Offshore Incorporation advice for a noob (me)

[notyetnomad]

Hello!

I'm planning to move to a zero tax country in a few years. I would like to prepare my exit.

I'm a programmer that works remotely for a foreign country.

I already have some savings to continue living in my country for some time.

From now own, I would like to receive all my wages and invest them internationally. For this, an offshore company looks ideal.

I don't really need a bank account. All I want is a way to receive my wages (Wise, Airwallex, Payoneer) and send everything directly to Interactive Brokers.

I have a bank account in my country with my savings. All my living expenses can come from that. While I burn my savings in the high tax country, I would save more in the offshore company.

What is the simples offshore jurisdiction to form a company for this? Does a BVI company works? Would I have trouble with Economic Substance?

After I move to a zero tax country, can I close down the company easily?

 

[mickey]

Hmm well,
it seems that you're not up to date with the current global regulations. Zero-Tax countries do not exist any more. Furthermore you have to separate your personal taxation and your company taxation. In one country your company/business taxation could be low but your personal taxes could be huge and vice versa. I suggest you to read around and watch some youtube videos for the start. When you have some basic knowledge and some questions, the people around here could help you.

 

[notyetnomad]

I don't know, @mickey. I'm not from the US or Europe.

I'm not up to date with global regulations, but I'm up to date with my own country regulations.
My country doesn't tax offshore companies. Any offshore company in a non-territorial tax country would be effectively zero tax for me. It doesn't even need to be zero tax.

 

[pesto]

There are a few threads about similar situations.

Personally I look into a setup for my savings in some sort of offshore setup, be it a trust, foundation or a company.

I have BVI, Switzerland and Cyprus on the Radar - but not sure yet what to do... from all low tax countries, Switzerland is the one that has the mot legit looking setup, they are not recognized as shady operations. But it is not cheap, costs are roughly 5000 - 8000 euro in setup alone

 

[Sols]

While I'm sure you've read up on local law, make sure you've also considered tax residence. It's normal for countries to not tax foreign companies — unless they are tax resident in that country or unless your activities for the company create a taxable event locally. If you form a BVI company today, it might be tax resident where you live and as such be required to pay local taxes, or your income is considered derived locally by you working from home.

 

[CyprusLawyer101]

Hello!

I'm planning to move to a zero tax country in a few years. I would like to prepare my exit.

I'm a programmer that works remotely for a foreign country.

I already have some savings to continue living in my country for some time.

From now own, I would like to receive all my wages and invest them internationally. For this, an offshore company looks ideal.

I don't really need a bank account. All I want is a way to receive my wages (Wise, Airwallex, Payoneer) and send everything directly to Interactive Brokers.

I have a bank account in my country with my savings. All my living expenses can come from that. While I burn my savings in the high tax country, I would save more in the offshore company.

What is the simples offshore jurisdiction to form a company for this? Does a BVI company works? Would I have trouble with Economic Substance?

After I move to a zero tax country, can I close down the company easily?

In the absence of providing complete information, really getting solid advice becomes impossible. If you would like to discuss your particular circumstances in private, I would be happy to PM you.

 

[notyetnomad]

I'm sorry I haven't posted more information. I'm little afraid of posting too much identifiable information.

I'm from Brazil.

I've searched for local agents, but they only deal with ultra high net worth individuals.
One would charge 999 EUR for a single consultation, with no other services provided.

I've browsed the forums, and I've seen that there are top agents here. I tell you guys. There is a market for you in Brazil.

There are tons of people finally earning good money with online work, and they all need protection from our dirty government.

----------------------------------------------------------------------------------------------------------------------
Going on with my case:
I've talked with my local country's lawyers and my country does not tax companies in tax heavens, unless there is a tax treaty.

Our dirty polititians always made sure Tax Heavens stayed on the clear for them.
The result is that we, honest folk with nothing to hide, can also use them, 100% legally.
It is also common practice by corporations here. Most corporations do it.

And, if I ever need to withdraw from the BVI company in my country, I can do it legally. I just need to pay taxes when I do it (27.5%).

We have unfavorable tax treaties with a few countries, one of them Switzerland. So even if I could afford it, it would be out of question.
Other unfavorable tax treaties are Singapore and the UAE. Brazil consider companies in these countries to be local companies.
Therefore, it would be best to select a jurisdiction with no tradition of making tax treaties.

My questions are related to the offshore company jurisdiction.
My client is from the US. Therefore I can't use an US LLC.
I don't know much about Cyprus.
I've read a lot about the BVI. I read their laws. I know them in paper, but I have little idea of how they are working on practice.
Does the BVI requires that my BVI company pays taxes in my local country? Do I have to prove it to the BVI?

 

[myshufflemix]

I'm sorry I haven't posted more information. I'm little afraid of posting too much identifiable information.

that's good you are, avoid it.

Does the BVI requires that my BVI company pays taxes in my local country? Do I have to prove it to the BVI?

not the last time I registered a BVI company. There is a awesome service provider for such stuff who is helpful, they have done a few entities for me.
https://www.offshorebvi.com/

 

[Sols]

Going on with my case:
I've talked with my local country's lawyers and my country does not tax companies in tax heavens, unless there is a tax treaty.

I'll bring it up one last time and then leave it be. Brazil's tax law is poorly written but here are some reputable sources:

https://taxsummaries.pwc.com/brazil/corporate/corporate-residence

The specific term ‘permanent establishment’ is not included in the Brazilian legislation, rather there is a concept of ‘taxable presence’.

