There is no way to avoid tax evasion if you live in France, Canada, or USA. Period.

[electric]

Well, today I finished my last meeting to find out how thing work. I have now met with tax authorities in France, Canada and the USA.


All of them have the same basic rule.


If you are a French or Canadian or US citizen, and live in your home country, you are required to declare every bank acount where you are the "beneficial recipient" or signatory, irrespective of who owns the bank account or in what country or jurisdiction the bank account is located.


There are no "but" or "if" exceptions.


So basically, this means that regardless of how you structure your offshore company and banking scheme... if you are a signatory or beneficial owner of the bank account(s), then you are guilty of tax evasion unless you declare the bank account(s) on your tax return.


The *only* way you can avoid this tax evasion is if you are not the actual signatory or beneficial owner of the bank account.

 

[JohnLocke]

Your information is much appreciated. Out of curiosity I just wonder if you declare the bank account on your tax return but it can be proved that the company is operated and managed in the offshore jurisdiction and taxed there, wouldn't it be possible to make use of a Double tax treaty then?

 

[electric]

...I just wonder if you declare the bank account on your tax return but it can be proved that the company is operated and managed in the offshore jurisdiction and taxed there, wouldn't it be possible to make use of a Double tax treaty then?

Yes, I asked this specific question. The answer was the same for each country. They told me that unless I could conclusively prove that the company is operated and managed in the offshore jurisdiction, then it would be considered my tax personal responsibility, regardless of whether the company paid taxes in that jurisdiction.


For example, if I am listed as the signatory of "offshore bank account" then I am required to declare that bank account.


So if I declare the bank account, but then claim benefits for it under a double-tax treaty, the auditor will check to see what is my relationship to the company. If they determine it is "legitimate" then they would accept the double-taxation calculation.


If they determine that my relationship to the company is "not legitimate" then I would be considered responsible for the bank account, and they would not allow me to take advantage of a double-taxation treaty, because the company would be considered a tax evasion shell company. In other words, the tax authority would ignore the company, and would treat the bank account as if it were my personal account. So in that case, the double-tax would not apply since there would be no reason for me to use it since I am not a resident of the offshore jurisdiction.


As for what they consider "legitimate"... I could not get them to clarify any further what that means. I think this is the "gray area" where they have a lot of power. And also, if they tell you exactly what is and is not allowed, then it would be more easy to get around their fixed rules.


The best answer I could get was from the US authority I spoke with. He said (off the record) that it would depend on the spirit of what they found out about me. If they see that I am living in a huge house with a fancy car and travelling all over the world.. but I am declaring only $10k of income... then it would be pretty clear that the bank account is the source of my funds, and so they would deem the account as my personal account.

 

[coromandel]

Move to a different jurisdiction?

 

[escapeskysun]

Wouldn't a trust setup take care of this since it's a 100% separate tax entity if setup correctly?

 

[electric]

Wouldn't a trust setup take care of this since it's a 100% separate tax entity if setup correctly?

Who is the ultimate beneficiary of the trust?

 

[clemens]

Why tax evasion.. why not a legit setup?

 

[electric]

Why tax evasion.. why not a legit setup?

It is not as easy as you think.


For example... What would you consider as a legitimate setup? This is a serious question. Please post what is a legit setup, so that we can compare.

 

[clemens]

A legit setup starts with a lawyer and tax consultance and a lot of money not a budget of 500 bucks and a good business plan. I really appreciate all man's replies to this topic but I believe no one here can honestly get a setup which won't be possible to break down in thousand of pieces faster than you can say BUH.

 

[electric]

Well, aren't you Mr. Very Helpful today?


For a small business or proprietorship, like the VAST majority of people on these forums... hiring a lawyer and tax consultant is not going to give you any different answer.


The fact is that if the tax authorities can tie you directly to ANY form of offshore tax avoidance scheme... then you're going to get busted and held personally liable for it. When you're a small player, there is literally no difference between tax avoidance and tax evasion.


At the end of the day, the tax authority will simply ask if you are personally benefiting from the bank account, company structure, or whatever. So unless you're prepared to show us a tax structure that wouldn't be the case, for a small business or one-man operation... what is the point of your post?

 

[electric]

The answer depends entirely on what is your country of citizenship.


For example, if you are a US citizen you are obligated to pay taxes on your worldwide income, even if you do not reside in the USA. You could live on the moon, but if you have a US passport, then you must declare every penny of income, every bank account where you are a signatory or beneficiary, etc...


If you are a US citizen, then the only way to get avoid paying taxes if you live somewhere else, is to renounce your US citizenship. (Not difficult to do, but there is an exit tax.)


Other countries are different.


In my home country, for example, I can leave the country and reside somewhere else for a year... make $10m (while outside my home country)... and then come back to my country and I am not obligated to pay taxes on the money I made while not a resident. (Although I must declare it.)


The only way to get a good answer is to discuss this with a tax specialist in your home country.

 

[EliasIT]

If we had a crystal ball back then that could show us what 2024 would look like in the world of taxes, I believe many, including OP, would have been better prepared.