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Tax Benefits

Having a home and office offshore means potential tax savings for global citizens

Option #1 - Tax Flexibility When Residing or Working at Sea


Continuous Business Trip

When finances are structured accordingly, people who plan to run a business, foundation or other entity from the ship, can be considered to be on a continuous business trip. In this case, most annual fees may be able to be written off.


Business Domicile

The ship is based in the Bahamas and the related fund is based in Liechtenstein. These could be considered the domicile for a business, foundation or other entity based on board (in addition to other jurisdictions). While some ‘offshore’ models are illegitimate, in this instance, the asset is an investment in a fund attached to the rights to use space on a ship based offshore; so this is a perfectly legitimate use of offshore structures in tax advantaged jurisdictions.

Residence/Office at Sea

This asset could be in a foundation or business name in an offshore trust. For people with a part-time land based life, they can make the ship their primary home. This means they are living and working offshore primarily and when on land, that is an extension of their business trip.

Banking

Those residing or working at sea might consider only using global financing / online banking. This is because any bank that is domiciled in a location (even a branch on board) requires proof of a land-based residential address (by proof of utility bill). However, the goal is to have all transfers, remittances, etc international (not attached to any particular country).


Structure

  • Americans have citizenship-based taxation. Wherever they are, they still need to file a tax return and pay taxes on worldwide income with the exception of an exemption of about $130k.
  • When investing in an asset-based offshore, some might consider doing so through an organization (a foundation or a business for example) in an offshore trust.
  • The master fund can be based wherever they want to domicile it.
  • There can be as many sub-trusts, sub-funds or sub-foundations needed (which don’t necessarily need to be based in the same country).
  • If the master is in the US with a master bank account, then the sub-fund managers can have different domiciles with bank accounts in those jurisdictions.

Land Based Properties

Some people who consider themselves to be global citizens with a global residence based offshore (for example MV Narrative), still own properties on shore, but they don’t always consider these properties to be the individual's residences; they are investment assets held by an offshore entity.

Option #2 - Expensing as a Home Office or Office for US Tax Purposes


People who want to invest in a unit aboard MV Narrative under their land based corporation would deduct their office expenses accordingly if they plan to work on the ship or use their global office for expanding their businesses to worldwide markets. The generally accepted accounting way of doing this would be to write off the proportional amount every year - the total cost of the unit divided by the number of years they own it plus the annual fees. There would likely be a split between personal and business expenses (similar to having a home office) unless they make the case of a continual business trip (as mentioned in Option #1) and lease the office back to the business which could mean writing most of the debt off.

 

Tax Deduction Example Chart

In this example we show annual potential tax advantages based on a nominal corporate rate of 15%. Not adjusted for inflation.

Business-expense

tax-benefit

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tax-rate

 

Foreign Earned Income Exclusion

If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income.
 
However, you may qualify to exclude from income up to $102,100 of your foreign earnings. In addition, you can exclude or deduct certain foreign housing amounts. You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer.
 
Here are two examples based on USA citizens, 2018 Tax brackets of federal income
 
 
Scenario Income Level Income tax
(Land-based living)
Income tax
(Living on a Storylines vessel)
Potential Savings
Household with 1 single-person income $350,000 $98,189 $62,454 $35,735
Married household filing jointly annual income $350,000 $75,379 $23,955 $51,424
 

Limit on Excludable Amount


You may be able to exclude up to $102,100 of your foreign-earned income in 2017. You cannot exclude more than the smaller of: $102,100, or your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later).
 
If both you and your spouse work abroad and each of you meet either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. You don’t both need to meet the same test. Together, you and your spouse can exclude as much as $204,200.
 

Exclusion of Meals and Lodging


You don’t include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met.
  • The meals are furnished:
    • On the business premises of your employer, and
    • For the convenience of your employer.
  • The lodging is furnished:
    • On the business premises of your employer,
    • For the convenience of your employer, and
    • As a condition of your employment. 
If these conditions are met, don’t include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation.
 
 
Information prepared on 2nd April 2018 - Version 1.1
Sources: www.irs.gov
 
DISCLAIMER: The information shared here is general in nature and should not be construed as tax advice. Any reference to specific tax-related strategies should not be interpreted as a recommendation. Nothing contained in this presentation should be construed as investment advice.It is designed to explore potential possibilities for your personal wealth plan when living a global lifestyle with Storylines. The information contained here is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation. It is expressly recommended that you seek advice from your attorney, accountant and/or a financial professional. It is highly recommended that you seek independent counsel.

Legal Disclaimer
 
The information provided in this and accompanying material is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs. Storylines Inc. does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, Storylines Inc. disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses. Content contained on or made available through the website or via email is not intended to and does not constitute legal advice or investment advice and no attorney-client relationship is formed. Your use of the information on the website or materials linked from the Web is at your own risk. Storylines Inc. is a Delaware registered Company.