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(Editor's Note: Mirror, mirror, on the wall, what’s the very best tax haven of all? In June 2003, we rated existing tax and asset havens, choosing the four best worldwide.2 You can read this issue on our website. Our top choices remain unchanged today. As we did in making our original choices, we considered: 1) government/political stability; 2) favorable laws, judicial system; 3) legal entities for estate planning, asset protection and/or business operations; 4) financial privacy/banking secrecy; 5) low or no taxes imposed on foreigners who invest, bank or do business.)  No. 1: And The Winner Is…Switzerland, Still The World’s Best Money Haven The banks and financial institutions of this historic European Alpine nation manage one third of all the world’s private wealth—an estimated US$4 trillion. That fact partially explains why we rate Switzerland as the safest of all offshore asset havens. (It’s not really a tax haven, since it does impose income and other taxes). With its centuries of experience and professionalism, Switzerland is regarded worldwide as the safe haven for international banking, investment management and insurance products of all types.  And in a world in which financial privacy is now at a premium, Switzerland still stands by its statutory guarantee to preserve banking secrecy, first adopted in 1935. In the last year, the Swiss continued to rebuke demands from the European Union and the Organization for Economic Cooperation and Development (OECD) to limit, or even abolish, its traditional banking confidentiality. Indeed, in one important respect Swiss banking secrecy is more secure than ever, thanks to the parliamentary election victory by the conservative Swiss People’s Party. This gave conservatives, who favor maintaining banking secrecy, an additional seat on the governing federal council. The new parliament in a bold, anti-EU move, promptly voted to enshrine banking secrecy in the national constitution. This conservative trend also probably means no entry into the EU, which polls show most Swiss view with skepticism.  Switzerland’s refusal to buckle to the EU and OECD also has likely doomed the notorious EU “savings tax directive,” scheduled to become effective in January 2005. The directive obliges EU nations to exchange tax data on the savings of their citizens in other EU nations. Alternatively, EU members may impose a steep withholding tax on income from savings. But the directive contains an important opt-out provision: to go into effect, all major financial centers, including Switzerland, must agree to its terms. While the Swiss agree in principle to impose a withholding tax, they refuse to sign the directive until other pending issues with the EU that would weaken banking secrecy are settled.

The Sovereign Society, headquartered in Waterford, Ireland, was founded in 1998 to provide proven legal strategies for individuals to protect their wealth and privacy, lower their taxes and to help improve their personal freedom and liberty. The Society's highly qualified contacts recommend only carefully chosen banks and investment advisors as well as financial and legal professionals located in select tax and asset haven jurisdictions around the world. The Society provides advice concerning the establishement and operation of offshore bank accounts, asset protection trusts, international business corporations (IBCs), private foundations, second citizenships and foreign residency, as well as practical safeguards for financial, Internet and personal privacy. The Sovereign Society stands alone in fulfilling this singular, international offshore service role for its members. To learn more about our organization and how you too can become a member, please click here.

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Protecting its tradition of bank secrecy, though, doesn’t mean that Switzerland is a lawless mountain enclave—quite the contrary. Money laundering is not tolerated. Investigations in recent months in which the Swiss assisted included the Parmalat bankruptcy, the Yukos Russian oil company seizure and bank accounts formerly belonging to Nigerian dictator Abache. 

However, Switzerland insists that due process be followed when investigating criminal activity. For instance, procedures now permissible under U.S. law, where the FBI can investigate an account based on a secret declaration by an agent, not reviewed by any court, are not tolerated in Switzerland. Moreover, tax evasion is not a crime; tax fraud is, but fraud is very narrowly defined. 

Bank secrecy and due process are not the only reasons we recommend Switzerland. It also features some of the world’s strongest asset protection laws for insurance products (in some cases tax deferred under both Swiss and U.S. law); one of the world’s strongest currencies (the Swiss franc); and laws that permit wealthy foreigners to take up residence for an annual, negotiated, tax payment. All these factors contribute to our top ranking for this Alpine enclave.

Recommended Sovereign Society Council of Experts Contacts in Switzerland

Swiss First Bank. Julia Fernandez c/o Weber, Hartmann, Vrijhof & Partners, Ltd., Adliswil, Switzerland. Tel.: +(41)1-709-1115. Fax: +(41)1-709-1113. E-mail: whvp@active.ch. Link: http://www.swissbankaccount.com. The Sovereign Society has an agreement with this bank to provide a “Convenient Account” for members through the bank’s subsidiary in Vaduz, Liechtenstein. To establish the account, request forms from the office of Robert Vrijhof, who offers members personal assistance in completing these forms and will accommodate account arrangements for members on behalf of Swiss First Bank. 

