This is not intended to be tax advice. Please consult your tax professional about anything I write here.
As a US citizen, your worldwide income is subject to US income tax, regardless of where you are living. You are also subject to the same income tax filing requirements whether you live abroad or live in the US.
I do a number of tax returns for clients living abroad. There is a partial exemption for income earned abroad and a deduction available for foreign income taxes paid. But each individual has their own unique set of circumstances. You can refer to IRS Publication 54 for more information:
http://www.irs.gov/pub/irs-pdf/p54.pdf
There are a number of Attorneys and CPA’s that promote seminars about how to escape US federal income taxes thru the use of foreign corporations. I have also seen the seminars on how to avoid income tax thru domestic and international trusts. Please be extremely careful when venturing down this road. Many of these will not hold up in the end and you may rue the day that these thoughts ever entered your head in the first place as the penalties for tax cheats can be severe.
If you think you have something ironclad, please review with your tax adviser the rules on controlled foreign corporations and other entities. Be aware that this is a very hot button with the IRS right now.
There are legitimate ways that US affiliates can reduce or eliminate their tax obligation. I have discussed these with several of you. Many of you may want to check past tax returns and see if you have ever taken the extraterritorial income exclusion.
My advice is to be very wary of those recommending these convoluted ownership structures unless you have a valid business purpose for pursuing them.