis Corporation.

Why do we not recommend that you hold the shares of the Nevis Corporation?

If you maintain ownership of the Panama Corporation, then the Panama Corporation is considered under US and many other countries[ tax laws to be a "Controlled Foreign Corporation" (CFC), and therefore the client would be required to pay tax on the capital gain income resultant from the investment activity of the Panama Corporation. If the client does not own the Nevis Corporation (the foundation owns it), then they are not required to pay tax on the capital earned by it.

Why use a Foundation instead of a Trust?

The use of the International Private Interest Foundation for asset protection does not exclude the possibility of using a testamentary Trust, but it would be used in a different way. Previous to the enactment of antitrust laws in several countries, the use of a foreign trust as the entity that held the shares of an offshore company was recommended as an asset protection strategy. The new laws required that any assets held in foreign trusts be reported and taxed. As a result almost all offshore legal experts recommend the Foundation be used in place of the Trust.

How does the client maintain control over the assets held in the Nevis Corporation?

Under the Panama Private Interest Foundation laws, the client controls the foundation as the "Founder/Protector", thus controlling all of the assets owned by the foundation, including the IBC (Nevis Corporation). The foundation does not have an owner, only a Founder (Protector), a Foundation Council and beneficiaries of the foundation which are listed in the Testamentary Trust. The founder/protector creates a letter of wishes, which will designate the Testamentary Trust as the instructional guide to specify beneficiaries of the foundations assets. Upon the client’s death, the assets held in the foundation will be distributed to the appropriate beneficiaries as the client has listed accordingly, without legal delays or deductions.

Why does the client not have to report assets held in the testamentary trust?

The trust is not funded until the client’s death. If the trust is not funded, then there are no assets in it that can be required to be reported.

Does the client have to report assets held in the Foundation?

Laws do not require that the client report any assets held in a foreign foundation.

How does the client stay protected and completely confidential?

Our goal is to offer our clients complete confidentiality. In order to do this correctly, there cannot be a trace of any of the client’s information on any of the public records when registering the Private Interest Foundation. This is why we offer a nominee foundation council for the Foundation since all Panama entities require disclosure in the public registry of the required minimum three directors. According to the by-laws of the foundation, the "founder/protector" is not required to be registered publicly and therefore the founder/protector document can be kept private and confidential.
Once the client establishes an offshore structure, how can they send funds to the Nevis

Corporation for accomplishing their investment objectives?

If the client is going to invest a large amount of funds, we normally recommend that the client purchase a Private Annuity of equal value from their Nevis Corporation in return for the funds the client sends to it. The reason for this is simple. If the client just sends funds to the Nevis Corporation without a reason or something in return of equal value, then the funds could be considered a "gift", and therefore a gift tax could be imposed. When the client sends funds in return for the annuity of equal value, the transaction is a legitimate purchase of a Private Annuity from the Panama Corporation, and the funds are not taxed. This is a completely legal transaction and the funds in the annuity investment are deferred until the client begins to receive payments from the annuity. The annuity can be arranged to begin making monthly payments in 5, 10, 15, or 20 years. If the client chooses, they can also use the Annuity payments as a method of repatriating the funds back to their domestic country, although a tax consequence would then occur if the client chose to do so. Once the funds are in the Nevis Corporation, they can be directed or invested in whatever the client wishes.

How can the client get funds back to their domestic country without tax liability?

There are several techniques the client can use to repatriate funds without the tax liability. One way to repatriate a large amount of funds at one time is to obtain the funds in the form of a loan from the Nevis Corporation. The client can arrange the loan in the form of a balloon note payable in 20 years, then renegotiating the loan when the loan matures. This is a completely legal transaction. Normally the loan would be backed by real estate equity, shares in their business, or some other form of collateral

If the client wants to transfer securities to their Nevis Corporation and later sell the securities without tax consequences, can this be done?

Yes, this can be done. The procedure is as follows: The client establishes an IFS and a brokerage account, and sends the statement of the brokerage account they wish to transfer securities out of, to us. We prepare DTC instructions for the client and send them to the client for the client’s signature. The client returns the signed DTC instructions to us and we send the instructions to the client’s broker. The broker transfers the securities to the Corporation's broker. The Corporation issues an annuity of equal value to the client in return for the securities. Once the securities are in the Corporation's possession, they can be re-invested or sold by the client without tax consequences. Normally, the client would be set up as the investment advisor of the Corporation, thus given signatory authority over the brokerage account.

How can the IFS be used to reduce taxes from domestic business income?

There are many ways that the IFS can be used to reduce taxes on business income. One way is to arrange that the Nevis Corporation invoices the domestic business for services provided. This enables the domestic business to send funds offshore as payment for services rendered by the Panama Corporation and at the same time creates an expense that can be used to reduce the domestic business' income, thus paying less tax. For import/export businesses, a separate Nevis or Panama Corporation could be set up to serve as a re-invoicing company, thus creating a middleman between the domestic importer and the foreign supplier. The Nevis or Panama Corporation marks up the cost of the goods to be imported, thus leaving less income for the domestic business, and the difference ends up offshore. See re-invoicing services. Another way for reducing a large amount of taxes is to set up a captive insurance company that would invoice the domestic business (normally used for medical practices) for insurance premiums. The domestic business sends payments for these premiums offshore and at the same time uses these premiums as expenses, thus paying less tax. The funds are then invested however the client chooses once the funds are offshore.

How can real estate be protected through the IFS?

Normally, depending on the client’s objective, we would recommend a domestic corporation or limited liability company to hold the real estate or place a mortgage on the property, thus absorbing any equity in it. As long as there is no equity in the property, it will not be attractive to creditors in the case of a frivolous lawsuit or dispute. If it was a U.S. based client a Delaware or Nevada corporation would be owned by a separate Private Interest Foundation to minimize taxes on the sale. The Foundation in effect establishes a Delaware Corp. The Delaware Corp. issues a bond to the Nevis Corporation, and the Nevis Corporation transfers funds to the Delaware Corp. The Delaware Corp. then issues you a reverse mortgage on the real estate for $900,000. The funds never actually reach your personal account, because you have requested that the funds go directly to the Nevis Corporation to purchase a Private Annuity from it with those funds. You sell the house for $1 million. You pay the Delaware Corp. $900,000 for the mortgage. The Delaware Corp. pays the Nevis Corporation $900,000 for the bond. The funds are now offshore and can be invested tax free, and your tax liability has been reduced or eliminated.

How does the client establish an offshore IFS?

The first step is to select a name for the Nevis Corporation and the Panamanian Foundation. These names are indicated on order form. The client submits the order form to us, and then sends a legible scanned or faxed copy of the their passport. The US$5,800 payment can be sent a variety of ways as indicated on the last page of the order form.