Question Any potential pitfalls with this set up?

[myfriendjohn]

I have the following set up currently, and wondering if anyone sees any holes.

I'm not looking to evade taxes, but to minimize them.

- I'm Canadian

- I live in Belize

- My clients are all US based

- I have a Hong Kong corporation (should be 0% corporate tax since all revenue is from outside Hong Kong and the business is run from here)

- From what I can see, Belize is a territorial taxation country and has no CFC rules, so dividends received from Hong Kong corporation should not be taxed here in Belize

- I also have a local Belize corporation (not an IBC - a local corp). I do some consulting with a few clients through this corporation. The main reason for doing so is that I enjoy paying some taxes here to help the economy.

- Theoretically, Canada should have no claim to taxes on any income or dividends as I've severed most of my ties. My only tie there is some furniture that I am waiting to have shipped down.

Does anyone see any potential pitfalls here?

 

[Martin Everson]

Sounds ok.

 

[FreedomSearcher]

I have the following set up currently, and wondering if anyone sees any holes.

I'm not looking to evade taxes, but to minimize them.

- I'm Canadian

- I live in Belize

- My clients are all US based

- I have a Hong Kong corporation (should be 0% corporate tax since all revenue is from outside Hong Kong and the business is run from here)

- From what I can see, Belize is a territorial taxation country and has no CFC rules, so dividends received from Hong Kong corporation should not be taxed here in Belize

- I also have a local Belize corporation (not an IBC - a local corp). I do some consulting with a few clients through this corporation. The main reason for doing so is that I enjoy paying some taxes here to help the economy.

- Theoretically, Canada should have no claim to taxes on any income or dividends as I've severed most of my ties. My only tie there is some furniture that I am waiting to have shipped down.

Does anyone see any potential pitfalls here?

Sounds like a good setup.

 

[Sols]

Does anyone see any potential pitfalls here?

In case any part of the structure relies on your own research, my recommendation would be to run the structure in detail past tax/legal advisers. Well worth it for the peace of mind.

Otherwise, seems OK.

 

[RealDude]

Let's imagine that the USA would sanction China in the near future as they are currently sanctioning Russia. How far would Honk Kong companies doing business in the US be affected?

 

[Marzio]

The only problem is that you are managing your HK LTD from Belize hence creating a PE in Belize.

They don't probably care but still there's a weak point in your setup.

 

[myfriendjohn]

Let's imagine that the USA would sanction China in the near future as they are currently sanctioning Russia. How far would Honk Kong companies doing business in the US be affected?

Definitely a concern for me. Setting up the company was pretty inexpensive. So, I'm willing to give it a shot - but not leaving much capital in the banks.

The only problem is that you are managing your HK LTD from Belize hence creating a PE in Belize.

They don't probably care but still there's a weak point in your setup.

Agreed. Not sure there's anyway around this if I want to continue living here. My quick research shows no PE or CFC rules in Belize. And my guess is they would not have the appetite to enforce them if they did.

 

[Martin Everson]

My quick research shows no PE or CFC rules in Belize. And my guess is they would not have the appetite to enforce them if they did.

Belize is too small an economy to worry about this right now. However once OECD set their sights on Belize like they are now the UAE and they did the Caribbean then CFC will happen at some point sadly.

Let's imagine that the USA would sanction China in the near future as they are currently sanctioning Russia. How far would Honk Kong companies doing business in the US be affected?

This is possible at some point with tensions over Taiwan. But it would be suicide for US to do such an action in near future. Which means they will do it of course...lol.

 

[myfriendjohn]

Belize is too small an economy to worry about this right now. However once OECD set their sights on Belize like they are now the UAE and they did the Caribbean then CFC will happen at some point sadly.

If that happens, is it a viable strategy to live 6 months less a day here, 6 months less a day in somewhere like Mexico, and 2 days in a third country? That more or less suits our lifestyle anyway.

 

[Martin Everson]

If that happens, is it a viable strategy to live 6 months less a day here, 6 months less a day in somewhere like Mexico, and 2 days in a third country? That more or less suits our lifestyle anyway.

