[Discuzz]Legit way for the lowest corporate tax

[shadowwalker]

Hi,

BVI and Cayman island just released Economic substance laws, and more tax heavens will fall and its just the matter of time.
The pure tax heaven company offshore plan wont work for long time.

I think the best way for cooperate tax should be: on shore + off shore
and only pay a few tax.

I have a setup model in my mind, please tell me if its good and legit.

If someone have a internet software company, making a lot of money, lets say 1 million USD a month, he can use Bulgaria + Dubai company setup.

Bulgaria company does the operation, selling software receive the 1 million USD from clients.
Dubai company owns a tecnical license of the software, and charges Bulgaria company 95% of its earnings.
So 950k $ transfers to Dubai taxed free. And only leave 50k $ in Bulgaria company each month, and you rent office, hiring people all spend from the 50k $, maybe only leave 20k $ as profit. and 20k $ will be taxed with 10% in Bulgaria, so you just pay 2k usd $ per month for tax.

What do you think for this setup ?
Bulgaria + Dubai is just an example, maybe Cyprus + Dubai or Singapore + Dubai also works.
Whats the best combinations do you think ?

anyway the point is just a on shore company with law tax works with a offshore company has no tax.
Thanks

 

[Bmw850]

This is the way when you make real money.
I have a similar set up mine is UK - HK
The choice of jurisdiction has been made in front of my customers need

 

[shadowwalker]

This is the way when you make real money.
I have a similar set up mine is UK - HK
The choice of jurisdiction has been made in front of my customers need

Why you dont use dubai instead hongkong ?
As hongkong is only tax free for foreign income, and need a lot of paper work. but dubai is totally free.

 

[Bmw850]

Why you dont use dubai instead hongkong ?
As hongkong is only tax free for foreign income, and need a lot of paper work. but dubai is totally free.

As you said HK is free tax for foreign income. In my business it is well seen by the banks that the company A ( UK ) buy from the company B ( HK ) because it s get sense to get this kinds of products from HK. I create set-up that don't last long ( less than a year ), so the paperwork are less important for me. In your scheme or mine , you can add companies/layers too, if you want to make it a real headache for the autorities to follow your money movements.

 

[shadowwalker]

As you said HK is free tax for foreign income. In my business it is well seen by the banks that the company A ( UK ) buy from the company B ( HK ) because it s get sense to get this kinds of products from HK. I create set-up that don't last long ( less than a year ), so the paperwork are less important for me. In your scheme or mine , you can add companies/layers too, if you want to make it a real headache for the autorities to follow your money movements.

I see, Thank you.
For the companies to add work as layers, you mean add more off shore companies like dubai ?

 

[shadowwalker]

As you said HK is free tax for foreign income. In my business it is well seen by the banks that the company A ( UK ) buy from the company B ( HK ) because it s get sense to get this kinds of products from HK. I create set-up that don't last long ( less than a year ), so the paperwork are less important for me. In your scheme or mine , you can add companies/layers too, if you want to make it a real headache for the autorities to follow your money movements.

And for the setup i mentioned, do you think Bulgaria + Dubai is the best combination ? do you think there are better option can replace Bulgaria in this setup ? Cyprus?

Thanks a lot

 

[Bmw850]

The purpose of the layers is to make difficult for the autorities to track the money.
For example when my business is in EU ( income ) , after my UK , i put directly outside EU layers. It s more difficult and take more time for EU autorities when it s outside EU.
I don't have real preference between Bulgaria and Cyprus , i prefer to speak about banking and which jurisdiction will offer you the banking for 1 millions per month because when you do this turn over, you cannot rely on 50+ emi to split.
I know customers that work with Bulgaria and unicredit , and the monthly turn over is 1-3 M euros.
Cyprus banks was usual to those amounts but i speak few years ago, i don't know what is the situation.
Your primary idea is good , and because of the Brexit soon, i also look at Bulgaria .

