Establishing Off shore company

[Bar1979]

Hello,

I am searching tax heaven location for establishing off shore company to issue service invoices to main company.

With internet searching, there are lots of places with pros and cons. I could not see any healthy comparison. Because even for same locations, there different information.

I am focusing on followings,

No file any annual report or no annual meeting
Bank account with payoneer
Virtual office
Remotely managing
Not domestic director required
%0 tax for all corporate or personal earnings
Privacy

According to my search, cayman, bvi, belize… your advice or any previous post link is appreciated.

 

[JohnnyDoe]

This wouldn’t work even 20 years ago

 

[Bar1979]

If you mean invoicing main company wouldn't work, According to my experience it works directly or indirectly somehow.

May I ask Why do you think so ?
I you mean about off shore company conditions, I can not say something. due to lack of experience.

What I see is that establishing off shore company possiblities are getting less than before. But I joined that community to ask about

 

[mud]

What about a simple US LLC based in a non-Sales Tax state?

 

[Bar1979]

What about a simple US LLC based in a non-Sales Tax state?

Annual and monthly reporting&filing requires additional cost&effort. And franchise tax

 

[clemens]

If you are not willing to pay some money to lower or get rid of your taxes it's not worth to have any setup anywhere.

You know, it costs money to make money! Apply that on all your business doings.

 

[Bar1979]

Yes. You are right. Thats why I am here and asking and researching as well. Its worth or not.

 

[JustAnotherNomad]

If you mean invoicing main company wouldn't work, According to my experience it works directly or indirectly somehow.

"Yes, Mr. tax inspector, this is the company I purchased those services from. Yes, terribly high invoice, I know. They only hire the best of the best in the Seychelles."

That's essentially what you're planning. Do you really think you're the first person with this idea and that they haven't thought about ways to prevent that?

 

[Sols]

Yes. You are right. Thats why I am here and asking and researching as well. Its worth or not.

It's all about tax residence: your own and that of your company. In most cases, the company assumes tax residence where you live.

Aside from a handful of specific use cases, forming an offshore company today is pointless. 10-20 or more years ago, there were enough loopholes or weaknesses in enforcement to make them viable for relatively stable tax evasion. Today, don't bother.

If you want to pay less tax, move to a place that has lower tax rates.

 

[Bar1979]

It's all about tax residence: your own and that of your company. In most cases, the company assumes tax residence where you live.

Aside from a handful of specific use cases, forming an offshore company today is pointless. 10-20 or more years ago, there were enough loopholes or weaknesses in enforcement to make them viable for relatively stable tax evasion. Today, don't bother.

If you want to pay less tax, move to a place that has lower tax

"Yes, Mr. tax inspector, this is the company I purchased those services from. Yes, terribly high invoice, I know. They only hire the best of the best in the Seychelles."

That's essentially what you're planning. Do you really think you're the first person with this idea and that they haven't thought about ways to prevent that?

So, how about if you found a company in offshore. And ofshore company bought a company in a taxed country . So, is there something abnormal ?

Or tax heaven company bought a goods as a broker and sold to a taxed company ? ( shipment is from source to tax country. )

I do not think so there is something absurd in scenerios above.

It's all about tax residence: your own and that of your company. In most cases, the company assumes tax residence where you live.

Aside from a handful of specific use cases, forming an offshore company today is pointless. 10-20 or more years ago, there were enough loopholes or weaknesses in enforcement to make them viable for relatively stable tax evasion. Today, don't bother.

If you want to pay less tax, move to a place that has lower tax rates.

But how about customers ? In the end, you will invoice your customer from ofshore.

 

[JustAnotherNomad]

I always put it this way:

[ ] Low costs
[ ] Substantial tax savings
[ ] Legal

Unless you move to a new country, you can choose 2 out of 3.
If you want substantial tax savings in a legal way, that comes with high costs. You can set up a company in a low tax country, but then you need staff actually running things on the ground.
Big companies can save taxes that way because they have lots of employees in those low-tax countries. It's not like their French or American CEO or the manager of the Irish investment fund owning the majority of the shares personally runs the operations in the Cayman Islands.
But as long as you manage the company from Belgium (and that will always be assumed if you don't have local staff, office, real operations, ... in the other country), then there will be tax in Belgium for that company. Otherwise everyone would set up their business in a tax haven and not pay tax where they live. It's not like that, unfortunately.
And even with economic substance in the other country, you may still have to pay tax in your own country due to CFC rules.

