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Warren: Hi, everyone. It’s Warren Black here. And I’ve got Stephen Petith with me again continuing on of our offshore update interview series. Hi, Stephen, how are you?
Stephen: Good day, Warren. How are you? Good day, listeners. It’s good to be here. Happy 4 of July! Our American friends.
Warren: Yeah, Happy 4 of July. That’s what made me think about doing it today on a perfect day to be talking about offshore structuring and sovereignty and freedom on the day of Independence Day when America basically said, “Enough is enough!” And we’re fed up with England telling us what to do and cartel governments running our lives.
And, so, I think today that could be our theme for our next 30-35 minutes, Stephen, if it’s okay with you?
Stephen: Yeah, definitely, as everyone’s starting to get sick of governments running our lives. Especially with the stuff that’s happening around the world at the moment. It’s quite interesting and funny. Governments blaming other governments, they interfering in elections, and, politicians blaming each other for grumpy old white man syndrome, you know how it goes.
Warren: Yeah. I don’t think I’ve ever seen once upon a time, I think, that, you know, Afro-Americans and dark people and Indians got the raw end of the deal. And these days, us white males are the ones who get our own fair share of trashing from the media, don’t we?
Stephen: Definitely. It seems to be if you’re a white straight male between the ages of like 25 and 45, you’re an endangered species.
Warren: Yeah, it’s pretty funny, I know, not really funny but anyway … let’s get on with this.
FIRST QUESTION: Offshore Banking Update
Stephen, my first question is for an update on what’s happening in the first half of this year in the offshore world on structuring? There’s been changes in Singapore and Hong Kong … and I’ve been having some challenges getting offshore bank accounts for clients which previously did not exist.
Stephen: Yeah, so, the first half of the year, it’s really starting to tighten up again, especially the banking space. Banks are getting very skittish, they’re starting to not trust each other, they’re starting to not trust companies, which is then flowing down they’re not trusting anyone.
And, so, this is not very good ground for the economy, the global economy as a whole. So, it’s definitely changed. I saw this again pre-2007. So, there’s a trigger coming. What it is, I’m not 100% certain yet because things definitely have moved. But, then again, when we say that, we’re talking the Western World there … so … we’re talking American banks and banking institutions. Which doesn’t help most of our listeners as that’s where we need to be with our ecommerce businesses, with general trading businesses and the like, but it’s still possible.
Hong Kong has got a lot stricter. It’s taking a lot more time to open bank accounts but it’s still possible. You’ve just got to prepared for the wait and to do the homework and all the preparation work.
It’s getting harder to do stuff in Singapore for now, unless you’ve got a very strong business case for Singapore. Singapore now is saying “No, we don’t really want to deal with you. We only deal with Singapore companies.” Definitely they don’t won’t deal with Americans. Americans won’t get bank accounts here in Hong Kong.
On the good front, we’re starting to see some of these non-banking platforms come to the fore. So, Transfer Wise, for example, brought about its borderless bank account in the last six months. There is a bank in Finland with a banking product for businesses, especially those who have an Estonian company.
Revolut in the UK is getting together and pushing ahead with its banking product. There’s also a new little app in Hong Kong that I noticed the other day which gives you a personal bank account and a credit card, so, that’s a good option for Hong Kong.
And there’s other products popping up all over the world now. They’re still not 100% a full online non-bank product. Banks still reign when it comes to foreign transactions, especially large amounts. Most of these companies are a money company, so, e-wallet companies so they are limited to the amount of money you’re going to hold in them. A lot of them had to say are limited to $10,000. Or at any one time or could be a transaction limit. So, there are limits to what can and can’t be done with it.
On the political front, we’re starting to see a whole lot of stuff happening in America around Trump. We need to remember he’s basically being a businessman. Calling shots as it is. And the established – the political class really don’t like it. It’s incredible. The left are really pushing really hard to do the impeachment or whatever they want to do with him. I can’t see it happening because at the end of the day, the Republicans control the House. There’s elections coming up in 2018, and a lot of the base of the Republican party are starting to come back in numbers and, say enough is enough.
The Left leaning part of the Republican party is moving more and more to the left and are now probably disposed of this time around. So, I would say a hardening of the GOP stance. Or a direct splinter of the GOP. As we’re starting to see with the Liberal Party in Australia, it is going to splinter in two. It is the Conservative wing of it, and the Moderate wing which is really just warring for power now. Basically, internally at war.