In general, a non-resident company may be treated as having a taxable presence if it operates in Brazil either through: (i) a fixed place of business or (ii) an agent who has the power to enter into contracts in Brazil in the name of or on behalf of the non-resident.

https://www.ecovis.com/brazil/tax-guide/

Basis of Taxation – Resident companies are taxed on worldwide income. A non-resident company generally pays taxes only on income derived from Brazilian sources. The tax rates and treatment are the same for companies and branches of foreign companies.

https://www2.deloitte.com/content/d...eloitte-Corporate-Taxation-Indirect-Taxes.pdf

Under Brazilian tax legislation, a foreign company may become subject to Brazilian taxation if agents or representatives of foreign legal entities perform sales activities within Brazil and submit invoices directly to a Brazilian buyer. In such case, the taxable income will be determined in accordance with some specific rules. The key element for the characterization of a PE relies on how independently the agent can perform the sales in Brazil, i.e., if the agent has powers to legally bind the customer to the sale.

The first two make it clear that your offshore BVI company is liable for tax in Brazil on any income that you earn while resident in Brazil (since you own/control the company). The wording from Deloitte leaves some room for interpretation: it might not apply if your customers are all foreigners.

I hope this is something your lawyers have taken into account, and not just looked at the surface.

Therefore, it would be best to select a jurisdiction with no tradition of making tax treaties.

Tax treaties are usually published online by the Ministry of Finance or similar. All jurisdictions sign tax treaties. Whether they have one with Brazil is down to economic ties.

I mean, maybe not North Korea but I've heard it's difficult to exchange KPW.

I don't know much about Cyprus.

It's an interesting jurisdiction but in your case, something simpler might work.

Does the BVI requires that my BVI company pays taxes in my local country? Do I have to prove it to the BVI?

No.

 

[notyetnomad]

I'll bring it up one last time and then leave it be. Brazil's tax law is poorly written but here are some reputable sources:

You are absolutely correct. The laws are incredibly poorly written. To an extent that they are contradictory and impossible to comply.
I'm sorry if I sounded dismissive. I'm actually really worried about the question you raised.

I already have a resident company here. I pay ~11% taxes and I'm not that sad about it.

Brazil's civil code forbids essentially forbids local companies to hold foreign currency. Foreign currency can only be used to pay direct obligations.
It can't be used to pay dividends. It must all be converted to BRL, then the BRL can then be issued as divideds tax free.
If I issued the dividends in USD I would have to pay 27.5% taxes on the dividends.

Well, supose I do that. I payed the 11%, and then the 27.5%. I would still be liable for tax evasion.

There's no way of being correct here. It is a tax hell.

That is why I checked with local lawyers and looked at jurisprudence. What happends is that foreign companies are not prosecuted.
I guess maybe the government is too lazy to go after BVI companies. Local companies are easier to plunder.

I mean, maybe not North Korea but I've heard it's difficult to exchange KPW.

=D

It's an interesting jurisdiction but in your case, something simpler might work.

Yes, I want something simple, but than can be trusted with my savings from now own, before I do my fiscal exit.

 

[Sols]

If all you need is a simple zero/low-tax foreign company and if you have a decent budget (paying a few thousand USD per year), then you have plenty of options that also solve Substance Requirements for you.

Look at BVI, Cook Islands, Cayman Islands, TCI, Nevis, Isle of Man, Gibraltar, and maybe Mauritius. Lots of good service providers to choose from. Vistra, Trident, Asiaciti, Southpac Trust, ILS, and the big international/offshore law firms like Appleby, Carey Olsen, Conyers, and so on.

A common way to solve Substance Requirements is to appoint a local nominee director. In most jurisdictions, this person can be appointed to any number of companies so it's really simple. You just pay for the nominee director. They will open and (normally) control the bank accounts of the company. On your instruction, they will sign agreements (subject to their legal review and risk appetite) and also execute bank transfers, for example dividend payments to you — that's how you get the money out into your broker account from the company.

 

[notyetnomad]

A common way to solve Substance Requirements is to appoint a local nominee director.

What I liked about the BVI is that their Economic Substance Act is very clear. My business is a software development business, which is not a relevant activity.
Therefore I believe it would not have to comply with economic substance requirements.

My goal is not to even have a bank account. Just an EMI account and an Interactive Brokers account. I need a jurisdiction that is well accepted Interactive Brokers and by an EMI that works well with Interactive Brokers.

The first two make it clear that your offshore BVI company is liable for tax in Brazil on any income that you earn while resident in Brazil (since you own/control the company).

The wording from Deloitte leaves some room for interpretation: it might not apply if your customers are all foreigners.

I forgot to point out that both PWC and Deloitte are 100% correct. But they are written from the point of view of a non-resident company trying to do business in Brazil.

In general, a non-resident company may be treated as having a taxable presence if it operates in Brazil either through: (i) a fixed place of business or (ii) an agent who has the power to enter into contracts in Brazil in the name of or on behalf of the non-resident.

An offshore company operated by a Brazilian would fit neither (i) nor (ii).
(i): Even local Brazilian companies don't need a fixed place of business. You even get tax exemptions from that. You don't have to pay municipal taxes.
(ii): I don't have an agent with POA. I don't need to sign contracts in Brazil.