We at Escape Artist don’t give investment advice… and this column is no different. My objective with the best offshore investments for your IRA in 2019 is to point out some of the most interesting international investments available. To give you a starting point for your research. We don’t earn a fee or commission on any of these products.
In no particular order, here are my best offshore investments for your IRA in 2020
1. Residency in Panama through the friendly nations reforestation visa
What makes Panama residency one of the best offshore investments for IRAs in 2019 is that you get a decent return plus residency. Considering you’re reading a website called Escape Artist, it’s a safe bet you’re looking for some unique options offshore.
Here’s the offer:
Invest $20,000 into one of Panama’s approved reforestation programs and get residency for free. After 5 years of residency you can apply for citizenship and a second passport.
In order to avoid the self dealing rules for IRAs, you will need to pay some fees out of your personal account. The investment can come from your IRA with fees paid from your savings.
This program is only open to citizens of the United States or the top 50 countries. If you’re not a US citizen (you earned your IRA as a US resident but never gained citizenship), you should consider Nicaragua’s reforestation program.
You can invest $35,000 into Nicaragua’s reforestation visa program and get residency in this country. Legal and other fees will depend on your country of citizenship, but can be as high as $10,000 per person.
Nica also leads to citizenship after 5 years. The big difference between the programs is Nicaragua’s physical presence requirement. You must spend 180 days a year in Nica where Panama doesn’t have such a rule to maintain your visa.
2. Cryptocurrency and Initial Coin Offerings
The IRS is going all out against cryptocurrency, many crypto opportunities are only available offshore, and early stage ICOs have been pushed out of the United States. If you want maximum return on your crypto investments, you need to be offshore.
The IRS recently won a decision against CoinBase, the largest US crypto exchange, requiring the company to turn over records from it’s top 14,400 clients. The IRS will audit all of these lucky individuals and make examples of many of them. I guarantee you that the IRS is just getting started and that all out war will erupt in 2019.
Plus, many opportunities in crypto are not available in the United States. For example, many US exchanges don’t pass on all the “forked” coins. The exchange gets the forked asset, but keep them rather than paying it over to their clients. The first exchange to guarantee to pass on all tokens is OurDAX in China and Mexico.
Finally, the US SEC has pushed earlys stage ICOs out of the United States. These have all moved offshore and are only available to IRA accounts traded through an offshore IRA LLC.
The SEC ruled that US ICOs must follow the same rules as US IPOs. This means that companies must spend hundreds of thousands of dollars, if not a million+, on legal, auditing, and compliance before going public. Thus, only the largest and best funded ICOs will come off in the United States.
True startups, that haven’t gone through multiple venture capital funding rounds, can’t afford to issue a US ICO. They will be forced to move abroad and block access to most US investors. If you want access to early stage ICOs, you will need to meet them offshore.
3. Real estate in zero tax countries
When you buy real estate in your IRA, you eliminate capital gains tax on the sale. These gains flow back into your IRA tax free (taxed when distributed if a traditional account).
When you buy foreign real estate in a high tax country using your IRA, you lose some of this benefit. For example, when sell a property in Mexico, you pay 25% in capital gains tax and net flows back to your IRA.
Therefore, the best offshore investment in real estate for your IRA in 2019 is property in a low or zero tax country. Buy property in countries like Belize, Switzerland, Singapore, Cayman, New Zealand or Hong Kong, and pay zero capital gains tax. This will allow you to maximize the tax benefits of your IRA.
If you have a sizable Bitcoin wallet, you might like to know that you can also buy real estate in Belize using Bitcoin. This is the first country where you can complete the entire transaction in Bitcoin.
4. Leveraged Investments
When you invest with leverage in a US IRA, you pay Unrelated Business Income Tax (UBIT) on the gains attributed to that leverage. For example, you buy a home in California in your IRA with 50% of the money coming from your IRA and 50% from a non-recourse mortgage.
As rental profits come in, and when you sell the property, you’ll pay UBIT on 50% of your net income / gain. UBIT is currently taxed at 35% and you pay this on the gain before the money gets to your IRA.
Had you done this transaction in Belize, and set-up a UBIT blocker corporation, you would pay zero UBIT and zero capital gains tax on the sale.
This is all to say, you can use leverage offshore and avoid the 35% IRS “penalty.” The same rules about borrowing in an IRA apply offshore as do onshore. Only non-recourse loans are permitted.
I hope this article on the best offshore investments for your IRA in 2019 has been helpful. For more information on any of these opportunities, please contact us here.
If you are interested about opening a self-directed IRA please reach out to us here
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