Start a business in The Caribbean

[TheTravelAgent]

Dear Forum,

I own a travel agency (only online) in a Scandinavian country, where I am also a citizen and resident.
We are considering to create an IBC or LLC in one of The Caribbean islands such as Nevis, BVI etc., since we sell vacations to these islands as a part of the program.

Are there any specific things we should be aware of such as CFC etc.? Also when setting up a bank account in of these islands and you get your credit card, can the money on this credit card be used in the country where I live without any problems?
The primary reason for doing this is to not having to transfer money to our vendors in The Caribbean (such as hotels, DMC's etc.) and also to avoid currency changes, especially a valid discussion for USD, as it changes a lot.

Also if anyone have a recommendation weather it's best with an IBC or LLC, it is much appreciated!

Please let me know if it's confusing.

 

[fshore]

Is the purpose only to save on bank transfer and to hold usd? Then first check carefully with the banks you have in mind the fees they will charge you, and also if they allow a ibc to transfer to a local company.

There might be other money transfer companies that can do the same for your Scandinavian company at a low cost.

You can hold usd in a Scandinavian bank.

Yes, you will have to deal with CFC and corporate residency rules.

 

[TheTravelAgent]

Is the purpose only to save on bank transfer and to hold usd? Then first check carefully with the banks you have in mind the fees they will charge you, and also if they allow a ibc to transfer to a local company.

There might be other money transfer companies that can do the same for your Scandinavian company at a low cost.

You can hold usd in a Scandinavian bank.

Yes, you will have to deal with CFC and corporate residency rules.

Thanks for your reply, fshore!
The idea was to create a company in The Caribbean. This company would then send invoices to the Scandinavian company for let's say a hotel stay for 7 nights (worth ex. 7000 USD).
I don't see this being illegal?

So no it is definitely also to get a tax advantage in the end, as the money would end up in The Caribbean and then being distrubuted from there to the actual hotel that is being paid for (ex. a hotel in Nevis).
Then after a while there would be some money in The Caribbean account.

I hope you can elaborate a bit further.

 

[fshore]

Thanks for your reply, fshore!
The idea was to create a company in The Caribbean. This company would then send invoices to the Scandinavian company for let's say a hotel stay for 7 nights (worth ex. 7000 USD).
I don't see this being illegal?

So no it is definitely also to get a tax advantage in the end, as the money would end up in The Caribbean and then being distrubuted from there to the actual hotel that is being paid for (ex. a hotel in Nevis).
Then after a while there would be some money in The Caribbean account.

I hope you can elaborate a bit further.

It's not illegal, but the company would likely be tax resident in your country of resident so you have to pay taxes there and threat it like a local company. If you hire local management in the Caribbean then the company shouldn't be tax resident in Scandinavia and you can only worry about cfc rules.

 

[JohnLocke]

this credit card be used in the country where I live without any problems?

If you want to avoid problems as you say, then you have to report all income from that company to your local tax authorities, there is no way around.

You can't get around the CFC and all the other rules which apply and for which your country may have signed agreement with, in 2019 you need to be very careful and you need to consult a tax specialist to setup something like what you want to do. The tax authorities in your country will find it supsicious once they get informed by any bank which hold an account for you and which is in the company say in Nevis's name.

Consult a tax lawyer or tax advisor locally if you want to avoid troubles, they need to understand International Tax rules.

 

[TheTravelAgent]

It's not illegal, but the company would likely be tax resident in your country of resident so you have to pay taxes there and threat it like a local company. If you hire local management in the Caribbean then the company shouldn't be tax resident in Scandinavia and you can only worry about cfc rules.

What if you rent some kind of office or even buy some land on the island in The Caribbean? Could that work?
Also I mean how is it different if we get invoices from the company in the Caribbean versus when we get it directly from the hotels or even DMC's (local agents)? Why would the tax authorities check up on this, when they don't do it with the transactions we do currently and have done for many years?

Thanks, fshore!

 

[TheTravelAgent]

If you want to avoid problems as you say, then you have to report all income from that company to your local tax authorities, there is no way around.

You can't get around the CFC and all the other rules which apply and for which your country may have signed agreement with, in 2019 you need to be very careful and you need to consult a tax specialist to setup something like what you want to do. The tax authorities in your country will find it supsicious once they get informed by any bank which hold an account for you and which is in the company say in Nevis's name.

Consult a tax lawyer or tax advisor locally if you want to avoid troubles, they need to understand International Tax rules.

Appreciate the answer! What if you choose an island that does not have any tax agreements (treaty) with the authorities in the Scandinavian country?
So my question is why the authorities would get contacted by the bank that have our account in The Caribbean island? Why would this bank contact the authorities in my country, if they don't have any agreements in place?

I will for sure consult a tax advisor on this, both from the country where I live and a tax advisor from the island in The Caribbean.

 

[fshore]

What if you rent some kind of office or even buy some land on the island in The Caribbean? Could that work?
Also I mean how is it different if we get invoices from the company in the Caribbean versus when we get it directly from the hotels or even DMC's (local agents)? Why would the tax authorities check up on this, when they don't do it with the transactions we do currently and have done for many years?

Thanks, fshore!

The difference is that you are the owner and control the company, making it tax resident in scandinavia.

 

[TheTravelAgent]

The difference is that you are the owner and control the company, making it tax resident in scandinavia.

So if we are multiple owners and one of us get out of the ownership and start the company in The Caribbean, this way it could work?

 

[fshore]

So if we are multiple owners and one of us get out of the ownership and start the company in The Caribbean, this way it could work?

Laws are most often written so that its not the formality that counts but the reality, so if he is just a nominee owner and you are still actually owner then it will not work legally.
If he is only owner and moves to Caribbean and runs the company there then it shouldn't be tax resident in Scandinavia, but might be still CFC until he is no longer tax resident in Scandinavia. It can take several years to become non tax resident, and might not be possible at all if he owns property.

If you are in family or closely connected there might also be transfer pricing issues to consider.

 

[James Turner]

Agree with @fshore and @Admin that if you want to use the offshore company to not declare income in your country of residence and to trade in those overseas territories you will have issues because of CRS and will generally have a liability to disclose to your country of residence. Nominee services are insufficient to avoid legal control in Scandinavia. Your original post however seems to suggest that your reason for doing this is to trade with local companies and not for a tax benefit, in which case you can do but you should ensure that you accurately declare your income in your country of residence.