 

[shadowwalker]

The purpose of the layers is to make difficult for the autorities to track the money.
For example when my business is in EU ( income ) , after my UK , i put directly outside EU layers. It s more difficult and take more time for EU autorities when it s outside EU.
I don't have real preference between Bulgaria and Cyprus , i prefer to speak about banking and which jurisdiction will offer you the banking for 1 millions per month because when you do this turn over, you cannot rely on 50+ emi to split.
I know customers that work with Bulgaria and unicredit , and the monthly turn over is 1-3 M euros.
Cyprus banks was usual to those amounts but i speak few years ago, i don't know what is the situation.
Your primary idea is good , and because of the Brexit soon, i also look at Bulgaria .

Hi BMW850, really appreciate for your warm hearted reply.
you mentioned: i prefer to speak about banking and which jurisdiction will offer you the banking for 1 millions per month because when you do this turn over, you cannot rely on 50+ emi to split.

What do you mean by "50+ emi" ?

 

[shadowwalker]

The purpose of the layers is to make difficult for the autorities to track the money.
For example when my business is in EU ( income ) , after my UK , i put directly outside EU layers. It s more difficult and take more time for EU autorities when it s outside EU.
I don't have real preference between Bulgaria and Cyprus , i prefer to speak about banking and which jurisdiction will offer you the banking for 1 millions per month because when you do this turn over, you cannot rely on 50+ emi to split.
I know customers that work with Bulgaria and unicredit , and the monthly turn over is 1-3 M euros.
Cyprus banks was usual to those amounts but i speak few years ago, i don't know what is the situation.
Your primary idea is good , and because of the Brexit soon, i also look at Bulgaria .

And yea i am looking at Bulgaria too. As on shore is mainly for operation, office and people's cost is much lower in Bulgaria than Cyprus.
Bulgaria has 7 millions population, Cyprus has just 1 million. so its easier to find coders in Bulgaria.

 

[Tax Cow]

Bulgaria is not a bad choice for the front-end by any means. Reasonable taxes and low op-cost. And of course, you further bleed out the entity of its taxable income through offshore licensing and other means of good accounting.

For your offshore back-end component, you shouldn't pick a random low or zero tax place though. You shouldn't go by "best reputation" either, because there is something more important at play.

1. Look at the DTA network
- Does your onshore front-end jurisdiction charge withholding taxes when (royalty; software licensing) payments are made to offshore holding company
2. Out of those offshore jurisdictions where low or zero withholding taxes apply under DTA rules:
- Pick a country where it's easy and cheap to establish economic substance. I have no experience with Bulgaria, but DTA withholding rates are almost never granted unless economic subtance is proven. Normally, you obtain a tax residency certificate as proof of substance. Assume at least 50K/year economic substance costs in the offshore jurisdiction.
- Obtain an advance tax ruling (from Bulgaria) in regards to withholding rate under DTA rules.

 

[Bmw850]

What do you mean by "50+ emi"

I mean the trend here is to open remotely emi ( electronic money institution ). It is easy, free and remotely being. Most of emi don't have deposit protection scheme and not reliable for the amounts you have mentionned. So you need a real bank, was my thought. Bulgaria is ok and the banking too seems in front of what my customers do.
Now that i understand you need coders ( i understand this business ) Bulgaria is definitely the right choice and not cyprus

 

[shadowwalker]

Bulgaria is not a bad choice for the front-end by any means. Reasonable taxes and low op-cost. And of course, you further bleed out the entity of its taxable income through offshore licensing and other means of good accounting.

For your offshore back-end component, you shouldn't pick a random low or zero tax place though. You shouldn't go by "best reputation" either, because there is something more important at play.