Weber, Hartman, Vrijhof & Partners Ltd., Adliswil, Switzerland. Tel.: +(41) 1-709-1115. Fax: +(41) 1-709-1113. E-mail: whvp@active.ch. Link: http://www.swissbankaccount.com. Partners Rob Vrijhof and Adrian Hartman offer a wide range of services including investment counseling, formation of companies and trusts and estate planning. 

NMG International Financial Services, Zurich, Switzerland. Tel.: +(41) 1-266-2141. Fax: +(41) 1-266-2149. E-mail: marcsola@nmg-ifs.com. Link: http://www.nmg-ifs.com. Managing partner Marc Sola has extensive experience in Swiss life insurance and annuities.

Henley & Partners, AG, Zurich, Switzerland. Tel.: +(41) 1-267-6090. Fax: +(41) 1-267-6091. E-mail: christian.kalin@henleyglobal.com. Link: http://www.henleyglobal.com. Partner Christian Kälin is a specialist in tax advantaged residency and provides international tax planning services for private clients worldwide. 

EurAxxess AG, Ebmatingen, Switzerland. Tel.: +(41) 1 980-4281. Fax: +(41) 1 980 4255. Toll-free U.S. message center: (866) 945-8799. E-mail: info@euraxxess.com. Link: http://www.euraxxess.com. EurAxxess provides assistance with opening accounts at major European banks, asset management, Swiss insurance policies, precious metals accumulation programs (Perth Mint Certificate) and other offshore services. Dr. Eric Stoeger is chairman.

No. 2: Panama: Privacy And Profits Offshore

Alone among offshore havens, Panama combines maximum financial privacy, a history of judicial enforcement of asset protection-friendly laws, a strong anti-money laundering law, plus tax exemptions for foreigners. Thanks to its unique relationship with the United States, it also exercises a high degree of independence from outside pressures, especially those emanating from Washington. And unlike the British overseas territories of Bermuda and the Cayman Islands, it isn’t under the control of London.

In many ways, Panama is ideally suited for the offshore investor who wants to enjoy the increasingly rare privilege of strong, legally guaranteed financial privacy and no taxes—corporate or personal. Unlike Bermuda and the Cayman Islands, Panama pointedly refused to cooperate in the OECD’s “harmful tax practices” initiative that would have committed it to exchanging information with tax authorities in high-tax OECD countries.3 And in July 2003, when Panama’s President, Mireya Moscoso, met President Bush at the White House, she refused to even discuss repeated U.S. requests to sign a tax information exchange agreement (TIEA) that would have permitted IRS fishing expeditions into Panamanian bank accounts.

According to Canada’s Fraser Institute, Panama is near the top of the list of the world’s freest economies. Panama has adopted more than 40 laws protecting foreigners’ financial and investment rights, including the Investments Stability Law (Law No. 54), which guarantees foreign and local investors equal rights. 

Panama’s location at the junction of North and South America makes it a natural base for world business. Financial services and trade contribute 80% of Panama’s gross domestic product. The current 80-plus banks include 58 multinational banks representing 30 countries. They hold 72% of a reported total US$40 billion in total assets. In 2004, the International Monetary Fund concluded that Panama’s banks were both sound and profitable. 

Panama is also a retirement haven. The law provides important tax advantages for foreigners who wish to become residents. The only significant requirements are good health and a verifiable monthly income of at least US$500. There are no local taxes on foreign income and you can import your household goods tax-free.
Far less expensive than Switzerland, Panama remains one of our favorite offshore venues. 

Recommended Sovereign Society Council Of Experts Contacts In Panama

Trust Services SA.  Panama, Republic of Panama. Tel.: +(507)269-2438 or +(507)263-5252. Fax: +(507)269-4922 or +(507)269 9138. E-mail: fiduciary@trustserv.com. Link: http://www.trustserv.com or www.trustservices.net. Licensed in Panama since 1981, this firm specializes in offshore corporations and trust formation and administration. Derek R. Sambrook is the managing director. 

Rainelda Mata-Kelly, Panama, Republic of Panama. 
Tel.: +(507)263-4305. Fax: +(507)264-2868. E-mail: rmk@mata-kelly.com. Link: http://www.mata-kelly.com. Ms. Mata-Kelly specializes in Panamanian administrative, commercial and maritime law and assists clients with immigration, real estate, contracts, incorporation and other legal issues. 

Greg Geurin, Panama, Republic of Panama. Tel.: +(507)264-2204. E-mail: panama@internationalliving.com. Mr. Guerin directs the operations of International Living in Panama and has excellent contacts in the Panamanian legal and real estate communities.

No. 3 Liechtenstein: The World’s Oldest Tax Haven

With asset protection laws dating from the 1920s, a host of excellent legal entities designed for wealth preservation, and strict bank secrecy guaranteed by law, this tiny principality has it all—plus continuing controversy about who uses it and why. 