If you have the necessary revenue, you could look at outsourcing a part of your business. For example, you could move your customer service into a new company in Cyprus or Ireland or Romania. Hire a local director for the company and local staff. Then you'd have proper substance, and then actually moving that part of your business abroad may actually lead to tax savings.
But you'd have running costs for the company as well, as you'd need staff, you cannot be managing the company from Belgium. The price also has to be "fair", it has to be the "market rate", you can't pay $1M per month to your customer service company in Cyprus when you'd be able to get the same product for $500k somewhere else. Otherwise that would be considered profit shifting.

 

[Sols]

So, how about if you found a company in offshore. And ofshore company bought a company in a taxed country . So, is there something abnormal ?

That's fine, but it doesn't change anything in terms of tax. The onshore company still has to pay just like before.

Or tax heaven company bought a goods as a broker and sold to a taxed company ? ( shipment is from source to tax country. )

If it's done for the purpose of evading tax, there are specific laws against that. Look into BEPS, tax residence, and permanent establishment (and CFC).

I do not think so there is something absurd in scenerios above.

It's not about what you think. It's about what your local tax authority thinks when they look into your affairs and starts asking questions.

But how about customers ? In the end, you will invoice your customer from ofshore.

Invoices from offshore companies are in some cases not considered valid expenses.

Not to mention difficulties being able to receive payments to offshore companies, with banking and payment processing being more difficult than ever (and getting worse).

This type of offshore is dead. It's a bygone era. Adapt to the present and prepare for the future.

 

[FDS ADS]

Hello,

I am searching tax heaven location for establishing off shore company to issue service invoices to main company.

With internet searching, there are lots of places with pros and cons. I could not see any healthy comparison. Because even for same locations, there different information.

I am focusing on followings,

No file any annual report or no annual meeting
Bank account with payoneer
Virtual office
Remotely managing
Not domestic director required
%0 tax for all corporate or personal earnings
Privacy

According to my search, cayman, bvi, belize… your advice or any previous post link is appreciated.

You can consider the British Virgin Islands.

 

[mud]

Annual and monthly reporting&filing requires additional cost&effort. And franchise tax

Yep. My LLCs do take 1 hour a year each to prepare and send a Disregarded Entity tax return and they do cost about $50 each annually.

 

[Bar1979]

I always put it this way:

[ ] Low costs
[ ] Substantial tax savings
[ ] Legal

Unless you move to a new country, you can choose 2 out of 3.
If you want substantial tax savings in a legal way, that comes with high costs. You can set up a company in a low tax country, but then you need staff actually running things on the ground.
Big companies can save taxes that way because they have lots of employees in those low-tax countries. It's not like their French or American CEO or the manager of the Irish investment fund owning the majority of the shares personally runs the operations in the Cayman Islands.
But as long as you manage the company from Belgium (and that will always be assumed if you don't have local staff, office, real operations, ... in the other country), then there will be tax in Belgium for that company. Otherwise everyone would set up their business in a tax haven and not pay tax where they live. It's not like that, unfortunately.
And even with economic substance in the other country, you may still have to pay tax in your own country due to CFC rules.

If you have the necessary revenue, you could look at outsourcing a part of your business. For example, you could move your customer service into a new company in Cyprus or Ireland or Romania. Hire a local director for the company and local staff. Then you'd have proper substance, and then actually moving that part of your business abroad may actually lead to tax savings.
But you'd have running costs for the company as well, as you'd need staff, you cannot be managing the company from Belgium. The price also has to be "fair", it has to be the "market rate", you can't pay $1M per month to your customer service company in Cyprus when you'd be able to get the same product for $500k somewhere else. Otherwise that would be considered profit shifting.