1. Look at the DTA network
- Does your onshore front-end jurisdiction charge withholding taxes when (royalty; software licensing) payments are made to offshore holding company
2. Out of those offshore jurisdictions where low or zero withholding taxes apply under DTA rules:
- Pick a country where it's easy and cheap to establish economic substance. I have no experience with Bulgaria, but DTA withholding rates are almost never granted unless economic subtance is proven. Normally, you obtain a tax residency certificate as proof of substance. Assume at least 50K/year economic substance costs in the offshore jurisdiction.
- Obtain an advance tax ruling (from Bulgaria) in regards to withholding rate under DTA rules.

Thanks for your response.

For 1. I will try to figure out, i didnt know about this before, its good to learn before taking action.
For 2. I also bought an office in dubai. i think i just need to hire a few guys there and come to dubai every 180 days once.

 

[shadowwalker]

I mean the trend here is to open remotely emi ( electronic money institution ). It is easy, free and remotely being. Most of emi don't have deposit protection scheme and not reliable for the amounts you have mentionned. So you need a real bank, was my thought. Bulgaria is ok and the banking too seems in front of what my customers do.
Now that i understand you need coders ( i understand this business ) Bulgaria is definitely the right choice and not cyprus

Thank you.
Yes, so better to talk to the bank in Bulgaria first, ensure they are fine with the amount before setting up the acct

 

[shadowwalker]

I mean the trend here is to open remotely emi ( electronic money institution ). It is easy, free and remotely being. Most of emi don't have deposit protection scheme and not reliable for the amounts you have mentionned. So you need a real bank, was my thought. Bulgaria is ok and the banking too seems in front of what my customers do.
Now that i understand you need coders ( i understand this business ) Bulgaria is definitely the right choice and not cyprus

Hi BMW850,

I did some research about Bulgaria, the setup i mentioned wont work with Bulgaria, just want to give an update and let you know as well.

As Bulgaria will charge 10% withholding tax, so it makes the setup meaningless...

 

[Bmw850]

@shadowwalker thanks for the info.
But what does it means exactly, not sure to understand.

 

[shadowwalker]

@shadowwalker thanks for the info.
But what does it means exactly, not sure to understand.

it means if its royalty or tecnical license fees from Bulgaria pay to a foreign company, Bulgaria will charge 10% for tax.

 

[wisdom]

why would the 10% make the whole operation meaningless?

 

[neweraoffshore]

@shadowwalker are you sure that you have to pay 10% on the license fee you pay to another company? I have no Idea about Bulgaria, but in Germany we pay 25% withholding tax (Abgeltungssteuer) only on the profit or interest we get from payouts. So it would fit as you said before that you only pay the 10% on the remaining profit in your onshore company. (In Germany withholding tax is 25% by the way).
I also own some IT companies, but in Germany, I invoice them over a Malta company (full nominee) and then invoice the Malta company from one of my US companies where i store my money with 0% tax. (In between I also do some crypto exchange stuff to ultimately cut the ties to my final money destination, but this is optional security) Doing this system for ca. 6 years now, during this time I had my audit already with 2 companies and there was no major problem.
However, I am a perpetual traveler, and therefore my home country doesn't really care about me because Germany taxes on your residence and I don't need to report my US bank accounts. The only thing I am doing "wrong" is that the German company doesn't have as much profit as it should to avoid corporate tax, however not provable for them. But if you are a US citizen then I guess there wouldn't be any legit way at all. Still, if you continue to live at one major place in the EU for more then 183 days then there is no real legit way to pay no tax. You can hide it so they don't have enough evidence but if your full system gets leaked then you will have problems for sure, no matter what lawyers want to tell you. Where are you from, or where do you have your "center of life" ?

 

[JohnLocke]

You simply setup a real business in a country that has double tax treaties with your country but a lowe tax! It's not more complicated then that. You can't setup a shelf company or similar it has to be a real company with real office and staff.

 

[neweraoffshore]

True, you have to really make business in the EU. At my EU places there are at least 3 persons working for real, in a real office. In Germany I have 15 people and Malta 3. It's just the profit for myself I take out. Just a shell company in the EU is dangerous, tax authorities will visit you and have a physical look on your business!