Offshore consting US citizen

[Adoze]

I am a US citizen, doing software development making $150,000 a year consulting. I am curious if I can open a consulting company offshore that I can operate under instead. I will not need to pay myself from this company, I simply want it as a place I can use to store wealth and invest the proceeds from. Ultimate plan is to expatriate to a more tax friendly country from the United states once I have enough assets housed in this company.

 

[Sols]

As an American citizen, you are taxed on your worldwide income regardless of residence. So while you can easily set up an LLC or corporation somewhere else, it will not be any different in terms of tax which ultimately affects how much wealth you can store.

Under FATCA, any bank account you or the company holds abroad will be reported back to the US. Can't hide money.

Your best options to lower your tax burdens are to change how your income is received (capital gains rather than salary) or take the big leap of obtaining a different citizenship and renouncing your American citizenship, and leave the US.

The first might be doable if you set up the right arrangements with a lawyer/trustee. Speak with firms like Ogier, Conyers, Appleby, and Walkers. But the fees charged to set something like this up may cost more than your tax savings, so make sure you have a full view of the costs before proceeding.

 

[Adoze]

I was looking a little deeper into this and am confused. So does this mean the offshore company would still need to pay US corporate tax? If so why? I will not be taking a salary and will not be an employee. The company itself will have no employees. If I was to pay the company for services could the company then use that money for investments?

 

[Golden Fleece]

If you live in the U.S., what you suggest is utterly impossible. Otherwise, everyone would do it. If you live overseas, just yesterday I discussed the only way to legally not pay taxes for offshore earned income as an American citizen in post number five of a thread titled "American Online Marketer, D.R. Resident & Setting Up Business In Estonia." It is my understanding that, as a new member, I cannot place web links in a post -- apparently, not even a web link to another thread in this forum. A very strange rule.

 

[Adoze]

Thanks! From what I can find it does not look like any special Corp is required to claim foreign earned income exclusions. Looks like as long as I stay out of the US for 350 days a year I can get $100k+ tax free so long as I don't get pulled into tax residence from another country with tax. Even if I am working for a US company like an average Joe. Am I missing something?

 

[Golden Fleece]

Thanks! From what I can find it does not look like any special Corp is required to claim foreign earned income exclusions. Looks like as long as I stay out of the US for 350 days a year I can get $100k+ tax free so long as I don't get pulled into tax residence from another country with tax. Even if I am working for a US company like an average Joe. Am I missing something?

If you are an independent consultant (versus an employee), then yes you are possibly missing something. By forming a CFC, in addition to taking the FEIE you might be able to avoid paying all U.S. self-employment / FICA taxes. You should consult an expat tax professional.