In the US system, there's a big difference between intentionally evading taxes and doing so by accident or ignorance. (The joke being that the difference is approximately five years in jail.) For this reason, elaborate structures designed to evade taxes are quite dangerous, because they show that the tax payer was obviously aware of the rules and tried to evade them. In contrast, someone like Tim "TurboTax ate my taxes" Geithner can become treasury secretary (which runs the IRS), despite "forgetting" to pay 32K in taxes because he claimed that TurboTax didn't to warn him he was making a mistake.
An extremely good resource for me has been an outfit called Offshore Press, which has a number of very well research e-books that approach the issue from the perspective of someone who wants to comply with the rules. They are not trying to sell some magic package that will hide your money from the IRS.
My conclusion so far:
- Generally don't buy non-US mutual funds. US based funds are much more tax efficient and provide you with all the paperwork you need to file. The only exception are funds that qualify for Qualified Electing Fund treatment, and the only ones I've seen that do that are a couple Canadian funds.
- Managed accounts (where you get the buy/sell records of each stock) and stocks are usually ok. Finding a broker that will deal with US persons is another matter.
- Before you buy insurance or annuities, read about the 1% Federal Excise Tax. It appears that Spain has a tax treaty exemption for some kinds of insurance, but you need to file an 8833 form to claim this exception.
- Foreign trusts, corporations, etc are generally more trouble than they are worth. It's unlikely to legally save you much in taxes, and if you want to just not pay, then it's better not to try too hard.
- Variable annuities seem to be to only moderately attractive foreign investment (but be careful about the Excise Tax).
- Buying non-US dollar bonds at a discount to face value can have unexpected tax implication.
- Buying/selling any capital asset means paying capital gains on the cost/proceeds converted in US dollars. This includes houses, stocks, bonds, etc.
- Tax advisers are a double edged sword: on one hand, if they give you an opinion and you rely on it and do something illegal, you generally avoid "intent" and won't go to jail. On the other hand, all your communications with the tax advisor can be subpoenaed by the IRS.
- File your FBAR (separate from your return) if you have more than $10,000 in accounts outside the US. The penalties are extreme, even for non-willful omissions. The US has had access to the SWIFT system used for interbank transfers for years (in the name of fighting terror and drugs of course), so don't think you can keep a secret.
- Try your best, but you will never be perfect. With 16,845 pages of the US tax code, you're probably breaking some rule.