The tax-free pitch: what happens when your money goes offshore

Paraguay's territorial tax rules are not an escape from British tax residence. Cyprus's exemptions are not a banking guarantee. And a trust's promise to protect assets needs a second question: protect them from whom?

Charles Pycraft · November 2026 · London

Cover card: The tax-free pitch. Navy ground with gold motif of a phone showing 0% tax and an arrow to a locked exit door. An investigation by Charles Pycraft

A new address. A foreign account. A reassuring zero beside the word tax.

Paraguay is being marketed as a route to tax-free foreign income. One current relocation guide opens with “Zero Foreign Tax. No CRS. No Drama.” Its own later warnings acknowledge that home-country tax residence still matters. That qualification deserves at least as much space as the headline.[1]

This is not an argument that every offshore arrangement fails, or that moving to Paraguay is improper. Neither claim is supported by the evidence. It is an argument against selling a tax rate as if it also settled ownership, banking safety and the cost of getting money back.

The public record contains examples of each problem: deposits converted into shares in Cyprus, thousands of companies using a small pool of nominees, and families fighting for information about assets held through foreign structures.[8][9][12] Ordinary savers should not need a multinational legal budget to understand what they have bought.

Paraguay: territorial does not mean untaxable

PwC describes Paraguay's personal income tax as applying to Paraguayan-source income, including income treated as Paraguayan-source under specific rules. PwC's October 2026 summary describes personal-services rates of 8%, 9% and 10%, with an income threshold, and an 8% capital-gains rate. Source depends on activities, assets and rights, not simply the country from which a customer pays.[2]

That matters to someone working at a laptop in Paraguay for foreign clients. The question is where the work is performed and how the relevant rules classify it. A foreign invoice is not, by itself, an answer.[2]

Nor should a small business assume that personal and corporate rules are interchangeable. PwC's corporate guidance identifies categories of overseas investment returns treated as Paraguayan-source for resident investors under the business income tax rules, and a further rule for certain activities abroad. The slogan loses important distinctions between an individual, a company and an income category.[3]

Then comes the British side. HMRC says UK residents normally pay UK tax on income from the UK and abroad. There are exceptions, including qualifying Foreign Income and Gains relief introduced from April 2025. A Paraguayan residence document does not itself decide whether the UK still regards someone as resident.[4][5]

The UK Statutory Residence Test considers time spent in the UK, work, accommodation and personal connections. Residence is assessed for each tax year, and split-year treatment may apply in qualifying circumstances. A foreign address does not replace that analysis. A business needs a separate assessment of its own position rather than an assumption that its owner's move answers every question.[5][21]

“Tax free there” and “no tax due here” are different propositions.

Secrecy is a changing timetable, not a plan

There is a particularly important correction to Paraguay's sales story. The OECD's commitments list, updated on 30 September 2026, places Paraguay among jurisdictions undertaking first automatic financial-account information exchanges by 2028. That is a future commitment, not evidence that exchanges are already operating.[7]

Cyprus began exchanges under the standard in 2017. The OECD list also places the BVI and Liechtenstein in the 2017 group, and Belize and Panama in the group undertaking first exchanges by 2018.[7]

Information exchange does not decide the tax bill. Domestic law does. Equally, an account outside an operating exchange network does not cancel the holder's reporting obligations. HMRC explicitly says there is nothing wrong with overseas investments when taxable income and gains are properly declared.[4][16]

The sensible question is not whether a bank can keep a secret this year. It is whether the arrangement remains lawful when the tax authority reads the file.

Cyprus: an exemption is not a guarantee

Cyprus offers real tax exemptions for qualifying non-domiciled residents, including its exemption from Special Contribution for Defence on dividends and interest. That is not a universal exemption from every tax or contribution. PwC's account of the 2026 reforms records a corporate tax rate of 15% and ordinary personal income tax bands reaching 35%.[8]

A “0%” headline needs its missing nouns restored: which person, which income, which tax and which conditions?