So, we’re starting to see the fractures of governments. In the UK over Brexit at the moment, the stupidest thing Theresa May did was call a snap election without knowing what the outcome was going to be, and then ran a really bad campaign. She’s now got a fracture with inside the cabinet, as welel as inside the entire House in the UK – they either want a hard or a soft Brexit. We’ll see where that goes.
I still think they should go with the hard Brexit and wear the pain early on because 5, 10 years down the track, will be a recementing of the Commonwealth. This means the Commonwealth as a trading power, like it was in the 60s and 70s, could once again become a very powerful tool.
On the back of that, Hong Kong has had its 20th year since the handover back at China. There’s a bit of an underlying current at Hong Kong at the moment around do we go for independence, don’t we go for independence, what do we do. It’s a watch this space.
Hong Kong’s not going to change from a business perspective because the business class in Hong Kong rule Hong Kong. So, the rules around business will stay the same. And it’s proven to be the greatest country in this part of the world to run a business out of.
So, what does this mean going forward?
Europe itself is splitting. We’re starting to see Macron do his thing. He was always going to the socialist, and was pushed out to create his own party so he would win. But, that doesn’t undermine what’s happening with the Right Wing or the Conservative side of Europe. It’s starting to grow and it’s going to take a long time. The European Union is a very heavily leftist movement, and, the Left today, a ruling party up and down through the Parliamentary wings.
So, if you’re a sovereignty type seeker like myself, you’re looking for a second passport, you’re looking for a second residency, you want to get out of the system so to speak. With the some of the American terms there. Now is a great time to be doing it and looking at great opportunities for business if you start looking outside the borders.
We were just talking off-air about the Silk Road Opportunity which is China, and about 62 other nations between here and Europe. Asia and Europe, it’s a maritime route for trading partners and it’s an over-land route. The opportunities along there for people to get involved are just huge. Everything from banking and financial services to consulting to trading to – you name it – it’s all there. And people with expertise can provide services to organisations, such as for example, the promise organisation in Azerbaijan, or the bridge builders or the civil engineers society in Turkmenistan. They’re all going to need expert advice and all are going to need advice from Western people.
If you’re willing to pack your bags and move, this is a great opportunity.
Stephen: Yeah, so, there’s a quick round up from where I see the world.
Warren: Very interesting. So, just honing in the feel of those things, Stephen, because I’ve noticed myself at setting up in Hong Kong, it’s gone somewhere to it’s about three or four banks we could use to down to just one bank, and with that one bank, it’s taking 4 to 6 months just to get an account.
For example, with Singapore, since 5th of January when they brought in tighter laws, I’m finding things have changed. I never had a client declined in my life and I had two clients declined since 5 January because they reckon I didn’t have a strong-enough business case for Singapore.
So now, we’ve been look more Malta, and then using Hong Kong as a second option to own shares and that.
SECOND QUESTION: What’s your comments? What are the options moving forward now or in the near future, while all these changes are happening?
Stephen: While the changes are happening, if you’re willing to wait, I’d still look in Hong Kong. Malta is also a very good choice. So is the Estonia e-residency solution.
What I’m looking at and talking with clients now is while you’re setting up your Hong Kong bank account, look at some non-bank options. And then use them as a stop-gap measure, say, you can at least stop taking payments, and you can get your sort of business rolling. You make your payment into say a Transfer Wise multinational borderless bank account. And then you just keep the money moving around.
And then, once the Hong Kong account’s opened, start putting the money in there. I think with the Hong Kong account opening, we’re going to be towards the end of the really hard time. I think from now on, it’s going to start getting easier and easier, easier to do as the banks realise that, one, they’re losing a lot of business, and, two, that their internal processes are getting better.
I was talking to a few of the banks here in Hong Kong last week, and, the internal processes, I’m just caught unawares. And, Hong Kong is not the place that moves very, quickly for mass change like what’s happening in the banking space.
So, Hong Kong is still good. Malta’s very good. And it’s still one of the best ones. The ideal is to have your company and bank account in the same jurisdiction. I know a lot of people say not to. But the bank account environment today are running stricter checks on money laundering and all these sort of stuff. You want the bank account and the company to be close. Unless you’re using it for a purpose we’ve mentioned before where it’s purely used for say holding shareholding and you have no intention of running a business or doing transactional work.