You gonna update your bank and other corporate records every 6 months to reflect your living circumstances?

 

[myfriendjohn]

You gonna update your bank and other corporate records every 6 months to reflect your living circumstances?

Good point. No, that doesn't sound like it's worth it lol.

 

[Martin Everson]

Chances are if CFC does happen then Belize will add a high CFC income threshold like some other countries, below which CFC rules don't apply to those companies. It will still want to stay competitive.

 

[myfriendjohn]

Chances are if CFC does happen then Belize will add a high CFC income threshold like some other countries, below which CFC rules don't apply to those companies. It will still want to stay competitive.

What would be considered a high income threshold? And would it apply to dividends?

 

[Martin Everson]

What would be considered a high income threshold? And would it apply to dividends?

How long is a piece of string? It varies from country to country i.e in Malta its 750k Euro's applied to accounting profits. Some other countries have lower thresholds. Please note CFC rules may not even happen in Belize but their is likely chance it will is what I am meaning and one should prepare for that.

 

[myfriendjohn]

OK, thank you. Appreciate the help.

 

[Chemtrade]

I'm Canadian too.
When I decided to terminate my tax residence in Canada in 2006, I was told that I can keep a travel passport only. No driving license, no OHIP (health card), no real estate and of course no bank account. Travel passport only.
And better to buy the one way ticket from Canada and send the scan copy of it together with boarding pass to your local Revenue Canada office.
And - in your are lucky enough - you may receive the confirmation that you are not tax resident any more.
Otherwise you have to declare your worldwide income and follow the agreements of doulbe taxation avoidance.

 

[myfriendjohn]

I'm Canadian too.
When I decided to terminate my tax residence in Canada in 2006, I was told that I can keep a travel passport only. No driving license, no OHIP (health card), no real estate and of course no bank account. Travel passport only.
And better to buy the one way ticket from Canada and send the scan copy of it together with boarding pass to your local Revenue Canada office.
And - in your are lucky enough - you may receive the confirmation that you are not tax resident any more.
Otherwise you have to declare your worldwide income and follow the agreements of doulbe taxation avoidance.

Thanks!

I have surrendered my OHIP card already. My driver's license expires in 3 weeks. I own no real estate in Canada. And I have abandoned my bank accounts - no activity in more than 6 months.

Also, bought our one-way ticket more than a year ago.

Hopefully I'm ok. Not sure how I'll know. I think the only way is if they reach out and tell me I owe income tax.

If they do that, I'm potentially prepared to renounce my citizenship - not to avoid taxes, but it's the principle of the thing. I'm clearly building a life here in Belize.

 

[Chemtrade]

Rather close your bank account. Try to write to the bank something like ... "Please, close my bank account and transfer all the balance of it meno fees and commissions to..."
In case you can control your former address - see, if Notice of Assessment will come.

 

[lacomaco]

I have the following set up currently, and wondering if anyone sees any holes.

I'm not looking to evade taxes, but to minimize them.

- I'm Canadian

- I live in Belize

- My clients are all US based

- I have a Hong Kong corporation (should be 0% corporate tax since all revenue is from outside Hong Kong and the business is run from here)

- From what I can see, Belize is a territorial taxation country and has no CFC rules, so dividends received from Hong Kong corporation should not be taxed here in Belize

- I also have a local Belize corporation (not an IBC - a local corp). I do some consulting with a few clients through this corporation. The main reason for doing so is that I enjoy paying some taxes here to help the economy.

- Theoretically, Canada should have no claim to taxes on any income or dividends as I've severed most of my ties. My only tie there is some furniture that I am waiting to have shipped down.

Does anyone see any potential pitfalls here?

What about accounting/auditing costs of the HK company? Did they give you a proper quote based on your turnover, number of transactions etc?

 

[myfriendjohn]

What about accounting/auditing costs of the HK company? Did they give you a proper quote based on your turnover, number of transactions etc?

I think it's going to be about $4K per year.