Thanks for your answer. Its really instructive answer. CFC rules are interesting and but our onshore country is not so strict about CFC rules. BUt surely, its a subject that is sould be considered.

Yep. My LLCs do take 1 hour a year each to prepare and send a Disregarded Entity tax return and they do cost about $50 each annually.

Is that all your cost. How about possibility of virtual office, virtial bank account ( like payoneer or wise) and remotely managing ? Do you fill forms by yourself ?

You can consider the British Virgin Islands.

Thanks. I will. But do you have any idea of possibility of virtual office, virtial bank account. It seems that opening bank account has been getting difficult.

This type of offshore is dead. It's a bygone era. Adapt to the present and prepare for the future.

Anyway, I think its a forum that I can learn about future trends.

 

[mud]

Thanks for your answer. Its really instructive answer. CFC rules are interesting and but our onshore country is not so strict about CFC rules. BUt surely, its a subject that is sould be considered.


Is that all your cost. How about possibility of virtual office, virtial bank account ( like payoneer or wise) and remotely managing ? Do you fill forms by yourself ?


Thanks. I will. But do you have any idea of possibility of virtual office, virtial bank account. It seems that opening bank account has been getting difficult.


Anyway, I think its a forum that I can learn about future trends.

Yes, we do fill in our own LLC tax forms but they're as simple as adding a few names, addresses, ID numbers and adding the 'Disregarded Entity " line. No (or few) financial figures are required to be submitted. Our agent handles the franchise fee, state lodgment, and registered addresses. Its pretty cheap <$1000 a year for a group of companies including registered addresses and mail forwarding.

Banking is largely free except transaction fees. For example Wise allows citizens of many countries to maintain USD accounts without cost. Our US banks are all free too (4 different banks).

I do maintain a US phone number at $10 a month but that's for dealing with US customers. Of all my phones the US is the cheapest.

One of the nice things about a US LLC though is that you can easily buy US based products and services which are usually much cheaper than in foreign countries, especially software.

 

[JustAnotherNomad]

CFC rules are interesting and but our onshore country is not so strict about CFC rules. BUt surely, its a subject that is sould be considered.

CFC rules are irrelevant for most people. CFC rules are relevant when you have proper operations (substance) in another country.

Take Switzerland as an example: Switzerland doesn't have any CFC rules. That doesn't mean you can live in Switzerland and pay no tax because your company is registered in a zero-tax country.
The fact that you work/manage the company from Switzerland will trigger tax in Switzerland, no need for CFC rules.

A typical example where CFC rules would be relevant is if your trademark was held by a company in a zero-tax country and you have 1 employee in that country.
That employee could be enough substance (you can prove you're not doing any work for the offshore company from the country where you live) - in Switzerland that would be fine.
In other countries, this could trigger CFC rules, so you have to pay tax, simply because you own the offshore company, even though you don't do any work for the company yourself.

 

[Gediminas]

Hello,

I am searching tax heaven location for establishing off shore company to issue service invoices to main company.

With internet searching, there are lots of places with pros and cons. I could not see any healthy comparison. Because even for same locations, there different information.

I am focusing on followings,

No file any annual report or no annual meeting
Bank account with payoneer
Virtual office
Remotely managing
Not domestic director required
%0 tax for all corporate or personal earnings
Privacy

According to my search, cayman, bvi, belize… your advice or any previous post link is appreciated.

Hey,

Usually, tax rules of the country where the main company is established are important and help to decide about jurisdiction.

If the main company is in Europe, it is very likely that local authorities will not allow deducting expenses for corporate income tax purposes if expenses are incurred towards a “blacklisted” offshore country.

Alternative to offshore islands might be non-resident companies in high tax jurisdictions such as the Netherlands (closed type CV) HK, US disregarded entity for tax purposes. The income of such companies is also not subject to tax.

On the other hand tax authorities of the main company might also understand that these are not standard, taxable entities.

Talking about “offshore” islands, there are plenty of options, but I would exclude those which are included in various international blacklists (from a banking perspective or tax perspective) and those that have very extensive KYC level or other bureaucratic rules.

I hope this helps.