Dateline: Tivat, Montenegro
There’s something special about Montenegro. Ever since the newly independent country was featured in the remake of Bond film Casino Royale, I knew I wanted to come here. And each time I come, I’m reminded that there is something magical here. In the five days, I’m here on this visit, I’m being interviewed by the country’s most-watched television station, speaking to a group of university students about entrepreneurship, discussing the potential economic citizenship program with a top lawyer, and meeting with the country’s investment agency to discuss the latest wave of privatization. It’s all a result of having put in the effort to make connections here, including colleagues and people who work for me. However, it’s also a result of hiring the right professionals. I’ve made no secret of the fact that hiring the right lawyers is a crucial element to success offshore. For example, I recently saved nearly 30% on a property in Georgia by not only having one of my assistants call and negotiate in Georgian but also by having my lawyer call and make a much more serious presentation. The deal was so easy, and I saved a five-figure sum as a result. I’ve always found it a bit funny that going offshore scares a lot of people… who in turn finally get around to doing it, but then decide to be cheap and go it alone. Having tried both ways — not just in the offshore world, but in businesses overall — I can tell you that having the right professionals to help you is crucial. Even though I feel at home in a couple dozen cities and own properties in various countries, I still get a little anxious when doing a deal in a new place. Having the right people makes all the difference. My role here at Nomad Capitalist is to help readers like you put the puzzle pieces together and create an offshore plan that works in its entirety, rather than just pieces and parts that don’t serve each other. I’m able to do that largely out of experience, but also because I’ve developed a network that I can depend on when I don’t know something, like how many days a Bulgarian must live overseas to declare tax non-residency. What criteria should you use to find the best offshore service providers? Here are my suggestions:
Have a clear strategy going in
I always advise people going offshore to focus on their desired result, rather than a particular strategy. After all, no one really wants a Paraguay passport… they want what a Paraguay passport offers them. That benefit is specific to each person, so it’s important to get clear. For example, if you have no clue WHY you need an offshore company, maybe you don’t. If YOU aren’t clear on your desired outcome, the person you call surely won’t be. A lack of clarity will result in you either not taking action, or taking the wrong action. If you’re speaking to a trust lawyer, you can bet the cure for whatever ails you will be — wait for it — a trust. Knowing where you want to be at the end of the process will allow you to make better decisions.
Find a guinea pig
If you’re reading this blog, you’ve already found one. It’s not that I need another second residency or offshore company… but I enjoy it. More importantly, by doing new things, I get to try out new programs and new offshore service providers. For example, this month I agreed to set up a company in order to get residency in another European country. The residency may help me establish a better presence in a country I want to do some business in, but it’s also a great way for me to see how the program works and make sure my referral knows what he’s doing. Having a guinea pig is valuable because you want to learn from someone in the same boat as you are. A Panama lawyer may know a lot about Panama residency (although many know far less than you’d hope), but he doesn’t understand why YOU want residency, nor does he understand anything about your situation outside of Panama. Knowing that the professionals you choose have passed the sniff test is important and can save you a lot of time and money, not to mention the opportunity cost. You don’t want to be one of those guys who sets up a strategy to save on tax, only to find out you not only wasted your time and money, but you now have to pay tax for the time you had the bad strategy.
Check their credentials
I’m pretty trusting when it comes to hiring foreign professionals. In fact, I frequently wire thousands of dollars to contacts I’ve never met, and I haven’t had many problems. That said, I now have a team that helps me vet the right people to reduce our risk. Many offshore service providers won’t have formal credentials except for their experience. For example, I am not a lawyer, nor do I even have a college degree, but I’m the ultimate guinea pig for offshore strategies. I’ve put my money where my mouth is and I can tell you what works and what doesn’t. That can be helpful, but if your situation involves a big tax question, I’ll always involve my tax lawyer. Make sure if you hire an attorney that you verify that he or she actually IS an attorney. There are people who pretend to be attorneys or speak in a way to suggest they are attorneys when they actually aren’t. There are even disbarred attorneys and guys who have been in prison offering their advice online. If someone claims to be an attorney, check with the respective bar association to make sure.
Don’t pay more than asked
This may seem obvious; of course, you wouldn’t pay more than was asked of you. However, I once learned this rule the hard way. It’s not that I volunteered to pay more than the price quoted, but rather that I paid for the entire service up-front, instead of availing myself of the guy’s installment plan. You see, in certain parts of the world, the promise of future payment is a strong carrot. Without it, nothing gets done. In my case, I paid a Nicaraguan lawyer all at once, rather than paying half up front and half when the work was done. I didn’t want to bother myself with having to think about several hundred bucks again later, so I paid all at once. In the end, I gave up working with the guy because, with no carrot to keep him motivated, he became lazy and even a little hostile. I don’t regret my decision, because I’d prefer to weed out bad professionals upfront. The money lost in my case was barely worth an hour of my time. However, if you value getting the job done, make sure you don’t pay someone lazy all at once. Better yet, don’t hire lazy professionals at all.
