Question about offshore company and personal tax

[alibran]

I thought I knew the answer to this, but now I'm not so sure.


If you incorporate an offshore company, are you supposed to declare all the profits in your country of residence for tax purposes, or should you only declare what you take out of the company's bank account for your personal use?


This isn't what I originally came here to ask because I thought I already knew, but I've seen both answers presented as fact by different posters on this forum, and it would be nice to know which is actually correct.

 

[clemens]

Well the correct answer is yes you have to declare all income regardless where the offshore company is incorporated!


Now what people do is to incorporate in jurisdiction which DON'T have any tax information exchange agreement or other agreements in place with the country of resident. So in other words they hide the income.


Keys are:


- Incorporate in a offshore jurisdiction where no Tax Information Exchange Agreement or any other agreement is in place i.e. Seychelles is such a country.


- Don't bank in the same country as where the company is resident, because it will be much more complicated to infiltrate


- If you need to bank in the same country there are other entities that you need to make use of and it gets complicated


Never use your Debit card in the country of resident and never access your Internet banking directly make use of VPN, VPS and similar services.

 

[system32]

You need a anonymous Debit card to take out the money in the Offshore company, otherwise you will be busted for tax evasion.

 

[alibran]

OK, now I'm confused again. How would I be busted for tax evasion if I was declaring all my income and paying tax on it in my home country? Because they assumed I must be doing something wrong because I had an offshore company? Surely they'd have to investigate first (at which point they'd find I was doing nothing wrong.)


I asked the question because I always assumed you were legally required to pay tax on all your worldwide income, whether you brought it into your home country or not.


I found other posts on this forum where people said you only had to pay tax on money you actually brought into your home country (and money left in the company bank account was "tax free" until you decided to do something with it.)


I wanted to find out if my first thoughts were correct, or if there were more legal advantages to having an offshore company than I'd previously realised.

 

[JohnLocke]

Okay I will try to shed some light on the issue.


If it can be proven that the operation and management is entirely in the jurisdiction of where the company is registered, your chances of avoiding the payment of personal income tax on net profits in the offshore company are perfectly good.


If you can't prove that, or if the authorities won't accept the fact that the company is controlled and managed abroad and that you are only working as some IM or Sales person for the company, and you can somehow prove that you are the owner of the company, then they will claim tax from the profits made by the company.

 

[alibran]

Thanks, Admin. I think I'm making sense of it now.


That's really for the future, but at least it's helping me to work out what's best to do. I'll send an email with some more specific questions to your support team.

 

[JohnLocke]

Your welcome,


Need to correct something:

and you can somehow prove that you are the owner of the company, then they will claim tax from the profits made by the company.

should say


and they (authority) can somehow prove that you are the owner of the company, then they will claim tax from the profits made by the company.