The banking question is separate. Bank of Cyprus reported that a Central Bank decision on 30 July 2013 brought the conversion of eligible uninsured deposit amounts into equity to 47.5%. Its annual results describe this as a conversion of uninsured deposits. For deposits covered by the €100,000 protection threshold, the bail-in applied to eligible amounts above that threshold, subject to the resolution rules, not every customer's whole balance.[9]

The bank's results also record restrictions on withdrawals, compulsory renewal of maturing deposits and controls on capital movements. Depositors acquired shares in place of part of their cash claim. That is not the same as saying every affected euro vanished, but it is very different from cash available on demand.[9]

This was a banking crisis and resolution, not a finding that depositors had evaded tax. The lesson is narrower: tax treatment, deposit protection and access to money are separate risks. A favourable answer to one does not settle the others.

A trust changes who holds the title

A trust is not merely a savings account wearing a foreign label. HMRC describes trustees holding property in their names for beneficiaries, whose benefits depend on the trust's terms.[10]

In a public OffshoreAlert talk, Marc Hürner said that clients needed to understand that separation before entering offshore structures. The OffshoreAlert recording, made in May 2015, discusses ownership, discretionary powers and the difficulty of recovering records. His warnings remain useful questions to ask, but they are not findings that every trustee steals.[11]

A transfer of legal title does not necessarily extinguish every beneficial interest, reserved power or legal remedy. Nor is a foundation simply another word for a trust. The rights attached to a marketed structure depend on its legal form, documents and jurisdiction. Ask precisely what rights survive and who can exercise them. “It is still your money” is an inadequate explanation of a document that gives someone else legal control.[10][11]

In that presentation, Hürner described an offshore structure involving entities in several jurisdictions. He said that obtaining records became difficult and discussed the potential need for court proceedings. This was his account of a disputed matter, not a judicial finding adopted by this article.[11]

The presentation illustrates questions about information rights and enforcement across jurisdictions. Its account of the particular dispute has not been independently established here. The firm and individuals he named are not identified in this article.

Similar or easily confused entity names can make responsibilities harder to follow. A complete structure diagram should identify every entity by its exact registered name, registration number and legal role. A settlor, trustee, protector and underlying company are different roles, even when the stationery looks alike.[11]

Twenty-eight nominees, more than 21,500 companies

There is independent reporting behind the concern about scale. A 2012 Guardian and ICIJ investigation identified more than 21,500 companies associated with 28 nominee directors, including 3,518 BVI companies.[12]

Those totals included present and former directorships and dissolved companies. They should not be presented as simultaneous active appointments, or casually relabelled as trustee mandates. The Guardian also acknowledged legitimate uses of nominees and that the arrangements were not inherently unlawful.[12]

Nevertheless, the reporting supplies a practical question: who actually makes decisions, and how many active responsibilities does that person have? A signature on a form is not a satisfactory substitute for an explanation of oversight.

Belize supplies another warning about recovery. In 2021 ICIJ and The Washington Post reported that Marc Collins-Rector had established a Belize trust, while abuse claimant Mark Ryan had received none of a multimillion-dollar default judgment. Collins-Rector disputed the civil judgment; the reporting described his separate criminal guilty plea.[13]

ICIJ reported that the trust was established before the civil judgment, but the leaked records did not identify the relevant assets. That reporting did not establish whether the trust prevented enforcement of the judgment. They did not establish that the trust alone caused every recovery failure. Nor does this example make ordinary offshore customers comparable to the people in that reporting. It shows why “asset protection” can mean an obstacle for somebody with a legitimate claim.[13]

Liechtenstein: even a dynasty can struggle for an account

The Agnelli inheritance dispute illustrates the information problem at a very different scale. Vanity Fair's 2008 investigation described Margherita Agnelli de Pahlen's demand for a full accounting of her father's estate and a lawsuit concerning offshore vehicles, including the Alkyone Foundation in Vaduz, Liechtenstein.[14]

The allegations were contested. Vanity Fair carried the family's opposing account and an adviser's statement that he had supplied exhaustive answers. This article does not treat the dispute as a judicial finding that foundation assets were stolen.[14]

The useful lesson is not gossip about a dynasty. It is that the legal right to information matters before a family needs to exercise it.

