Question Will this offshore structure meet my needs?

[electric]

Please tell me if you think this proposed offshore structure is good for the objectives I am trying to accomplish, or if you think the structure is overkill. (See my question at the end.)


MY OFFSHORE OBJECTIVES


I do not want the tax authorities from France or Canada (I have dual citizenship) to discover my identity as beneficial owner/director/shareholder or consider me to be the "mind, and management" of the offshore setup.


PROPOSED OFFSHORE STRUCTURE


A. Create a Panama Private Interest Foundation. The "Founder" and "Foundation Council" will use nominees provided by the Offshore Service Provider. (Expensive!) I will be personally named as the "Protector" and "Beneficiary", since information about those two roles is not publicly available.


B. The Panama Foundation will create and own a Belize IBC. The Panama Foundation will be listed as director and shareholder of the Belize IBC, although from what I understand this information is not publicly available anyway.


C. The Belize IBC will open a corporate bank account in a different country. (Maybe Latvia?)


D. I will work for the Belize IBC as a "general manager". The Belize IBC will issue me an official "General Manager Agreement", which I will use to explain (if I am ever questioned by my local tax officials) my role in the Belize IBC, my salary, and why I am a signatory on the company's bank account and why I have a company debit card.


E. I will pay personal income taxes in my current country of residence on all money the Belize IBC pays to me as part of my "general manager" job. (ie: I will pay taxes on anything that gets transferred to my France or Canada personal bank account.)


QUESTION


What do you think? Is the proposed structure above ok? Any suggestions for improvement?


Or… is this proposed offshore structure overkill and unnecessary? Can I accomplish my "Offshore Objectives" by just having the Belize IBC with nominee shareholder & director, a bank account in a different country, and the "General Manager" agreement? Does adding the Panama Foundation really add any protection, or is it just a waste of money?


Thanks for any advice, suggestions and opinions!

 

[hugger]

Just a couple of quick and short answers:


1. The Panama Foundation seems a bit of over kill.


2. Will the Latvian bank open an account for a Belize company?


3. How much do you expect the Panama company to have as annual revenue? The size of revenue and net profit will be a major factor in deciding what steps to take.

 

[Zqq]

Do you plan to re-brand your current website? If not, what's stopping French or Canadian authorities from simply looking at historical information about your company and find out who owns/runs it? How will you hand over from your current company to the new one without raising suspicion?


Have you calculated the costs of setting this up compared to just paying tax? You have said earlier that your annual turnover is around $200,000. I don't know how much of that is profit, but your start-up costs are going to be around 5% - 10% of your turnover; not to mention that your processing fees will likely go up.


Another idea is to move to a more reputable low-tax jurisdiction? For example, setting something up in for example Hong Kong, Ireland, Malta, Cyprus (just don't bank there), Singapore, or Switzerland and utilizing any applicable DTAs to legally pay a reduced tax rate.


If you are absolutely hell-bent on using this absurd offshore structure, then your proposed structure as such is fine - if a bit overkill, especially with the nominees in the foundation. Since France has a TIEA with Belize and Canada with Panama, you may want to consider different jurisdictions.

 

[electric]

2. Will the Latvian bank open an account for a Belize company?

Yes, according to a few different OSPs I have been in contact with, it should not be too difficult for a Belize company to open an account in a different country (including Latvia).

3. How much do you expect the Panama company to have as annual revenue? The size of revenue and net profit will be a major factor in deciding what steps to take.

The Belize IBC will make (starting first year) about $250,000/year gross sales with about $100,000 net profit. (This is after my personal salary and all company expenses are paid.)

...what's stopping French or Canadian authorities from simply looking at historical information about your company and find out who owns/runs it? How will you hand over from your current company to the new one without raising suspicion?

The Belize IBC will purchase my current onshore company with a Sales Agreement that stipulates the terms of the sale. In exchange for my onshore company's assets (website, brand, domains, customers, etc.), I will receive a position of "General Manager" within the new Belize IBC company with a $40,000/year salary for a minimum of 4 years. Basically, the sale will look legitimate as though I am simply selling my onshore company in exchange for a guaranteed salary/income for the next few years.
A normal amount for selling a business in my industry is about 1/2 to 1 year of net profit, so the sale amount and terms are actually realistic. It is also common to keep the old company's owner around as a consultant or manager. (ie: My business has a lot of "consolidation" occurring. So larger businesses will purchase a smaller business, and then essentially keep the smaller business "as is" including the original brand and owners who continue to be involved in running the business pretty much as it was prior to the sale.


Once the sale "completes", then I will send out an announcement to all my customers explaining that my company has been purchased and that I have accepted a role as General Manager with the new owner.


What do you think?

Have you calculated the costs of setting this up compared to just paying tax?

The corporate tax for a foreign-owned company in Canada is about 25%. In France it is ridiculously higher and will likely get even higher due to impending government changes.
The idea with "moving" my business offshore is that my business continues to grow and so it is paying more and more taxes. Last year we did about $200k in gross sales, and this year we're on track for about $250k even though expenses are not getting higher by the same amount. Profit for the company is increasing, and I want to keep as much of it as possible away from the government.


I understand that merchant account rates and the cost of operating an offshore business are higher. However, it seems likely that even after all the extra costs... the offshore business will end up with more in its bank account than the equivalent onshore company.

Another idea is to move to a more reputable low-tax jurisdiction? For example, setting something up in for example Hong Kong, Ireland, Malta, Cyprus (just don't bank there), Singapore, or Switzerland and utilizing any applicable DTAs to legally pay a reduced tax rate.

The biggest issue for me is that both France and Canada will consider a company's tax residency primarily based on the location of the company's "Mind and Management". Thus, a dual tax treaty won't really matter unless I can figure out how to retain control over the offshore company... yet still be able to convince my local tax authority that I am actually *not* the Mind & Management of the offshore company.


For example, let's say I am living in France and the French tax authorities deem me to be the true Mind & Management behind an offshore corporation domiciled in Ireland. In this situation, it doesn't matter that there is a dual tax treaty between France and Ireland. The Ireland company would be considered a tax resident of France and would be taxed as if it were a French corporation. Yes, any tax the company already paid in Ireland would be counted as paid in France (thanks to the DTA), but since France has a much higher corporate tax rate... the company would end up owing France a lot of additional taxes.


That is why I'm trying to determine a way where I am not publicly or easily considered to be the true Mind & Management of the offshore company. If I can figure out a way to do that.... then there is not much point to domicile in Ireland (and pay lower tax), when the company could just as easily be domiciled in Belize (and pay no tax, and also have no financial reporting requirements).


I hope that makes sense? What do you think?


(Btw -- I greatly appreciate your comments. I have actually spoken with three different tax/accounting professionals in Canada and France, but I ended up being even more confused. Nobody seems to understand how this all works, and none of them are willing to put anything on paper. So this is why I'm trying to sort this all out, based on the information I've discovered online and through my meetings with the tax professionals.)