So, this goes back to my tier 1 – my white tier, my grey tier, my black tier stuff, base everything around that. But in short, be prepared to wait, and be prepared to be a bit flexible in how you look at stuff.
Warren: Yeah, because what I’ve been doing with clients is like I had two clients recently. One who was a trading client. So, we’re setting up her in Malta because we said, “Too difficult to do trading clients in Hong Kong or Singapore right now.” And then, the other client was a business owner and although I’ve recommended Hong Kong, I wasn’t aware you could use a multinational like Transfer Wise as I’ve used Australian companies. So I recommended we set up an Australian billing agent for the client’s company which they can use until they’ve got the account set up.
But, what you say gives another option which is really useful to know.
Stephen: Yeah, there’s a whole heap of options around and things we can do. Australia and the U.S. or the UK are the 3 easiest places to open companies and bank accounts. But the problem is that you’re in the locations where you don't want to be.
Stephen: So, it’s easy to open there because they know that people will stay rather than take the long hard road, which it is at the moment, and that’s to move offshore and re-establish yourself offshore.
But if you are really wanting to create your own Independence Day, today is the day to do it. Step out and do it. Accept life wasn’t meant to be easy and sovereignty at the moment is certainly anything but easy. But, it’s doable. It’s just got to be broken down into small easy chunks and you do one step at a time, and all of a sudden, you look back in 10 years’ time, and go, “Well, what was all the fuss about?”
Warren: Yeah, I can remember, I think, it was Thomas Jefferson who once said this, the – who is one of the main forefathers of Independence Day, like he, of course, was the third U.S. President and one of the main guys. And he made some comment, I’m paraphrasing, but it was along the lines that when it’s still possible to have liberty, and when you continue to basically take the easy way out, eventually the day will come when you’ll have to basically shed blood or words to that effect to get your liberty.
And, in other words, you’re better off to take the harder road in the beginning because it’ll be easier later on. Whereas if you just stick to the easy one, then, later on, it’ll get too hard. And I even had a client email me yesterday who I had told 9 months ago to get stuff done in Singapore who now said “yeah, I’m ready to set up and go to Singapore.” I told him, “Well, we can’t do Singapore now because you don’t have a strong-enough case. So, now, we’re going to have to go elsewhere.” And it’s probably every 6 months on average I’m telling some client who’s procrastinated, “Well, you’re going to have to redo your options because it’s all changed.”
Stephen: Yeah. That’s exactly right. You’ve just got to keep revisiting and looking at it. And, it’s like do you take your band-aid off slow or fast? And, at the moment, it’s rip it off. Take the pain and move on. It is getting harder, but you need to do it. If you want – if you’re really wanting to do it, act now, act today.
As I tell other people, build your blueprint. We could always change the blueprint as you go forward. But start today because you’ve got time to do it. And time is one of the things we cannot get back.
Warren: Exactly. When you say Estonia and places like that for structuring or banking, with the changes with Trump, what do you see moving forward, Stephen, in the next 12 months? Do you see things getting easier? Harder? Do you really see that we’re moving towards more global independence or open doors?
THIRD QUESTION: When you say Estonia and places like that for structuring or banking, with the changes with Trump, what do you see moving forward, Stephen, in the next 12 months? Do you see things getting easier? Harder? Do you really see that we’re moving towards more global independence or open doors?
Because with what’s happening with Trump and some of the guys like with Brexit, do you push towards sovereignty while there is heavy resistance from the Left? Like how do you see things panning out in the next 12 months? Getting easier, or getting harder for a bit then getting easier? What do you see?
Stephen: For the next 12 months, I don’t see a lot changing from what it is today. It’s going to be harder, it’s going to remain hard for the next 12 months.
In the next three years, I can see the door is getting closed a lot more, a lot harder.
The rules and regulations, a lot of the politicians now are realising they’re starting to run out of other people’s money. Margaret Thatcher, I think it was Margaret Thatcher who said, “You know the problem with socialism is you run out of other people’s money at some point in time.”
And, we’re starting to see that around the world. Even people like Trump, and that now that he’s in, they’re actually saying that there’s no money coming in. I’m going to try and keep the business and tax revenues here and the country.
The problem is the politicians of the world don’t want to change their spending habits. They don’t want to get their hands out of the trough. It’s too big a change for them.
So, things in the political world are only going to get worse from here on out until the day that it actually self-implodes.