The system's flaw

These examples concern different mechanisms, not one universal conspiracy. A banking resolution is not a nominee arrangement. A beneficiary's disputed account is not a criminal conviction. A low tax rate is not evidence of misconduct.

But my reading of the pattern is critical. The product can be easy to buy while the remedy is expensive to use. The people arranging the layers get paid at the beginning. The client must ask, before signing, who pays to untangle them.

Hürner also discussed limitation periods in his 2015 presentation. A historical talk cannot establish the deadline for a current dispute. Applicable deadlines depend on the claim, governing law and current legislation. That is a reason for prompt independent local legal advice, not a deadline calculated from a video.[11]

Sunlight is the best disinfectant. Here, sunlight means readable rules, named decision-makers and remedies that can actually be used.

What to do instead

1. Establish residence before moving money. A useful starting point is written independent advice on residence for the relevant tax year, including any split-year treatment. Individual and company positions need separate consideration, as do UK-source income and departure or return consequences. Paraguayan advice should address the particular income and source rules, not just the location of the customer.[2][3][5][21]

2. Buy advice independently of the structure. For regulated investment advice, use the FCA's Register or Firm Checker and confirm the exact permissions and contact details. Check its Warning List too. Absence from the Warning List does not establish that a business is authorised or that an investment is safe. For tax advice, check relevant professional membership, qualifications, experience in the jurisdictions concerned, complaints arrangements and professional indemnity cover. Membership alone is not a guarantee of suitability for a particular cross-border issue. Tax advice is not automatically FCA-regulated.[15][17]

3. Compare ordinary UK alternatives first. Subject to eligibility, UK residents can put up to £20,000 into ISAs in 2026 to 2027. The standard pension annual allowance is £60,000, but tapering and other restrictions may reduce it. That allowance is separate from tax-relief limits on personal contributions, where relevant earnings and individual circumstances matter. Domestic options and business pension contributions belong in an independent comparison of costs, access restrictions and suitability before offshore complexity is added.[18][19]

4. Demand a complete ownership and exit pack. Ask for the trustee's exact legal identity, registration, licence where required, active mandate count and conflicts; the protector's powers; governing law and court jurisdiction separately; rights to accounts and bank records; fees; and effective removal and replacement rights. The documents should explain death, incapacity and provider insolvency, who holds the assets, whether they are segregated, and who can supply records if the provider fails. Ask how a court order could be enforced where the assets are held and whether the likely cost makes the remedy realistic. A sound general rule is not to sign a declaration-of-trust-only package without the full operative documents and independent advice on their effect.[10][11][12]

Before transferring money, independently confirm the recipient's exact legal identity, account holder, banking details and relationship to the arrangement, using contact details obtained independently of the payment instruction. Ask what protection actually applies if the provider fails.

5. If already exposed, act on records and tax together. Preserve deeds, statements, messages and transfer instructions. Seek independent legal advice promptly on access, protective action and limitation periods. For unpaid UK tax involving an offshore issue, discuss eligibility for HMRC's Worldwide Disclosure Facility with a specialist. HMRC requires the disclosure within 90 days after receipt of its notification acknowledgement quoting the disclosure reference number. Complex cases may qualify for extra time on request, potentially up to 180 days in total; the applicable deadline should be confirmed with HMRC. It is not a blanket amnesty or immunity from prosecution.[6]

The historical Requirement to Correct regime carries a standard failure-to-correct penalty of 200% of the relevant tax, reducible for disclosure but normally not below 100%, unless special circumstances apply, and subject to other conditions. It concerns specified earlier non-compliance and the September 2018 correction deadline, not an automatic penalty on every new foreign account. Other penalties can also apply.[20]

The answer is not another secret address. It is an arrangement whose tax treatment, ownership and exit you can explain before anyone else holds the keys.

Understand the tax, the ownership and the route out before committing the money.

This article provides general information and commentary, not personal legal, tax or investment advice. Consequences depend on individual facts and the laws of the jurisdictions concerned.

