Now that Automatic Exchange of Information (AEoI) is in force is there still an advantage to having an offshore corporation? My understanding is that all the income made is released to your home country (mine is Canada) where you will be taxed at your country's rate. If this is true how does the home country handle the expenses of the foreign company. For instance I might sell a product for $100 but I have costs of $75 leaving a profit of $25. Is the $100 deemed income in the home country leaving me a tax bill of 25-50% (yes in Canada when you add up all the "other" taxes) or will they allow the $75 expense? If so what prevents fake invoicing or creating a trust/foundation to invoice the IBC reducing the income?
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Is offshore incorporation still worth it - from a low tax view?
- Thread starter mrchip
- Start date
My understanding is that if you can make use of the double tax treaty you don't have to pay tax in your home country, so the key may be to incorporate in an offshore jurisdiction where you can make use of it, that simple. Still they have put all this in force a Trust or Foundation with Trustee &/or protector in place can protect you from these information exchanges!
I would recommend to speak with a local tax lawyer in your country before you setup anything offshore! There is and will always be ways to avoid these Auto Info exchange and reporting, however, it will require lot more then before where it was simple just to form an offshore corp and open an account without worrying about anything to be send to your home country.
Found the below information which explains it well what it's all about!
Found the below information which explains it well what it's all about!
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Another point of view is privacy. Many seeking privacy as the only reason to create a offshore company!
that's correct, you just need to convience the tax office that it is the case which most tax firms or lawyers can help with.
that's correct, you just need to convience the tax office that it is the case which most tax firms or lawyers can help with.
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Thanks for your input and wisdom everyone. I am starting a legit e-commerce site referring and rating sales people for the consumer. Kind of like rate your MD site - not a high risk business. I am gearing it to be fully automated and hands off. It is untested and have no idea if this will produce money but want to do it right from the star without investing a bunch of money in an untested business. Was worried if I started in my home country and it was successful then moved the business off shore that would give the tax office more of a foothold saying I am evading taxes.
Alain: I'll have to check into the double taxation countries. So I would have to create an offshore IBC and a trust/foundation?
PhongBong: Being automated, hopefully there wont be any "management" but I guess that might be a good thing as I can get a PO Box or hire a local from elance or other freelance site who works in the country of incorporation and have them forward mail or answer a call from a Google phone number that will never be published. Or even a virtual office. The server will be in a country different than mine...probably the USA. As far as working on the web site I usually have others I hire out. For instance I have a developer in Belgium that is working on the script. I'll hire a web developer probably from Philippines. If I update anything on the server I was just going to invoice my off shore company so that my Cdn business is now a supplier to the off shore...like the Belgium developer or website designer.
Admin: Not sure if I need the privacy at this point. I figure I only need to worry about privacy if I'm trying to hide my assets. I have a very simple solution. I don't have any. At least an amount that would be worth chasing into a offshore business. The lawyers would eat up any money they might gain. I am running a legit business so no pharmacy/drugs/investments/gambling/P**N or other high risk things that would raise concern from a criminal or even ethical aspect. It's just an e-based business that can be run from anywhere so why setup in a high taxed region. I just don't want the country I'm a citizen of twisting things so they can take taxes on something that has nothing to do with them - but I'm probably preaching to the choir on this point.
That should give a little more insight. Just a guy, with a business idea, trying to scratch out his dream of financial independence in the most prudent and wise way.
Alain: I'll have to check into the double taxation countries. So I would have to create an offshore IBC and a trust/foundation?
PhongBong: Being automated, hopefully there wont be any "management" but I guess that might be a good thing as I can get a PO Box or hire a local from elance or other freelance site who works in the country of incorporation and have them forward mail or answer a call from a Google phone number that will never be published. Or even a virtual office. The server will be in a country different than mine...probably the USA. As far as working on the web site I usually have others I hire out. For instance I have a developer in Belgium that is working on the script. I'll hire a web developer probably from Philippines. If I update anything on the server I was just going to invoice my off shore company so that my Cdn business is now a supplier to the off shore...like the Belgium developer or website designer.
Admin: Not sure if I need the privacy at this point. I figure I only need to worry about privacy if I'm trying to hide my assets. I have a very simple solution. I don't have any. At least an amount that would be worth chasing into a offshore business. The lawyers would eat up any money they might gain. I am running a legit business so no pharmacy/drugs/investments/gambling/P**N or other high risk things that would raise concern from a criminal or even ethical aspect. It's just an e-based business that can be run from anywhere so why setup in a high taxed region. I just don't want the country I'm a citizen of twisting things so they can take taxes on something that has nothing to do with them - but I'm probably preaching to the choir on this point.
That should give a little more insight. Just a guy, with a business idea, trying to scratch out his dream of financial independence in the most prudent and wise way.
I agree with most of you, even if everything is setup legit and you intend just to lower the tax that has to be paid, then I would say that consulting a tax lawyer for 1 or 2 hours and pay him what ever he is asking for is a good idea to prevent any legal issues later on or at least to know what issue may rise doing so.
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To comply to the double tax treaty Canada may have with Cyprus or the Seychelles is one big step in the right direction & to avoid trouble I think. Speaking with a lawyer or tax firm would be another good idea at least to get some information about how to deal with all of it.
Suppose if you sell a product of 100$ and make 25$ profit, i think income tax is applicable on income\profit and not on the turnover i think. May be i am wrong.. I am not sure.
Agree, you need to talk to your local lawyer for the tax and also find a local lawyer on your offshore business to also ask their tax laws. This will prevent the hassle and legal issues that may arise when you already starts operating your offshore business.
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