That said, there are some good things on the horizon as in the doors still being ajar. It’s still possible, and it’s still good to go out and do it. You can still go out and paint your new flag in your new home, even if you just start as a tourist. I’ve got so many people now that are saying to me, “Well, what’s the easiest way to start?” I just say, “We’ll just drop on a plane. We’ll work the rest out when you get overseas.”
It’s becoming one of these things as in becoming a tourist, staying in Thailand for a month, go to Europe for two months, and travel around. They say “you can have a look around, just do what you want and then we’ll slowly build up everything behind it”. Especially if you’re in a position where you can take six months off, because for example, you’re laid off at work, which is only going to happen more and more and more, especially as computers take over basic office functions and companies keep outsourcing. So take the opportunity to start the process, go overseas and have a look around and get out of your comfort zone for a while.
I think you’ll find it’s the best thing you ever did.
Warren: Yeah. The more we’ve been traveling, the more we see that. I read some extraordinary statements by Bill Shorten, and Wayne Swan, the former treasurer, and I was sitting there thinking either these guys are deliberately doing what they’re doing as part of the agenda, or they just don’t have a clue. And I’m presuming the former because what they are basically saying is, “We need to tax the rich more,” and Wayne Swan even said, “Donald Trump is a very irresponsible for cutting the tax right down to 15% because he’s going to bring a race to the bottom and countries can’t afford this, anhd if anything, we needed to be increasing taxes upon people. And I said they’re thinking is just crazy because all that happens is that the wealthy, as you and I know, go whatever and just move offshore and restructure themselves. The middle class get hit.
But what surprises me more is not so much what the leaders are saying, but the incredible stupidity of what a lot of the middle class and business owners do by accepting it. This surprises me even more so, to be honest with you.
Stephen: The middle class are basically making themselves extinct. Those who get out now and move and restructure and have a look around are going to be the new middle class, and even the new wealthy class going forward.
One of the things I must admit is staying put and restructuring overseas is nearly an impossible task now. The Australian Government are really seriously looking hard at if you got any connection at all overseas, and wanting to know your full income. They mightn’t tax it now, but they want to know about it. They want to know your entire worldwide income so they can tax you on that. So, I think they’re going to move to a total world taxation, and will happen whether you like it or not.
So, the only thing is is start moving overseas and start disconnecting yourself as much yourself and start moving forward.
Warren: Yeah, it’s a pretty good point. I mean, what I tell Australian clients now is you're going to end up paying full taxes in Australia if you run an Australian business. If you run an international business that has genuine offshore clients, then it’s possible to set up offshore while in Australia but you're going to have to go through a lot of process because you have to set up a genuine offshore company with a genuine international office with international presence … because even setting up an offshore company isn’t enough as the Australian CFC laws deems it to be an Australian-owned company effectively. Unless you got a very clear overseas office and overseas business income. So, I say if you’re willing to move offshore and become sovereign and serve your residency, Tax Ruling 2650 is very clear that’s okay.
With US clients, I tell them now , it’s almost possible to set you up a bank account offshore. It’s just not going to happen. And, I mean, the only kind of thing I found that could help US people now is some of my clients do spiritual work, so, I suggest we set up a church in America as that’s still a very good tax exemption. But that’s about it.
Stephen: The options are getting limited and limited. We know that the end of the empire is happening and accelerating. When we start worshipping money and building bigger and bigger football stadiums and all this sort of stuff.
And the other thing is we know that’s happening. So, you want to be in a place where the next real boom and the real empire will come. And I’ve been looking at it and talking about it with guys around the world, and, we’re all coming to the place where we believe the next empire will be formed around the Caspian Sea.
So, if you have a look in the world, the Caspian Sea is smack bang in the middle of the New Silk Road project that China’s backing. It’s right in the middle of the ex-Russian states. You’ve got Azerbaijan the one side, Kazakhstan on the other, surrounded by “stans”. It’s full of minerals, it’s full of people who can form a middle class. These guys aren’t afraid of spending money. They’re very rich nations as they are.
Once the shackles of the United Nations and the World Bank and America and the Western Allies are released from these sort of countries in the way they could do their international business, they’ll just explode.
And, so, by being outside and looking at this from a different perspective, you can see where you can fit. And see where you can get a slice of this.
Warren: Now, that’s really good. Helps a lot.