Sources

Sources and reference materials are listed below. Numbers above identify supporting sources. Speaker accounts, media allegations, official records and commentary are distinguished in the text.

  1. Current commercial Paraguay pitch, cited only as evidence of marketing, not as tax authority: https://www.sebsauerborn.com/countries/paraguay
  2. PwC, Paraguay individual income tax, reviewed 19 October 2026: https://taxsummaries.pwc.com/paraguay/individual/taxes-on-personal-income
  3. PwC, Paraguay corporate income determination, reviewed 19 October 2026: https://taxsummaries.pwc.com/paraguay/corporate/income-determination
  4. HMRC, foreign income and qualifying relief: https://www.gov.uk/tax-foreign-income
  5. HMRC, UK residence: https://www.gov.uk/tax-foreign-income/residence
  6. HMRC, WDF eligibility, process, anti-avoidance issues, separate company disclosures and criminal-investigation reservation: https://www.gov.uk/guidance/worldwide-disclosure-facility-make-a-disclosure
  7. OECD commitments, last updated 30 September 2026: https://www.oecd.org/content/dam/oecd/en/networks/global-forum-tax-transparency/aeoi-commitments.pdf ; Cyprus actual commencement: https://www.oecd.org/en/publications/peer-review-of-the-automatic-exchange-of-financial-account-information-2021_90bac5f5-en/full-report/cyprus_81aa72ed.html
  8. PwC, enacted Cyprus tax reform: https://www.pwc.com.cy/en/services/tax-legal-services/tax-advisory-services/the-cyprus-tax-reform.html
  9. Bank of Cyprus, recapitalisation announcement: https://www.bankofcyprus.com/en-gb/group/news-archive/Recapitalisation-through-Bail-in-and-Resolution-Exit-Bank-of-Cyprus-Announcement/ ; Central Bank of Cyprus, threshold and resolution rules: https://www.centralbank.cy/en/announcements/30032013-1 ; audited 2013 results, particularly printed pages 4 and 7: https://www.bankofcyprus.com/globalassets/news-archive/auditedfinancialresults_fy2013eng_20140327.pdf
  10. HMRC, the trust relationship: https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem1004
  11. OffshoreAlert, public talk recorded 5 May 2015, published 25 January 2016, speaker credited as Marc Hürner. Auto-generated captions checked for relevant passages, not treated as a legal transcript: https://www.youtube.com/watch?v=4TxDfYGiCG4 ; overview 3:00 onwards, Belize 12:39, structure and records 13:30 to 20:33, Agnelli discussion 20:47 to 26:42.
  12. Guardian and ICIJ nominee investigation, 26 November 2012: https://www.theguardian.com/uk/datablog/2012/nov/26/offshore-secrets-companies-sham-directors
  13. ICIJ and The Washington Post, Belize reporting, 4 October 2021: https://www.icij.org/investigations/pandora-papers/belize-american-offshore-glenn-godfrey-law-firm/
  14. Mark Seal, Vanity Fair, The Woman Who Wanted the Secrets, 2008, reporting allegations and responses: https://www.vanityfair.com/news/2008/08/agnelli200808
  15. FCA, warning-list limitations and contact checks: https://www.fca.org.uk/consumers/warning-list-unauthorised-firms ; Register: https://www.fca.org.uk/firms/financial-services-register
  16. HMRC, offshore disclosure facilities: https://www.gov.uk/guidance/offshore-disclosure-facilities
  17. CIOT professional status and directory: https://www.tax.org.uk/cta-membership ; member directory: https://pilot-portal.tax.org.uk/utilities/ciot/find-a-member ; ATT: https://www.att.org.uk/
  18. HMRC, ISAs: https://www.gov.uk/individual-savings-accounts
  19. HMRC, pension annual allowance: https://www.gov.uk/tax-on-your-private-pension/annual-allowance ; tax-relief earnings restrictions: https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief
  20. HMRC, failure-to-correct standard, reductions and additional penalties: https://www.gov.uk/hmrc-internal-manuals/compliance-handbook/ch123400
  21. HMRC, RDR3 Statutory Residence Test guidance: https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt ; full notes: https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3

Sources