Network with your good contacts
In a few cases, I’ve had a great service provider become a good friend. We go to dinner together, sip tea together, and chat about business opportunities and everything under the sun. Those interactions have led to me successfully purchasing real estate, hiring employees, and all sorts of other things… …all because my local lawyer or service provider knew things about the market that I didn’t. Once you have a good lawyer, use them as a resource. In many smaller or emerging countries, your lawyer can get you appointments with government big wigs or their other clients who may be business big wigs. The funny thing is that having good lawyers has saved me tens of thousands of dollars in other professional fees and staff costs — not to mention my time — by making things in the country easier. However, in order to get that kind of treatment, I had to be a good customer first. That’s why I never try and negotiate a lower price with a lawyer (or anyone else for that matter). I want to be among their top priorities.
Keep everything legal
That passport that can be obtained without visiting the country… for just $25,000? Or that offshore bank that just so happens to not adhere to FATCA? The internet is littered with shady offers from cheap diplomatic passports to anonymous companies issuing bearer shares. A lot of this stuff existed twenty years ago (often when it was still illegal, but less policed), or never did exist except in the mind of the tin-foil hat crowd. If an offshore service provider offers something that seems too good to be true, ask questions. Yes, it’s legal to reduce your taxes — in many cases to zero, depending on your situation. Yes, it’s possible to get second passports without waiting for decades. Anything involving bribes, pay-offs, special favors, or obvious tax evasion should be avoided. As my father always told me, “play it straight”.
Make sure they’re around long-term
One of the other challenges of the shady or cheap service provider is whether they’ll be in business long-term. For example, I put my name and face out there because I believe you deserve to know who you’re getting advice from. If you establish an offshore company with some faceless dude over Skype, you might be asking for trouble. That offshore company has to be renewed next year, and you’ll have to reach the service provider for their help. Perhaps you’ll need apostilled documents, or you’ll have a question about renewing your residency. Finding one provider you can work with long-term is better, and you’ll sleep more soundly at night.
Look for globally-minded people
One of my biggest concerns with incorporating an offshore company in some tax haven online is the quality of service providers. Yes, there are some good providers in Nevis, but many providers there aren’t very knowledgeable about your global picture; and certainly not many of the people offering “total privacy” and “lowest prices” on Google Adwords. Sure, a so-called lawyer in the Seychelles can tell you that the country is “tax-free” for any and all business you do. That applies to the Seychelles; what else would you expect from a Seychelles attorney? However, if you’re setting up an offshore company, it’s usually because you’re trying to save on tax. In that case, you have to consider the jurisdiction from which you are trying to reduce tax. Chances are the answers to doing that aren’t as simple as setting up a Seychelles company and having all of your clients pay you there. Even the best offshore service providers in good jurisdictions won’t know much about US taxes unless they are US citizens themselves. You should at least make sure that whomever you work with realizes there is a lot of nuance to this stuff.
In almost all cases, I give up after someone is ten minutes late, whether it’s with a potential colleague, on a Nomad Strategy call, or (when I was single) a date. I value my time and want to work with people who are punctual. Punctuality may not be as important to you, but you might set a boundary of only working with people who speak excellent English, or whose website looks professional. Just set boundaries in advance and stick to them. Another thing about many offshore service providers that frustrates me is the “mini-consultation”. I was recently referred to someone who sets up Dubai companies and since I’m always in the mood for a good Dubai company, I gave them a call. Within 30 seconds, they had “diagnosed” my problem and recommended a particular strategy. When I informed them that their suggested strategy didn’t address the main issue I specified in my introduction, they immediately had another idea. They didn’t ask me any questions or get to know me; they just had a bunch of off-the-shelf products to sell whether I needed them or not. Not good.
Get clear on price
You wouldn’t believe how many service providers don’t know what their own products cost. When I was interviewing lawyers in Panama, only one out of seven of them could give me a total price. Being nickeled and dimed is frustrating in your own country, but at least you might know enough to have a reasonable expectation. Not getting a firm price overseas can be disastrous, or at least wallet-draining. I prefer to get an all-in-one quote so I know exactly what I’ll be paying. In fact, I often volunteer to pay a little extra so there are no surprises later. That said, being clear on price doesn’t mean being cheap. A good offshore strategy offers amazing monetary and lifestyle benefits, and I don’t recommend the cheapest provider. In fact, I don’t recommend anyone who makes price their selling point. Your taxes, your citizenship, and your investments are not a commodity. I always ask myself “can this person get me my desired result?” rather than “is this person inexpensive?”
Avoid referrals from the wrong people
A referral is a great way to find the right professional… right? Not always. In many cases, people seek referrals from friends and colleagues that have very different situations than they do. One example of this is internet forums and expat groups. If you’re looking to get something done in a foreign country, who better to ask than people who speak your language and are already there? For one thing, most of the advice I see on internet forums is just wrong. A lot of it is shady if not outright illegal. It’s a bunch of keyboard warriors who, when it comes to offshore stuff, often have a flagrant disregard for the law. Those who do want to “play things straight” may not know your situation. One example of this is the difference between an expat and a nomad. If I were to set up a UK company, I would be doing so as part of a tax mitigation strategy, and asking another American living in the UK wouldn’t help me if that expat was paying 50% income tax to the UK. Their goals are different than mine. Reading blogs will give you information, but you’ll eventually need the help of a competent professional. Finding the right offshore service provider can be difficult, especially when you need several different solutions in different areas.