FOURTH QUESTION: So, just to conclude, Stephen, how would you summarise the next step for somebody in this current environment and up to date? If they wanted to set up their business, move offshore, what would be the next step?
Stephen: The next step would be to just do it. There is no more, “Let’s think and let’s do long plans, and let’s think about it.” As I’m working with my guys now, it’s basically make the move, go and set up a villa for a month in Koh Samui or Pattaya or Lankawi or somewhere wherever you want to do, and work it out from there. Because what I’m seeing is most people procrastinate too much and especially when all that the garbage is on, it becomes so overwhelming. So you need to remove yourself from that current environment that you’re in and get into an environment where your head’s clear.
But when I say, “Your head’s clear,” I basically mean your head is not being bombarded with garbage that the media is throwing at people in these places now. It’s amazing how many times while we’re talking with someone on the phone and I’ll say, “Oh, did you hear about this, this, this, and, this?” And they’re like, “No, wow, really, did that happen?” And they’ve got no idea about the good stuff that’s actually happening around the world and the opportunities that are presenting itself.
So … what I’d say now is, “It’s time for action. It’s time to pick up your arms, so to speak, your laptop, your mobile phone. Plane tickets are cheap. And make the move.” Especially with the way things are now, it’s not going to get any better. It’s not going to get any better until the change happens.
Warren: Yeah, you summarised what I’m telling people. Every single time people have held off, they have paid for it. 2 years ago, I could get them an account with almost any Hong Kong bank and for any Singapore bank. A year ago, I could get it with some Singapore banks, some Hong Kong banks. Now, I could get it with no Singapore banks, one Hong Kong bank and still with Malta.
Who knows where we’re going to be at in January next year?
So, I’m saying now is the time to do it.
Stephen: Yeah. This time next year, it’s probably not going to get any worse, but it’s not going to get any better either. And all you would’ve done is lost the total year.
Warren: Actually, I agree.
FIFTH QUESTION: One last question before you go … How do you see Bitcoin, Ethereum, Ripple, and all these e-currencies, as changing things? Because, of course, the prices have soared. Everyone’s saying that this is amazing and it is going to outdo the banks eventually and put them out of business. What’s your honest take? I’ve still got my reservations. I believe this is the way of the future. But I still think the banks have enough stranglehold that Bitcoin have the same issue as Paypal, that is, they have to comply with the government to get ATMs, Visas, and all that, and with the banks.
So, I don’t see it’s an immediate revolution myself. I’m just curious what you think and whether you have a different view.
Stephen: Right now, I think it’s a great frontier investment and it’s something that is very risky. As a medium of exchange, I cannot see it in its current form taking hold. It’s something I’ve left on the side for now as they still don’t hold real gold. That said, there’s a couple out there that are backing themselves with gold or silver or some sort of medium exchange. And there’s one guy I’ve heard about and I’m following it up at the moment that has bought a gold mine and is backing the digital currency with the gold reserves in a gold mine.
So, if that’s doable, that’s a meeting of exchange because it can’t go to zero. Whereas right now, Crypto currency can go to zero just like normal currency.
Warren: I agree.
Stephen: Where anything that’s backed by physical gold or physical commodity can’t go to zero. Where a fiat currency, a paper currency is right now is just the same as a digital currency. It can go to zero.
Warren: Like is it Ethereum or Ripple is backed by gold? I think it’s one of them, isn’t it?
Stephen: Yeah. There’s a couple around that are saying they’re backed by gold. But where is their physical gold? The one that I’m looking at, the guy that set it up owns the gold. What I’ve also been told is there’s many replications of the bitcoin infrastructure. So, if you’re on the block chain infrastructure, everyone says, “Well, you’re mining one lot, surely it’s cloned, and it’s being cloned five or six times.” So, you’re building up larger and larger reserves. So, there’s probably no real structure around it.
Now, the bitcoin are the block chain technology. I think that is going to be the backbone of a lot of stuff that we’ve got going forward in the digital and the fintech space. It’s going to be good.
What we see with that, I just want to be sure it is a physical replacement or a really good replacement. It is something to trial, but for me, not yet. I’m still gold, silver in a vault guy.
Warren: Same as me. Perfect. Well, thank you, Stephen. I appreciate your time. People can contact us and click on the application link at the end of this call. So put your enquiry in your interest in and what happens is myself and my team will contact you and talk to you further, and then, if we think there is a good fit, we go from there.
-End of Podcast-