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Is offshore incorporation still worth it - from a low tax view?

mrchip

Offshore Agent
Jan 3, 2016
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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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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!

Information To Be Exchanged


The financial information to be reported with respect to reportable accounts includes interest, dividends, account balance, income from certain insurance products, sales proceeds from financial assets and other income generated with respect to assets held in the account or payments made with respect to the account.


Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement that financial institutions "look through" passive entities to report on the relevant controlling persons.


The financial institutions covered by the standard include custodial institutions, depository institutions, investment entities and specified insurance companies, unless they present a low risk of being used for evading tax and are excluded from reporting.


- See more at: http://www.tax-news.com/features/The....YcIi40N3.dpuf Information To Be Exchanged
Signatories To The Standard
The total number of signatories as at June 4, 2015, was 61, including the following countries and territories:


Albania, Anguilla, Argentina, Aruba, Australia, Austria, Belgium, Bermuda, British Virgin Islands, Canada, Cayman Islands, Chile, Colombia, Costa Rica, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Ghana, Gibraltar, Greece, Guernsey, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Montserrat, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Turks and Caicos Islands, and the United Kingdom.


A total of 90 jurisdictions have endorsed the CRS, a number which is likely to continue to grow.


Commencement


It is envisaged that the first automatic information exchanges under the CRS will begin in 2017. However, the OECD itself admits that the current timetable is "ambitious" because many countries, especially in the developing world, do not currently have the administrative and technical mechanisms in place to meet the standard, nor the resources to build them. Therefore, with the assistance of the rich countries, it will probably take several more years before the CRS is a truly global information exchange network.
 
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If Management is on same country you don't have to pay tax in your home country my tax lawyer say! I work with him on an setup in Cyprus for my purpose with nominees and real office in Cyprus.
 
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.
 
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I read on other forum that financial service license and privacy is other reasons to go offshore with your business' date=' do you have examples for this Admin?[/quote']
I don't want to turn this topic into something else then what it was posted as by OP. You may open another topic for your questions.
 
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/porn 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.
 
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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.
 

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