Dateline: Istanbul, Turkey
“Please take one. Sir, take one… it’s poison.”
So goes the call of sellers offering Turkish nuts, spices, and teas enticing passersby to try their free samples. While merchants at Istanbul’s tourist bazaars are notoriously closed to negotiating on price, they are excellent at getting people into their stalls, where they can corner and close them.
Few escape their grasp.
It was two years ago almost to the day that I stood on this same stretch of Istanbul’s remarkable Bosphorous and predicted to several of my friends who had businesses in nearby Cyprus: your money will be confiscated within six months.
Of course, it only took four months for the bail-in in Cyprus to put a freeze on the accounts of pretty much every small business. What the mainstream media brushed off in late 2012, people here in Turkey knew was coming.
Today, I find myself back overlooking the same wavy waters and listening to the same cries of “Bosphorus! Bosphorus! Bosphorus tour!”
While I’m not one for tourist attractions, I just can’t help standing and taking in the beautiful view here and the spectacle of global commerce that comes with it.
But there is another thing I’ve been noticing as I walk around Istanbul. While it may be a bit annoying to some other tourists, for me it’s a great reminder about the importance of knowing your market.
Every time a white tourist passes by one of Istanbul’s ubiquitous shoe shine men, the merchant will drop one of his shoe brushes on the ground.
And then keep walking.
The shoe shine guys have figured out that the US person or European they know is walking behind them will be all too quick to run up and tell them how they dropped their brush.
The shoe shine man will then appear to be out of it as he retrieves his brush and offers the friendly tourist a shoe shine as a reward. While it might seem to be free, tourists who fall for this “scam” end up paying a fortune for their “free” shoe shine.
You’ll never see the shoe shine guys pulling this on Arabs or Asians or the local Turks. In the hour I spent people watching in the city center, I saw the scenario play out again and again.
These capitalists figured out who their market is and what makes them tick. Then, they go after that market exclusively.
Of course, knowing what market to target with your own business is equally important. We discussed just the other day about how Istanbul, which has a few strikes against it in my opinion, is still high on my list of investment destinations to consider for the sole reason that the market here is made up of Middle Easterners seeking a nearby safe haven.
However, going offshore requires you to pay attention to make sure that your needs are being met and you have found the best bank, lawyer, or service provider for your specific needs.
The internet is littered with armchair expats and salesmen who tout one-size-fit-alls solutions for offshore banking, offshore companies, and more.
In my experience, most people get into this “offshore stuff” thinking of ways to get around some laws in their home country, or how to hide their money.
As we frequently discuss here, going offshore is not about “hide and seek” but rather “show and tell”. Offshore strategies are perfectly legal in pretty much every country on earth so long as you follow your country’s reporting requirements and regulations.
While you or I might find those requirements silly or even draconian, chances are you’ll be a lot better off complying than waiting for the taxman to find you and subject you to the fast hand of justice. If you’re a US person, this is especially the case.
For one thing, you should never use some random offshore incorporator on the internet. While you’d think that the competition among “lawyers” in the Seychelles or Vanuatu would force them to provide good service, you’d be wrong.
In addition to frequent reports of slow service, there are also plenty of reports of scams by people who took the advice of some shady law firm they found on Google.
A lot of people think that hiring some half-cocked lawyer on a remote rock in the ocean somewhere assures you privacy. Of course, obtaining such privacy would require you to actually fly to that lawyer’s office, since any phone call, Skype conversation, or email you send to this so-called lawyer will be recorded by the NSA and other agencies to begin with.
Besides the threats posed by the surveillance state, however, is the fact that there is no culture of privacy in most of these tax havens. If you’re not an American and you want privacy, go to Austria, Germany, or Switzerland.
(If you’re an American, forget it.)
I’m not saying the Seychelles is a bad place to start your offshore company if you’re just selling e-books online, but I am saying that jurisdictions like the Seychelles, Belize, and the British Virgin Islands are not the panaceas they are marketed as.
For one thing, the people selling them tend to be less experienced. Imagine you’re a lawyer in Belize and you’re trying to decide how to market your practice. I imagine that selling boilerplate $100 companies at a 1500% markup to unsuspecting foreigners would be a good business.
Because just as western tourists are all too quick to kindly point out when the shoe shine man drops his brush, so are all too many people looking to go offshore suckers for some Caribbean lawyers’ claims of “privacy” and “secrecy”.
Claims that generally don’t exist.
That’s why I have recommended anyone starting a serious business at least take a look at more serious offshore jurisdictions like Hong Kong, Singapore, Labuan in Malaysia… heck, even Ireland.
Paying a little bit of tax in these jurisdictions can be well worth it, and you won’t be tempted by the lawbreaking siren song that is so prevalent in the tiny banana republics.
We set up shop in Hong Kong for that very reason. Our counsel Joel Nagel advised us to bypass even more upstanding jurisdictions like Panama in favor of Hong Kong. For what we wanted to do, a rock solid country like Hong Kong was the most sensible place to plant our new offshore corporation flag.
Now that we are doing more business-to-business deals, our flag in Hong Kong is a lot more attractive to the serious businesses we’re seeking to build relationships with.
That’s because going offshore isn’t only about tax savings but simply good international diversification.
If you’re planning on doing business in Asia, an Asian company might be the best fit. Your international bank will certainly give you odd looks (and may even decline your application) if you tell them you plan to sell exclusively to Chinese customers with your Nevis IBC.
Some of the truly best jurisdictions for stability and privacy have a few more rules than you might be used to, and your bankers there will have some questions for you. If you only choose a jurisdiction for its purported tax benefits, you can also expect to be shown the door at a number of banks and with a number of future customers.
The same advice goes for opening an offshore bank account. I frequently recommend opening an offshore bank account in Belize or a Caribbean country if you don’t have the time to travel and you don’t have a lot of cash.
Countries like Switzerland have closed the door on banking to almost all Americans, but there are other options – such as Singapore, Andorra, and Austria – that are more open if you’re willing to travel there.
Don’t go to an offshore conference and let someone talk you into moving all of your money to Nevis or something like that. Remember that the people selling offshore services are salesmen and know the right pitch points to get scared Americans and Europeans to buy their services.
When in Turkey, don’t be the white guy who picks up the shoe shine brush for the aimless scammer. And when going offshore, don’t fall for the same old sales pitch that is given to every other potential customer.
Nomad Capitalist is all about helping people like you “go where you’re treated best”. If you want to learn more about what exactly that means, and why I believe so strongly in it, I made this video that is worth watching: