with very lax (or non existing) laws about what sort of informatiThe difference between "onshore" and "offshore" trusts and corporations is, roughly speaking, that "onshore" means subject to a big-brother, high-tax jurisdiction that obliges trusts and corporate management to file a host of disclosure forms with the local company register (which also handles trusts). This information essentially then will be public, freely given out to anyone for the asking. In addition, annual statements must be made and any profits taxable. In countries with wealth taxes, the trust or corporation may be obliged to give a percentage of its capital to the state.

On the other hand, an "offshore" location is a country or jurisdiction The difference between "onshore" and "offshore" trusts and corporations is, roughly speaking, that "onshore" means subject to a big-brother, high-tax jurisdiction that obliges trusts and corporate management to file a host of disclosure forms with the local company register (which also handles trusts). This information essentially then will be public, freely given out to anyone for the asking. In addition, annual statements must be made and any profits taxable. In countries with wealth taxes, the trust or corporation may be obliged to give a percentage of its capital to the state.

On the other hand, an "offshore" location is a country or jurisdiction authorities). An "offshore" corporation or trust will be tax-exempt.

For a small, yearly fee payable in lieu of any taxes, an offshore corporation or trust may conduct just about any business, anywhere, without any legal requirement to inform the local tax authorities about this. This is the basic distinction between a legal entity that is registered "offshore" as opposed to "onshore". Recap: offshore corporations or trusts pay little or no taxes and their true ownership and activities can be kept secret.

Is there anything immoral or illegal about incorporating a company or trust in an offshore location? In and of itself - no. Most, if not all countries recognize the authority of other countries to make their own laws as far as company registers and taxation is concerned (and car registrations, passport, insurance, etc. for that matter). Just as it is quite legal to move to another country in order to save taxes (even though your own country may not quite like the idea and usually will attempt to legislate against it), so it is also quite legal to register a company or form a trust in a jurisdiction that extorts little or no taxes.

An American Citizen may freely own any number of tax-free corporations in any number of different countries. There is nothing illegal about that. The "iffy" part is the "legal" requirements that he has to face to make a full disclosure of his interest in foreign assets on his tax return. Remember most governments think they own their citizens and may confiscate citizens assets (or send them off to get killed in a silly war) at will. And then keep in mind that governments can only exist because their victims, the citizenry, grant to government their sanction of monstrous laws by abiding by them, however grudgingly.

But what you should be concerned with is that aforementioned "veneer of legality" that you need to give you at least some protection, in case anyone ever makes a connection between you and a vacation home in Monte Carlo that is not in evidence on your latest tax return.

One way to do this is to form a Trust which owns the villa, or other assets. This automatically relieves you of any law (and certainly very immoral law) requiring you to disclose all your worldwide assets. You do not own the villa, the trust does.

And neither you nor anyone else owns the trust, since that would be a contradiction in terms. Of course, the trust has to be in an offshore location with no legal requirements that the trust must declare what assets it owns. A trust in, say, the Isle of Man (in the Irish Sea) may legally own all the stock of IBM and not be obliged to disclose this to a living soul - not on the Isle of Man, anyway.

On the face of it, transferring your assets and business interests outside of your home country to a trust or foundation may be a cure-all for your tax troubles. You can own anything you wish through the trust, retaining complete control over those assets and not be obliged to disclose it to anyone.

But there are two slight catches. First, that a trust may usually not engage in or conduct an active business unless through the (whole or part) ownership of one or more companies which, as explained, should also be incorporated offshore).

Second, that you cannot legally arrange to disburse funds owned by the trust to yourself. It is true that the local nominees ("straw men") who lend their names to the trust for use in the company register in exchange for a modest fee could possibly not care less what you do with the assets belonging to the trust. Still, the legal requirement - even on the Isle of Man - remains that the trust cannot legally make payments of any nature to anyone unless by following the rules laid down in the trust's charter documents. And local laws do not allow the incorporation of a (tax exempt) trust or foundation with rules that allow it to be blatant as a tax-shelter by making no requirements of fund applicants.

The way to legally get around these requirements is to create an offshore corporation - or several. Say, for instance, that you have quietly transferred a million pounds to the trust's Swiss bank account by way of a donation. You no longer need to disclose this particular one million pounds on your tax return as it no longer legally belongs to you. But you may still want to get some of it back one day. Then what? What you do is basically trade with the trust i.e sell something to the trust. An arm's length transaction with a foreign trust is quite legal. But if a transaction is not reported, who is going to measure the arms? The trust may wish to acquire ownership of, i.e. a newly-incorporated Delaware company through which to conduct future business in the U.S.. Let us say that you need a quick, legal £250,000 from the trust, the bank accounts of which you control with a POA (power of attorney). You now buy a oe100 Delaware corporation from any broker specializing in selling newly incorporated "fresh" corporations - and then pledge as security for a loan your shares in it to the trust for a cool £250,100 in cash.

Truth to tell, you may break one law in some country or other if you do not disclose the fact that you don't expect to ever repay the loans and that you are lending yourself your own money. But generally, there is no income tax due on borrowed money until and unless the loan is formally "fugitive". If you need cash for a new car etc, then who is entitled to say that you "owe" taxes on money on which you have, presumably, paid 40, 50 or even 60% income tax when you first made it?