Tiny Liechtenstein (16 miles long and 3.5 miles wide, population 32,000), nestled in the Alps between Switzerland and Austria, has existed in its present form since 1719, when the Holy Roman Emperor Charles VI granted it independence. Until the end of World War I, the tiny principality, with no natural resources, was one of the poorest countries in Europe. 

But the “Law on Persons and Companies,” enacted in 1926, changed everything. It authorized a variety of low-tax legal entities that provided some of the strictest statutory asset protection and privacy protection in the world. With minor amendments, the law remains in effect. And its popularity among tens of thousands of the world’s wealthiest families has helped propel Liechtenstein to top ranking among the world’s wealthiest nations. 

Challenges arose in 2000, when the Financial Action Task Force (FATF) placed Liechtenstein on its money-laundering blacklist.4 It was removed after Liechtenstein modified the 1926 law to provide greater judicial assistance to foreign authorities investigating criminal activities. But Liechtenstein has not budged against EU and OECD pressure to end bank secrecy with respect to tax investigations. 

In 2001, Liechtenstein signed a mutual legal assistance treaty (MLAT) with the United States, scheduled to take effect in August 2003. The treaty would provide investigative assistance in cases of mutually recognized crimes, including tax fraud. While the U.S. Senate ratified the treaty, controversy developed in Liechtenstein over whether the MLAT contravened existing strict privacy laws and should therefore be rejected. As of this writing final approval is still pending.

A controversial development in the last year was the demand by the then-ruling prince, Hans-Adam II, to amend the constitution to give him greater powers. In a 2003 vote, an overwhelming majority of Liechtenstein citizens voted in favor of this proposal. The ruling prince (now Prince Alois, Hans-Adam’s son) has the right to dismiss governments, approve judicial nominees and can veto laws simply by refusing to sign them. However, Prince Alois is expected to continue his father’s policy of defending Liechtenstein against the demands of the OECD, the EU and other busybodies that try to coerce tax haven nations. 

Liechtenstein remains a top choice as a tax and asset haven. One measure of proof: the principality remains on the now short OECD blacklist of “uncooperative” nations that refuse to agree to tax information exchange.

Contacts In Liechtenstein

The contacts listed for Switzerland also provide services in Liechtenstein. In addition, you may contact: 
First Advisory Group, Vaduz, Liechtenstein. Tel.: +(423) 236-0404. Fax: +(423) 236-0405. This firm specializes in setting up companies and trusts, company management, asset management and represents clients before Liechtenstein courts. 

No. 4 Hong Kong: The Gateway To China

Although the Communist government in Beijing controls it, Hong Kong remains relatively free, a reflection of Beijing’s need for Hong Kong as its financial powerhouse. 

The 1997 peaceful handover of a democracy to a Communist-controlled dictatorship was unprecedented in history. However, the outcome has been far from pleasant. 

While Hong Kong retains a strong set of common law–based statutes governing banking and finance, Beijing has clamped down on previously existing civil rights, including a free press, the right of assembly, freedom of religion and many aspects of due process. Beijing has also announced that it will not allow fully democratic elections in 2006 and 2007. 

Despite this uncertainty, Hong Kong continues to thrive financially. Hong Kong is China’s banker, investment broker and go-between in what is now a multi-billion annual trade flow. China has too much invested here to destroy it all in a fit of rigid political ideology. Today, 30% of Hong Kong bank deposits are Chinese and more than 2,000 Chinese-controlled entities now do business there. Moreover, in the past 15 years, some US$150 billion of foreign direct investment has flooded into China—60% of which came from, or through, Hong Kong.

If you’re doing business in Asia, and especially in China, this is the place to be. Over 77% of foreign forms based in Hong Kong surveyed said they felt that it was an advantageous location for them due to advanced telecommunications networks, a free trade environment, low taxes and effective regulation. 

In a strange twist of world economic fate, Hong Kong has benefited from the recent clampdown by the EU and the OECD on tax havens. That’s because it has clout, in its own right and as a special economic zone of the world’s most populous nation. Wealthy account holders from the Middle East started shifting cash towards Asia from Europe and the U.S. in the wake of the Sept. 11, 2001, terror attacks.

While the outcome is far from certain, Hong Kong could quite possibly become the Switzerland of the Far East. We’ll keep you informed.

Contacts In Hong Kong

Henley & Partners Far East Ltd. Tel.: +(852) 2525-7818. Fax: +(852) 2140-6833. E-mail: hongkong-office@henleyglobal.com. Jack Flader, Managing Director, can assist with company formation and administrative services, as well as banking and legal introductions.
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Robert Bauman is Legal Council for The Sovereign Society. He is a former member of the U.S. House of Representatives from Maryland. He is a graduate of the Georgetown University Law Center (1964) and the School of Foreign Service (1959). He also edits the e-mail newsletter, The Sovereign Society Offshore A-Letter.

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