Question Tax free country and proof of income

[Puzel12]

Lets say someone is living in Tax free country or country where foreign sourced income is tax free. You are paying yourself money as a salary from your company offshore, or you are getting profit from US LLC as a non-resident.

What happens if after 3 years you managed to save up $500000 and someone asks (government or whatever tax authority is your country of citizenship) you where this money comes from?
You don't really have any way to prove it, as you didn't pay tax on it. The foreign income was exempt from tax, so you didn't need to declare it. Do you just show them transactions between you and your US LLC? Will it be enough, or is there any better documentation that one should keep?

Another thing that comes to my mind is: Some countries ask you for proof of funds before you buy real estate, so you may need to show where the money came from.

 

[wellington]

Lets say someone is living in Tax free country or country where foreign sourced income is tax free. You are paying yourself money as a salary from your company offshore, or you are getting profit from US LLC as a non-resident.

What happens if after 3 years you managed to save up $500000 and someone asks (government or whatever tax authority is your country of citizenship) you where this money comes from?
You don't really have any way to prove it, as you didn't pay tax on it. The foreign income was exempt from tax, so you didn't need to declare it. Do you just show them transactions between you and your US LLC? Will it be enough, or is there any better documentation that one should keep?

Another thing that comes to my mind is: Some countries ask you for proof of funds before you buy real estate, so you may need to show where the money came from.

Legally required to keep records in most countries.... for commercial organisations...

 

[Mike Forman]

No problem to use that proof of income for the purchase of real estate, they don't care if you paid tax on it or not as long as you can show it was legit.

If you plan to move your funds to a taxable country you will need to provide higlikely some tax certificates if the income was salary income etc. If it was tax exempted you will need to proof that and probably pay the tax in the country you move the funds to.

If you don't have a way to proof the source of income tax authorities and/or banks may block your funds and take all necessary actions as this money could come from money laundering, tax evasion or any shady business.

Best is to keep it on your account where authorities don't bother you for over 7 years and keep the bank statements. Authorities can't go back more then 7 years.

 

[Konstanz]

If you business is legitimate It depends what country you move funds to and from.
Everything is usually only about tax. If you live in tax free country, I dont think anybody would care about your source of funds besides of banks etc

 

[jafo]

Best is to keep it on your account where authorities don't bother you for over 7 years and keep the bank statements. Authorities can't go back more then 7 years.

Is this really true? Links? Court opinions? Government sites with links?

 

[sergeylim88]

you can pay the money as dividend/salary to your self while being resident in tax free country

you produce the company document (declaration/resolution)
you cross reference the bank statements of your personal account with the documents (declaration/resolution) you made (when sending money to your personal account you can write in SWIFT's note dividend or salary)

if anyone needs proof you show the documents (declaration/resolution) and bank statement showing that money being credited to your account
this is the only thing you can actually do and should be enough

the citizenship country can question if you were really tax resident in the tax free country, so be prepared to have TRC, rental contract for apartment, bank statements showing that you were making purchases within tax free country, passport with stamps... if you have all that, and not liable under some kind of exit tax, or tax on worldwide income, you should be good

 

[sergeylim88]

just to add you will have to be able to show share certificate(or some other official document showing that you are the owner of the company) in case of dividends, or some work contract in case of salary

just in case keep a few contracts/invoices with your clients if they are looking into source of company's funds
would be the best to have easily checked clients (companies with web site in reputable jurisdictions)