How the Wealthy Legally Pay Less Tax: Offshore Strategy, Real Estate, and What the Panama Papers Actually Revealed

I recently sat down with the team at CPI Capital to talk about something I get asked about constantly: how high-net-worth individuals and real estate investors legally reduce their tax burden across borders. We covered offshore structures, the Panama Papers fallout, and what real planning looks like for someone with international exposure.

If you want to watch the full conversation, you can find it here. But I also want to walk through the key themes here, because there’s a lot of confusion in this space, and confusion tends to cost people money or compliance headaches.

The Panama Papers Didn’t Reveal Illegal Structures. They Revealed Unreported Ones.

This is a distinction that matters enormously. When the Panama Papers broke in 2016, the headlines made it sound like offshore accounts were inherently suspect. But most of the structures exposed weren’t illegal on their own. The problem was that many of them weren’t disclosed to the relevant tax authorities.

For a US person, using an offshore company or trust is not inherently a red flag. The IRS has a well-established framework for these structures: PFIC rules for foreign investments, Subpart F and GILTI for controlled foreign corporations, Form 5471, FBAR, Form 8938. The reporting obligations are extensive, but they exist precisely because the government allows these structures to be used, within limits.

What the Panama Papers showed is what happens when people skip the reporting side. That’s where the exposure is. The structure isn’t the problem; the non-disclosure is.

What “Legally Paying Less Tax” Actually Looks Like

When I work with a high-net-worth client, I’m not looking for loopholes. I’m mapping their actual situation, and then identifying which legitimate tools are available to them.

A few of the most common planning opportunities that come up in practice:

Foreign Earned Income Exclusion (FEIE) – If you’re a US citizen living and working abroad, you can often exclude a significant portion of your earned income from US tax. For 2025, that exclusion is $130,000 per person. The key word is “earned.” It doesn’t apply to passive income, investment income, or business distributions unless structured carefully.

Treaty Benefits – The US has income tax treaties with about 70 countries. These treaties can reduce or eliminate withholding taxes on dividends and interest, and in some cases, they affect how certain income is categorized. Most people don’t know which treaties apply to their situation, or how to actually claim the benefits on their return.

Foreign Tax Credits – If you’re paying income tax abroad, you can often use those payments to offset your US tax liability dollar-for-dollar. The interaction between foreign tax credits and treaty benefits is one of the more technically demanding areas of expat tax planning, but it’s also where the real savings tend to live.

Offshore Corporate Structures. For international entrepreneurs, the right corporate structure can defer US tax on foreign income in certain circumstances. This is not tax avoidance; it’s how the international tax system is designed to work. The catch is that the rules here have tightened considerably over the past decade, particularly with TCJA’s changes to GILTI, so the planning has to be updated regularly.

Real Estate. Cross-border real estate creates its own set of considerations: FIRPTA for foreign investors in US property, passive activity rules, depreciation recapture, and how rental income is treated under various treaties. For US persons investing abroad, the picture is different again.

The Mistake I See Most Often

People find me after they’ve already made a structural decision. They’ve set up an offshore company, or bought foreign real estate, or moved to a lower-tax jurisdiction, and then they ask: “Is this okay?”

Sometimes it is. Sometimes it creates a reporting problem that’s expensive to unwind. And sometimes the structure they built for tax reasons actually doesn’t accomplish what they thought it would, because they didn’t account for how the US looks at it.

The better sequence is to talk before making the move. International tax planning is genuinely proactive work. Retroactive cleanup is possible in many cases, but it costs more and delivers less.

Who This Conversation Is For

The CPI Capital interview focused on real estate investors and high-net-worth individuals, which makes sense given their audience. But the underlying principles apply broadly: to US expats running foreign businesses, to entrepreneurs thinking about relocating, to investors with accounts or assets in multiple countries.

If your financial life crosses borders in any direction, the US tax system has something to say about it. Understanding what it’s saying, and planning around it intelligently, is what we do.

If you’d like to explore your situation, you can book a consultation with our team here.