Advice On Offshore Tax Structure From Australia

[Twackout]

Hey all,

Just looking for some advice on this potential idea my business partner and I had for running our large website.

- Set up Cyprus/Malta company, whatever it may be
- Accumulate revenue from our website in the Cyprus company
- Pay 12.5% tax rate on revenue in Cyprus company
- Accumulate wealth and make investments from this company in tern, growing this balance.
- Pay ourselves salaries out of this Cypriot company into Australia (not 100% sure on the tax implications in Australia)
- When the time comes, say for example we have 10 or 20m in the Cyprus account, we just cop whatever tax rate we need to pay in Australia.

Here is the benefits in my mind:

- Instead of paying 30% company tax in Australia, we would be paying 15% in Cyprus, in tern, saving more money on tax over time whilst also making investments to grow our Cyprus bank account. Although we know we would eventually get hit with some type of tax in Australia (please advise) - we would have had more capital to make more money leading up to this taxable event.

Question:
- What are the tax implications on paying ourselves a salary from the Cypriot/Maltese company? Would we subject to personal income tax? Or would we be subject to company tax (30%)? Or both of these? (surely not). What if the salary was 500k per year and the personal income tax bracket exceeded the 30% company tax?


Thanks for taking the time to read

 

[Sols]

It's quite simple.

Are you going to stay in Australia?

If yes, the companies are tax resident in Australia and have to pay Australian tax just like an Australian company. Check the Australian tax rates to see how much tax your companies must pay locally in Australia, and then work out how much tax to pay in Malta/Cyprus as well. There may be a tax treaty you can use to not pay double tax.

If no, the companies are (probably) tax resident wherever you move to. Moving to Cyprus or Malta if your company is there is often the easiest option. Anything involving multiple jurisdiction quickly gets expensive and complicated.

Welcome to 2023. Pack your bags if you want to save on taxes.

 

[mud]

Also, be careful of Australia's strong CFC laws that apply at the both the corporate and personal level. And then there's a defacto exit tax - CGT on deemed gains when you leave the country.

 

[kyaky]

1. avoid customers from Australia.
2. has a second director making descision.
Your offshore company might be able to avoid being Australia tax resident

​

According to ATO:​

​

Sole traders and ordinary partnerships​

If you operate your business as a sole trader or an ordinary partnership, your Australian income tax obligations are based on your individual residency. Refer to Work out your tax residency.

Companies​

A company is a resident of Australia if:

• it is incorporated in Australia, or
• although not incorporated in Australia, it carries on business in Australia and has either its
  • central management and control in Australia, or
  • voting power controlled by shareholders who are residents of Australia.

Corporate limited partnerships​

A corporate limited partnership will be considered a resident of Australia if either the partnership:

• was formed in Australia
• carries on business in Australia - or has its central management and control in Australia.

It is usually not necessary to determine the residency status of ordinary partnerships (which do not have the benefit of limited liability). The individual partners are taxed on their share of the net partnership income according to their individual residency status.