US persons can surely benefit in many ways from having an offshore company and bank account, from international tax planning, to avoidance of local regulations, but it is obvious that international tax planning for US citizens and residents might be more complex than those for other jurisdictions, and some banks might even not onboard US persons.
Tax Residency
The United States of America has a worldwide tax system, and its tax residency is based on Citizenship, in addition to tax residents based on time spent in the US, Permanent Residents, etc.
So for US Citizens, just leaving the country and having no ties to the USA would not suffice to avoid being a tax resident in the USA. If you have a US passport, you will be a tax resident there, even if you have never lived there, or have lived all your life “abroad” from a US perspective.
So even if you have lived all your life in Asia, Europe, Latin America, you will pay taxes to the IRS on your personal income regardless if this income is not US sourced.
Foreign Earned Income Exclusion.
If you are a US person and live abroad, you would not have to pay taxes to the US if the income does not exceed a certain threshold,which varies (increases) each year but it is $112,000 for 2022. You can check the IRS link here https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion
Treatment of Offshore Companies and Offshore Bank Accounts for US Persons.
US tax residents, in their tax return and appropriate form, must report their ownership of their offshore companies (Controlled Foreign Companies Rule), disclose the ownership and existence of their offshore bank account, etc.
It is more difficult for US persons to hide money offshore as all banks have implemented FATCA, so US persons would have to implement more complex structures and strategies, to legally have this offshore account under the IRS radar or reporting requirement. Same goes for offshore structures.
On the other hand, non-US persons would still have hope to open an account in a non-CRS country, and avoid the account being reported.
Of course, there are ways to legally reduce your taxes via international planning, but that will depend on each person and company situation, as you know the rich usually don’t pay taxes.
Tax Treatment of Offshore Companies
Even though a US person would have to pay taxes on his/her offshore income, is the tax due even if the income is not distributed or not repatriated? it depends on the type of income (royalty, financial income, services, etc), and business structure, etc.
Each type of income has their own treatment and rules to determine if such income would be taxed either once distributed, or taxed even if it was not distributed.
Postponing when the tax is due is tax deferral.
These rules are Subpart F, TCJA, Gilti, just to name a few.
Drastic approach
There are of course ways to escape the US tax system, once and for all, and that is giving up the US passport / citizenship. Of course this requires extreme measures like getting a second citizenship, new life, and all it comes when you move abroad and give up a US passport.
Other countries that have a similar tax system, like Canada, don't make you give up your passport or canadian citizenship, but you have to cut ties to Canada and perform an exit tax procedure to pay all tax due that may be accrued.
Uses of Offshore Companies
US persons can use offshore companies for international tax planning, international operations, asset protection, access to better business regulations, etcetera.
Offshore Bank accounts can also be used for asset protection purposes, to easily make or receive payments from clients,
Illegal means
People could also try to keep these offshore companies private by having a second passport, nominee shareholders, etc., in order to conceal the ownership, and these might work to evade taxes, among other things, but of course, if you get caught, you can guess what comes next.
The USA as a tax haven:
It sounds odd that even though the USA has a draconian tax system, it is a tax haven for non-resident foreigners, and it even ranks first in the financial secrecy index.
Disclaimer: the information contained herein is for information purposes only and nothing herein shall be considered or be a substitute of financial, tax, or legal advice.